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Koch begins Veracruz deliveries

19 Oct 2017, 5.22 pm GMT

Koch begins Veracruz deliveries

Houston, 19 October (Argus) — Truck distribution of Koch Supply's first fuel cargo to independent Mexican buyers began last week, the company said today.

An 80,000 bl ultra-low sulfur diesel (ULSD) waterborne cargo delivered last month to a Vopack terminal in Veracruz was offered at the facility's truck rack for buyers at Port of Veracruz, Orizaba, Xalapa and Puebla.

Koch has a multi-year agreement to deliver up to 40,000 b/d of gasoline and diesel into the facility and a region with few supply options.

"We are there long term and plan to be a very cost-effective participant," Koch trading manager for Latin America Eduardo Andrade said at the Argus Mexican Refined Products Markets conference in Houston today.

State-run Pemex is particularly entrenched as a supplier in the Veracruz area, a conference speaker said yesterday. Mexico's regulatory authorities have said that the level of competition in different regions will be under review as the country continues to open its fuel markets.

"Pemex in Veracruz is a dominant player because of its penetration level in storage and logistics," Enix consulting founder Alvaro Efrain Tellez said. "That could later be considered to be a barrier to competition."

But the port also shows the most opportunity for a company to cut costs for a competitive edge, Andrade said today. Draft limits for tankers and pipeline supply beset by theft help make Veracruz both one of the highest-cost points of delivery for Mexico on the Gulf coast and a ripe target for investment, Andrade said. Future expansions could add rail and barge delivery options and connect the port to the large Mexico City market.

Koch was evaluating potential deals closer to the retail side of the business but is facing another Pemex entrenchment, Andrade said.

"They have been working with Pemex for a long time," Andrade said of fuel retailers. "I think we are in a transition, where they are starting to learn that there are other alternatives and hopefully they will approach us."

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