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Q&A: ExxonMobil plans Mexico fuels expansion

24 Jan 2018 22:02 GMT
Q&A: ExxonMobil plans Mexico fuels expansion

Mexico City, 24 January (Argus) — Nearly two months after gasoline and diesel prices were fully liberalized in Mexico, Argus talks to Carlos Rivas, who leads ExxonMobil's fuel operations in the country. The company, which has planned to invest $300mn in Mexico's downstream sector in the next decade, began importing fuel from its Beaumont, Texas, refinery last year.

You opened the first eight Mobil branded fuel retail stations in December 2017. How are you progressing on your goal to open 50 facilities with your local partner Grupo Orsan?

We are just starting, really. So far we have imported three unit trains, each of which carried 60,000 bl, so about 180,000 bl of products since we started.

The fuel tanks at the San Jose Iturbide [in Guanajuato state] and San Luis Potosi storage terminals are still under construction. We expect them to be ready by February or March.

We started supplying another 12 stations last week, so we have a total of about 20 ExxonMobil-supplied stations now. We want to have all 50 ready by the end of March, plus some others that we are working on.

There is a lot of interest in the market, business owners, who want us to start supplying them with our product because it is a unique proposal. As of today, we are only supplying our affiliated fuel retail stations and we do not have a final goal in terms of how many stations we want to open. It depends on how the infrastructure develops. But at least in the three digits. We want to be a significant player in the market.

What is your retail model in Mexico?

Our model is to use all private infrastructure and develop strategic relationships. We are refiners, we are good at investing in our brand, and we have commercial agreements with terminal operators [in the US and Mexico], with fuel retailers and each one of us does his job. We do not compete. This is a model that has been working for us and that allows Mexicans to participate in the value chain, and therefore grow their businesses.

Is selling fuel as an independent importer in Mexico already viable?

It is viable in all segments of the market, especially in Mexico, where there are few stations, where volumes are big, and where there is need. It has to be viable. I do not see any stations closing down. On the contrary, it's always growing.

Are you thinking of building your own transport infrastructure too?

The plan is to invest in infrastructure, because the country needs it. If Pemex opens up [some of its infrastructure], and the conditions are favorable, we are definitely going to consider it.

We're interested in what they might have to offer, we're not ruling anything out. But we are not going to sit around waiting either. Because in the mean time the country is growing, it needs capacity, pipelines, tanks and infrastructure in general, and we are going to help. That is why we are investing in terminals, logistics and private pipelines. There are a few projects already.

What pipeline projects are you looking at?

One of them was already announced. It is a pipeline connecting Tuxpan [near the port in the state of Veracruz] and Tula [where Pemex has a refinery]. Three companies are proposing projects, and we are evaluating which one is the best. But that is a fact, a pipeline is getting built there. There are other pipeline projects as well, one in Progreso [in the Yucatan Peninsula] and another in Altamira [Tamaulipas state].

Could fuel price liberalization endanger small- to medium- size fuel retailers, which account for 75pc of the market?

In an international market, prices depend on supply and demand, and Mexico is not an exception anymore. It is up to fuel retailers, not us, to set prices. We offer them a competitive price, and they are free to put whatever price they want at the station.

All fuel retailers are obliged to report their prices to the energy regulatory commission (CRE) so there is a lot of transparency. And since prices were liberalized, we have seen fuel prices going up and down. So I think we have to demystify this idea that small fuel retailers are going to disappear. All business owners have now the opportunity to chose. They can continue to work with Pemex, join other brands [or] create their own. The reform gives them the freedom to do whatever they want. It is not the government anymore who says what the price will be.

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