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Mexico biofuel regs favor US imports: Industry

05 Jul 2017 22:22 (+01:00 GMT)
Mexico biofuel regs favor US imports: Industry

Mexico City, 5 July (Argus) — Mexico's recently approved increase in allowable ethanol content in gasoline to 10pc could boost US gasoline imports over domestic ethanol production, some Mexican companies say.

The increase initiated last month in the allowable ethanol blend from 5.8pc seemed good news for Mexico's fledgling ethanol industry.

"A 10pc ethanol content makes sense for Mexico, since its main provider is the US [which has similar content rules]," Stephen Wittig, president of the Mexican association for sustainable mobility (AMMS), told Argus.

Mexico has discussed blending ethanol in its gasoline since 2008, when Mexican law-makers approved a law to promote and develop bioenergy. But the country has remained a loyal buyer of MTBE from the US to use as an oxygenate in its gasoline. Last year, Mexico was the US' biggest importer of MTBE with an average of 24,000 b/d, followed by Venezuela with 10,000 b/d.

Antonio Garcia Carreno, chief executive of Bioergeticos Mexicanos, a Mexican firm that plans to produce ethanol, says while the new regulation should boost imports of US E10 gasoline, Pemex is still reluctant to move away from MTBE to ethanol. He points to the results of a 2015 pilot program Pemex launched to kick-start the domestic production of ethanol as the key example.

In an auction opened to Mexican firms only, six companies were selected to supply up to 123mn liters (2,119 b/d) per year of ethanol under 10-year contracts to Pemex. Pemex said it would blend the ethanol into its Magna gasoline at a 5.8pc level, with contracts due to begin no later than April 2018.

Garcia's company was one of the winning firms, with three terminals, but he says Pemex has not signed any supply contracts in the last six months.

"We're ready to build, but Pemex still has doubts," he said. "They're not sure they're going to buy the ethanol from us."

Garcia said Pemex finally arranged a meeting last month, during which they said they were "evaluating" the contracts. Another meeting is set for 7 July.

Pemex did not respond to a request for comment before press time, but in a June document to Cofemer — the agency that oversees energy regulation — Pemex appears to take a hostile view towards ethanol, strongly opposing the regulatory changes.

"As technical literature in the world recognizes, the use of gasoline with ethanol impacts the environment," according to the Pemex document to Cofemer, which Argus reviewed.

It also mentions the "economic non-viability" and the "serious economic repercussions" for Pemex to blend ethanol, use specific storage and transportation infrastructure, and acquire special materials for the handling of E10 gasoline. There will also be additional costs for retail fuel stations, Pemex said.

"In my opinion, this was a concession to allow fuel retail stations in the northern border to import US gasoline by trucks," Garcia said.

Wittig, with the AMMS, agrees. "There will be more ethanol where it already is, at the northern [US] border," he said.

Drivers in northern Mexico already fill up their tanks with E10 gasoline when crossing the border to find cheaper fuel. "Now Mexican distribution trucks will do just the same."

AMMS says it believes there's a good deal of investment potential for Mexican ethanol production. The association has identified ten ethanol construction projects "on stand-by" that could be revived in the next five years, representing $1bn in private investment.