Theft fees reveal Mexico's costliest fuel lines
Mexico City, 13 April (Argus) — Mexican pipelines that connect refineries to distribution and storage hubs in the northern part of the country are among those most likely to be tapped illegally, based on theft offset fees that state-run Pemex has settled on for each route.
Argus analyzed the fees in effect for 2018 on more than 126 pipelines which indicate which are the riskiest ones in terms of fuel theft costs. This fee can be passed on to consumers — with approval by the energy regulatory commission (CRE) — to prevent and remediate fuel theft cost. The higher the fee, the more likely illegal tampering is expected on a particular pipeline, according to the CRE's resolution on the matter.
The 488-kilometer (300 miles), 10-inch Cadereyta-Madero pipeline located in the northern states of Nuevo Leon and Tamaulipas that connects two refineries with the same name, has the most expensive offset fee of Ps41.62/bl ($2.31/bl) when fuel is shipped north to south. The same line also claims the second-most expensive fee of Ps14.57/bl when fuel is shipped from south to north. The pipeline also transports most of the fuels exported by pipeline from the US as it is connects to the international Brownsville-Cadereyta line.
The Ps41.82/b offset fee would translate to Ps0.26/l in additional cost to the total fuel price at the rack, which is currently Ps16.07/l in the case of regular gasoline, or 1.6pc of the cost.
The third most-expensive line in terms of the fuel theft offset fee is the Salamanca-Tula pipeline, which also connects the two refineries of the same name in central Mexico. It has a Ps13.60/bl fee.
What Pemex would pass on in fuel offset fees could reach Ps5.6bn ($327mn) this year, based on Argus calculations of pipeline fees and pipeline capacity. The cost includes all expenses state-run Pemex has related to stopping the flow in a pipeline, wages of workers who fix the taps, private investigators and monitoring of the pipelines.
The tariff does not involve a transfer of money between Pemex and the CRE. It is a cost added to the fuel prices that CRE allows Pemex to pass on to consumers and wholesale clients, which is why CRE approves and audits the costs.
Most fees fell slightly from 2017 rates, as fuel theft prevention efforts last year were expected to show effect in 2018.
Yet illegal taps are costing Pemex overall $1.64bn annually, despite the efforts, Pemex chief executive Carlos Trevino said this week.
Independent firms could also incur similar costs if they use or lease Pemex's infrastructure, said energy consultant Ramses Pech, with Caravia y Asociados.
"Private companies will definitely have to add these costs in Mexico or, as it is now an open market, they will have to label them as country risks," Caravia said. "We will see how much private investors will add for this concept, but it might be pretty similar to what Pemex has in each area and pipeline."
One way private companies will directly pay for this theft prevention fee is if they bid and win in one of Pemex's open seasons, which have drawn subdued interest from investors so far.
Andeavor is the only company so far to win capacity in an open season, in the northeast of Mexico in which they were awarded 2,350 b/d of capacity in the Rosarito-Ensenada pipeline which has one of the lowest offset fees at Ps0.44/bl.
An auction of capacity in the north ended with no bids earlier this year. Pemex continues to offer capacity near the Topolobampo port on its west coast and the Madero refinery to the north, with bids due 16 April and 15 May, respectively.
|Pipeline name||Region||State||Fee (Ps/bl)|
|Madero - Cadereyta (Cadereyta to Madero)||North||Tamaulipas-Nuevo Leon||41.62|
|Madero - Cadereyta (Madero to Cadereyta)||North||Tamaulipas-Nuevo Leon||14.57|
|Tula-Salamanca (Salamanca to Tula)||Central||Hidalgo/Guanajuato||9.66|
|Tula-Salamanca (Tula to Salamanca)||Central||Hidalgo/Guanajuato||9.66|
|Tula-Salamanca (Palo Seco to Salamanca)||Central||Guanajuato||9.31|
|Tula-Salamanca (Salamanca to Palo Seco)||Central||Guanajuato||9.31|