Informal ethanol market thrives in Mexico

Drivers in Mexico are using high concentrations of ethanol in their tanks as a direct, cheaper substitute for gasoline despite blends over 10pc being illegal, conventional fuel retailers said.

Retailers in often informal street-side outlets advertise ethanol on e-commerce platforms such as Facebook Marketplace. They claim it makes gasoline perform 30pc better, cleans injectors, reduces pollution and is cheaper than gasoline.

Mexico's biggest retail association Onexpo said the practice concerns the country's 12,500 conventional fuel outlets.

"They are selling it in a pretty irresponsible way," Onexpo president Roberto Diaz de Leon told Argus. "Some are clandestine shops where they put the product in taxi cabs directly from plastic jars and some are more formal retail fuel shops where they sell gasoline and ethanol."

Retail costs for ethanol range from Ps13/l-Ps16/l ($2.50/USG-$3/USG), or up to 40pc cheaper than Ps21/l for regular gasoline. Ethanol is also less expensive than MTBE, Mexico's main oxygenate.

The ethanol shops typically advise drivers to make sure their tanks have at least 40pc of gasoline to avoid engine damage. Whether ethanol in certain conditions and concentrations can damage especially older engines is debated between ethanol industry groups and other trade associations.

Argus got in touch with one reseller on Facebook who offered to sell 15 l jars for Ps13/l, or full tank trucks of 10,000 l (2,600 USG) at a discounted Ps12/l. The reseller offered a franchise that normally costs Ps35,000 at a special discounted price of Ps25,000.

One formal seller, Fuel Flex, holds a license from the energy regulatory commission (CRE), has a formal website and offers different franchise options to resell ethanol. Its website cautions that its E85 blend of 85pc ethanol can only be used in flex-fuel vehicles, while fuel-injection vehicles can use E50 and vehicles with a carburetor should only use E20.

Shops such as this do legally hold permits to store ethanol, but not all of them are authorized to sell the product.

"They use these legal permits for importing and storage as licenses to market and sell this product irregularly," Diaz de Leon said.

In Mexico there is a tightly regulated process for blending gasoline with ethanol or with MTBE. Blending must be done in refineries, authorized storage centers or in authorized tank trucks before distribution, Diaz de Leon told Argus.

Mexico is the main buyer of MTBE from the US, where supply has been tight because of plant outages and other issues. Mexico imported 2,000 b/d of ethanol from the US in September, compared with 23,000 b/d of MTBE, according to the US Energy Information Agency.

Mexico only in late 2018 approved a 10pc mix of ethanol for gasoline, and it is still prohibited in the largest cities of Mexico City, Guadalajara and Monterrey.

Associations such as the US Grains Council have lobbied Mexico to allow the use of E10 in all of the country.

Mexico has had a few pilot projects to produce ethanol, mostly from sugar cane rather than corn because of supply concerns over one of its main agricultural products. But production is negligible.

By Sergio Meana