The new products terminal at San Jose Iturbide was originally expected to be up and running products deliveries via rail from Corpus Christi, Texas, around August 2016. The project was delayed by logistics issues and slower-than-expected construction.

This represents the first-ever diesel delivery via rail into Mexico from the U.S. for PMI. This will add fuel import “optionality” for PMI, which is also importing oil products via pipelines and ships. The rail delivery option could
also help mitigate potential import capacity loss next year when Pemex opens its northern Mexico pipeline system to third parties.

In Mexico, the state-owned Pemex currently maintains a monopoly of fuel supply, import and distribution in the domestic market. PMI, the trading arm of Pemex, is in charge of procuring oil products from international markets and delivering fuel to Pemex, and PMI does not have a role in the domestic oil market. Beside products, PMI is also involved in crude trading. PMI is expected to face some competition from private importers amid the Mexican market liberalization, but this is not expected to happen overnight.

The first diesel import ever via rail into Mexico was completed by PMI, which comes as a mild surprise as the Mexican oil market is in the process of opening the domestic market to private imports. There were expectations of private imports at the new rail terminal at San Jose Iturbide last year amid the ongoing market liberalization. The Mexican energy reform, which encourages private imports and investment in domestic energy infrastructure, was aimed at breaking Pemex’s fuel supply monopoly.

PMI is unloading diesel at the new terminal to alleviate supply shortages in central Mexico. San Jose Iturbide is located 174 miles north of Mexico City and about 650 miles south of Corpus Christi, Texas. PMI will be the only company delivering diesel via rail from Corpus Christi to San Jose Iturbide, at least for now.

Each diesel rail delivery load from Corpus Christi to San Jose Iturbide could be up to 75,000-100,000 bbl. Corpus Christi is home to refineries belonging to Valero, Flint Hills and CITGO.

The San Jose Iturbide terminal was expected to receive both gasoline and diesel, but diesel will be the first product. The terminal is owned by a private company, Simsa, and it is operated by Howard Energy Partners.

The terminal is expected to handle about 25,000-27,000 b/d of oil products or one unit train every few days.

Sources said that new rail and terminal projects, for both oil products and LPG, in the heart of Mexico make “a lot of economic sense” due to the arbitrage economics and supply requirements in that area.

The new diesel-by-rail delivery into the heart of Mexico from Texas represents the beginning of a much-needed energy infrastructure build-out in Mexico. Several Mexican government officials had highlighted the stronger need for energy infrastructure in Mexico than extra oil products imports from private companies.