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Mexico's CFE decreases gasoline, diesel storage capacity of fuel pilot project

Increase font size  Decrease font size Date:2017-06-14   Views:440
Mexico's state power company, Comision Federal de Electricidad (CFE), through its fuel division, CFE Energia, will offer 1.1 million barrels of former fuel oil storage for diesel and gasoline storage, down from the originally planned 1.6 million barrels.

The decrease in the capacity offered by CFE for the project could be to protect the value of the assets, Sandy Fielden, Morningstar's energy research director based in Austin, said Thursday.

"Perhaps there is a concern that if they put too much capacity available before there are enough players in the market they could reduce the value of the assets," Fielden said.

On Wednesday, CFE released its draft participation rules for potential partners for its refined products storage pilot project in the states of Baja California and Sonora. It will announce the winning proposals on August 18, which will hold a 30-year contract to operate and maintain the facilities.

Originally, the draft rules for participation were expected to be released by March 24, with projects starting operations on July 18. CFE could not be reached for comment on the reasons for the delay, or why the storage capacity was reduced to 1.1 million barrels.

"CFE would provide the storage infrastructure and the physical space while CFE's partners would provide the financing, permits, engineering, procurements, and construction as well the operation and maintenance of the facilities," the company said in a statement late Wednesday.

In Baja California, CFE will retrofit 496,000 barrels of storage capacity in Rosarito and Mexicali. In Sonora, it will modify 656,000 barrels of storage tanks in Piquito.

Over the next decade, CFE expects to make available 10.7 million barrels of gasoline and diesel storage capacity as it switches away from using fuel oil to less expensive natural gas.

Pemex has 13 million barrels of capacity across 78 terminal points, which are all saturated due to the growing fuel demand.

Between 2012 and 2015, CFE reduced its fuel oil consumption by 48%, from 201,000 b/d to 104,000 b/d, as it switched seven power plants to natural gas. By 2021, the state utility expects it will no longer use fuel oil for power generation.

CFE's fuel storage project will help private-sector companies to compete against Pemex. The lack of logistic infrastructure has made it hard for new players entering the market to operate, despite the liberalization of Mexico's fuel markets.

The storage capacity opens the doors for more competitors to enter Mexico's northwestern region, where only Pemex and San Antonio-based refiner Tesoro have the infrastructure available to operate.

The refiner was awarded 320,000 barrels of combined gasoline and diesel storage capacity as well 9,535 b/d of combined pipeline capacity in the first phase of Pemex's logistic open season in May.

Tesoro in its first-quarter earnings call described northwestern Mexico as an attractive market because it is far away from Pemex's refineries located in Mexico's Gulf and Pacific coasts.

According to Mexico's Energy Secretariat (SENER), between 2015 and 2030, Baja California's gasoline demand will grow 34.8% to 51.5 million b/d from 38.2 million b/d, and its diesel demand will rise by 40.4% to 18.4 million b/d from 13.1 million b/d.

During the same period, Sonora's gasoline demand will grow 34.7% to 32.2 million b/d from 23.9 million b/d, and its diesel demand will rise by 40% to 29.4 million b/d from 21 million b/d.

In the northern region, CFE has 41 storage facilities with 5.3 million barrels of capacity, CFE data showed. In the central and southern regions, it has 19 storage facilities with a total capacity of 5.4 million barrels.

The state utility said in March that key markets would be Baja California Sur, where Pemex has no storage facilities, as well as Yucatan and Mexico's central region, where CFE could hold key fuel storage facilities.

In the port city of Tuxpan, Veracruz, CFE has 1.9 million barrels of storage. From this point, companies are building multiple infrastructure projects to move gasoline into Mexico's central region, where 60% to 70% of all gasoline demand in the country is located.
 
 
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