Tanker traffic jam: Harlingen’s port roaring with Mexico diesel demand - Brownsville Herald: Local News

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Tanker traffic jam: Harlingen’s port roaring with Mexico diesel demand

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Posted: Tuesday, April 30, 2019 1:00 pm

HARLINGEN — The Mexican government’s widespread crackdown on theft from gasoline and diesel fuel from pipelines in Mexico is creating a gusher of new business at the Port if Harlingen.

New Mexico President Andres Manuel Lopez Obrador has taken drastic measures to roll back the chronic, decades-long fuel theft, ordering the closure of six major pipelines in December.

Given Mexican refineries’ inability to keep up with domestic demand, diesel and some gas are being hauled across the border by trucks from distribution sites like the Port of Harlingen.

And business is booming.

Barrels and barrels

Yesterday at the Port of Harlingen, more than 100 Mexican diesel tankers were idling on the roadsides, grille to bumper, patiently awaiting their turn at the pumps and hoping for a quick trip back across the border.

“Last month, the two terminals that handle the diesel, we’re probably looking at in the neighborhood of 500,000 to 520,000 barrels of diesel in March,” said Walker Smith, port director. “That’s around 25 barges in the month of March.”

Smith said the port frequently loads 100 trucks a day which come in for diesel and gas, which is either headed to Mexico or up the Valley on the U.S. side. The port already supplies about 70 percent of the gasoline and diesel used here in the Rio Grande Valley.

“On one day they did 185 trucks. I said ‘Man, what in the world, is Mexico running out of diesel? What’s the deal?’” Smith said he asked workers at one of the companies that brings diesel up the Arroyo Colorado and into the port. “They said ‘We could do that daily if we had the ability to do it.’”

Titan Marine Fuels and Key Petrol are supplying the increased demand for diesel coming out of the port. Another company, NuStar Energy, handles some diesel but mostly ships in gasoline used by Valley residents on the U.S. side.

“It is a huge demand, not only for diesel, but gasoline as well,” Smith said. “I’ve been told that for every gallon of diesel demand in Mexico, there’s five gallons of demand for gasoline there, which makes sense. But also all the other propanes, butanes, heating oil and those kinds of things, that’s a huge need as well.”

Theft, infrastructure woes

Fuel theft has been a difficult issue for the Mexican government for decades, but the scope of the theft has increased dramatically in recent years.

“ The crackdown on the drug war has caused gangs to turn to other forms of theft, and the nation's network of pipelines proved to be ripe targets,” the CNBC business network reported in January. “Theft escalated in recent years following reforms to the country’s oil sector by previous president Enrique Pena Nieto, who liberalized the industry for foreign investment. In turn, retail prices rose, giving cartels an opportunity to undercut those prices through black-market sales of gasoline.”

Pena Nieto’s easing of the rules on foreign investment is a touchy issue in Mexico, where pride in the national energy firm Pemex has been strong since foreign oil companies’ facilities were nationalized to form it in 1939. Until 2016, Pemex was the only company allowed to import gasoline and diesel.

But Pena Nieto concluded new foreign investment was needed to rejuvenate the country’s refinery system and make its aging oilfields more productive. Additional fuel imports will have to cover shortfalls until those projects began to pay off, but that could take years.

Fuel imports on rise

In 2018, Mexico received over 1.2 million barrels/day of petroleum products, valued at more than $30 billion. U.S. exports of petroleum products to Mexico made up 22 percent of all petroleum products exported from the United States in 2018. “Most of these exports were finished motor gasoline and distillate fuel oil,” the U.S. Energy Information Administration reported a week ago.

By comparison, in 2009, the value of U.S. gas and diesel exports to Mexico was just $8 billion, rising to $20 billion by 2013. Exports of natural gas to Mexico also have increased significantly over the past decade and should continue, given the new Valley Crossing Pipeline which originates at Agua Dulce near Corpus Christi and extends through Harlingen and Port Isabel to Mexico.

“In 2018, U.S. petroleum product exports to Mexico rose in both the volume and value of product traded. Changes in Mexico’s utilization of refineries have created a widening gap between their domestic supply and demand of gasoline, and U.S. gasoline exports now supply more than half of Mexico’s gasoline consumption,” the EIA concluded.

Smith, the port director, says Mexican fuel demands could be the result of several factors, including the deteriorating energy infrastructure in the country which Lopez Obrador, like Pena Nieto, also is addressing.

“The pipeline crackdown? I’m sure it is. There’s got to be a correlation to something that’s going on down there,” Smith said. “Guys have said that since he’s come into office, that things definitely changed. I can’t say for sure that’s the reason there is an increase, but the fact is, Pemex just can’t keep up with demand and the refining capabilities that Mexico has is far short of what we can do.”

If there is an incentive to solve the energy puzzle for Mexico, it could be the fact shipping gasoline and diesel by tanker trucks is nearly 14 times more expensive than using pipelines, according to a study by Mexico's Federal Commission for Economic Competition, or Cofece.

Port poised nicely

Infrastructure on the scale needed to rejuvenate Mexico’s energy industry is not going to come cheap, and it isn’t a problem amenable to overnight solutions.

“It’s going to take years — it’ll be really good for the port,” Smith said. “They can’t get it from anywhere else but us. When I say us, this area, Texas. And the fact that we’re 18 miles from Los Indios Free Trade Bridge, we’re strategically located to be able to help them out with their demand of needing diesel.”

Smith said the growing demand for gasoline in Mexico could lead to changes here, too.

He says the port may be ready to step up.

“We’ve fielded some questions and some interest in the port for gasoline,” Smith said. “The only problem with a gasoline terminal is it’s quite a bit more expensive and intensive to put in the infrastructure of a gas terminal here. But I would imagine you’re going to see one here in the next couple of years — for gasoline.

“Whether it will be one of the companies already here, or another one coming in, I’m not sure. It’s getting crazy around here.”

rkelley@valleystar.com

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