Pemex unwinds fuel logistics deals with Marathon

Pemex is letting fuel storage and transportation contracts signed in 2017-2018 with Marathon Petroleum run out as it pivots to regain its only capacity awarded in a series of largely unsuccessful open seasons.

Marathon's contracts for 315,000 bl of storage space and 9,535 b/d of pipeline capacity in Sonora and Baja California in Pemex's first tender in May 2017 were set to expire in July 2020. Pemex allowed the company to continue to access remaining fuel inventories at the Rosarito terminal under a deal signed in November 2020, according to Pemex's 2020 report submitted to congress this week.

Marathon told Argus in June 2019 that it was considering other options if Pemex chose not to renew the contracts, but neither party updated the status until now.

The first deal included terminals in the cities of Rosarito, Mexicali, Ensenada, Guaymas, Hermosillo, Ciudad Obregon, Magdalena, Nogales and Navojoa. Marathon's Arco retail brand has over 200 stations in the states of Baja California, Baja California Sur, Sonora, Sinaloa, Chihuahua, Jalisco and Nuevo Leon, with plans to reach 600. The company did not immediately respond to a request for comment.

A second package of contracts won in 2018 for 110,000 bl of storage and 3,000 b/d of pipeline capacity in Sinaloa and other sites in Baja California Sur are still in effect but will end in January 2022, Pemex said.

Restoring Pemex dominance

Pemex has made regaining this capacity part of its business plan, based on President Andres Manuel Lopez Obrador's aim to roll back the 2014 energy reform that opened the market to competition.

The reform forced Pemex to lease its fuel storage and transport capacity through the open seasons as a way of opening the Mexican fuel market to other players. But only two of 11 open seasons held led to successful awards — both to Marathon — and potential bidders found that the locations and terms offered were not always attractive.

A Mexican court specializing in competition claims ruled in 2019 in favor of Pemex that it no longer had the obligation to lease fuel pipeline and storage capacity to private companies.

Pemex has added 1.275mn bl of storage in the past year through either maintenance at its existing facilities or through letting the deal with Marathon run out. This includes 370,000 bl of storage for regular gasoline, 165,000 bl for premium gasoline, 250,000 bl for diesel, 470,000 bl for fuel oil and 20,000 bl for jet fuel.

Pemex said it reached record high fuel inventories in April 2020 with 11.2mn bl of fuels in stock, enough for for 15.2 days' worth of sales, at a 737,000 b/d consumption rate. The company did not detail if that level included storage in refineries and off-shore centers.

By Sergio Meana