Deregulation in Mexico: Changes to the Petroleum Supply Chain

Link to article: https://stillwaterassociates.com/deregulation-in-mexico-changes-to-the-petroleum-supply-chain/

December 10, 2015

Major changes in Mexico’s energy markets will start happening next year and it is important to understand what the landscape will look like in order to take advantage of the opportunities. On November 17th, Dave Hackett spoke about the state of the Mexican petroleum products market at the OPIS Mexico – U.S. Petroleum Summit. Dave’s presentation, Product Flows and Markets: Today and Tomorrow, discussed the current petroleum product flows in Mexico, the export flows from the U.S. into Mexico, and what the deregulated Mexican market may look like in 2018.

In Mexico, Pemex provides refining and logistics with six refineries supplied by pipeline and tanker. Gasoline demand in Mexico is 776 thousand barrels per day (kbd), but its production is only about 442 kbd making the country a net importer of gasoline and diesel. Pemex needs to increase refinery utilization in order to make more products and back out imports.

As deregulation continues, a host of logistics issues will need to be resolved. Ownership of each link in the supply chain will change. Privatization will spread from upstream production to transportation, terminalling, trucking and retail. Price setting and tax structures will have to be put into place, and foreign investors will have to understand the legal framework of the new system.

The next few years will be a dynamic time for the Mexican energy markets. We’ll be watching developments closely.

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