Railed
movements of refined products are a small portion of Mexico's total
imports, but they will grow once Mexico builds new terminals and storage
to handle increased traffic, industry officials said at the Argus
Mexican Refined Products Markets conference.
Railed crude shipments from Canada to the US Gulf coast run
along more efficient networks and offer better returns for energy
companies looking to deploy their fleets of owned or leased railcars,
said Jennifer Fussell, assistant vice president of sales and marketing
for chemicals and petroleum at Kansas City Southern (KCS). The railway
runs unit trains from US Gulf coast refining centers into central
Mexico.
"These energy companies are looking at … crude by rail that's
getting incredible turn times on equipment that is expensive, and then
looking at the current infrastructure limitations for Mexico," Fussell said. "Those railcar turns are not as efficient, but they will be."
Terminals capable of unloading unit trains within 24 hours
will be key to boosting railed refined products shipments, Fussell
said. To that end, KCS said it expects substantial storage to be built
in Mexico, to the tune of about 1.5mn bl each year from 2019-2021.
About 60pc of US refined exports to Mexico move by vessel, followed
by pipeline at 20pc, truck at 12pc and rail at 8pc, based on an analysis
of US cross-border trade data, said Rangeland Energy vice president of
business development Michael Moss.
Rail could boost its share to 15-20pc of US refined products exports
by 2020 as more terminals and storage are built, Moss said. Rangeland Energy's Corpus Christi products-by-rail and LPG loading terminal came on stream for manifest carload service in June, and is targeting unit train shipments by late in 2019.
Truck operations have had first-mover advantages in Mexico, with
cross-border shipments from Corpus Christi and even Houston moving "deep into Mexico,"
Moss said. Trucking operations will be increasingly limited to
border-area deliveries once rail and port options are built out, Moss
said.
New international marine fuel rules set to go into effect in 2020 could create new opportunities for Mexico's rail networks.
Pemex's six refineries produce a large amount of high-sulfur residual
fuel, which is mostly sold into the bunkers market from Mexico's ports.
Once the marine fuels rules take effect, Pemex will need to find other
markets for its high-sulfur material. Both Rangeland and KCS said they
were targeting ways to tap additional business to carry fuel oil.
The new marine rules will be a significant challenge for Mexico and
its refineries, said Jerry Phillips, global market analysis manager for
Phillips 66. Mexico's refineries yield about 30pc high-sulfur residual
fuel, versus about 3pc for US Gulf coast refineries, Phillips said.
Railroads could support imports of US light, sweet crude to Mexico,
which could help Pemex's refineries decrease their residual fuel output
because US crude has less sulfur content than many Mexican grades.
"There is no reason why clean products can't import in and crude import out, or even bringing some light sweet into the country," Fussell said. "We see that as an opportunity for Mexico."
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