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Natural Gas Opportunities for Mexican Fleets

Alejandro Allier - Neomexicana
General Manager

STORY INLINE POST

Mon, 09/01/2014 - 11:17

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Neomexicana de GNC is established as the leading provider of off-pipeline natural gas solutions in Latin America. Having mainly been focused on clients in the heavy industrial segment, it is now moving into other sectors like commercial, residential, and automotive. As a joint venture between the Brazilian firm NEOgás and Mexico’s Grupo Diavaz, Neomexicana takes care of the entire delivery process of compressed natural gas (CNG). It was the first company to get a permit from SENER to work with CNG in Mexico and was the first worldwide to obtain an ISO 9001 certification for CNG operations. The opportunities offered by the automotive sector based on the potential of natural gas vehicles, as well as the expansion of CNG for industrial clients lacking access to the natural gas pipeline network, are two pillars upon which Neomexicana is basing its expectations for future growth in Mexico.

NEOgás’ focus on the Mexican market was proven last year when, after raising US$20 million from the IFC, it announced that between 40-60% of these funds would be allocated to Neomexicana. According to Alejandro Allier, General Manager of Neomexicana, Mexico’s many industrial opportunities make it a natural step to invest in the country. Neomexicana is clear on where its opportunities lie in the automotive industry. “Companies like Ford, Mazda, or Nissan place their production near an existing gas pipeline,” he says. “It is unrealistic to provide CNG to a manufacturing cluster that has easy access to a natural gas pipeline.” However, CNG can offer a temporary solution until a natural gas pipeline is built. Allier understands that the natural gas business has the facility to be mobile so that if a pipeline extends to some of its clientele, the company can then move its units to another location. To incorporate this into its business, the company already has a diversified business strategy and highly efficient technical procedures. Allier is aware that it will face competition since it would be impossible for just one company to cater to the country’s entire potential CNG demand for industrial customers. “The length of the road network is 15 times the size of the natural gas pipeline network, which has a total length of 9,500km. Even all the new pipeline infrastructure that will be built over the next years will not be enough to supply natural gas to the whole of Mexico,” he explains. 

A new opportunity for CNG distribution is emerging in the Mexican transportation market. Given Mexico’s huge fuel consumption, even if just a tiny portion is converted into natural gas, the market would prove immense,” explains Allier. The company is ready to provide CNG as fuel but sees one major obstacle standing in its way. There are not enough gas stations providing CNG because there is not enough demand for the moment. Neomexicana will provide a dedicated service to corporate customers, offering CNG stations dedicated to servicing their fleets. This program will primarily be aimed at major organizations that own their own fleets of commercial vehicled, such as Grupo Bimbo and Grupo ADO. Allier sees these as more than able to afford the investment needed to pay for Neomexicana’s services, and he predicts they will be convinced by the 25- 30% fuel reduction costs associated with switching to CNG.

The US is currently seeing a major trend among big fleet owners that are changing their fleets to natural gas. In Mexico, Allier says interest in converting fleets to CNG is beginning to grow. For example, Walmart is undergoing tests to convert part of its fleet to CNG which will bring advantages in terms of fuel autonomy, reduction of maintenance costs, and security, while also contributing to sustainability performance. To continue building up the appeal of CNG, Neomexicana knows that it has to enter into alliances with engine manufacturers. “The issue at the moment is that engines that run on natural gas are not fully available in the Mexican market,” explains Allier. The company is in talks with engine companies to seek an agreement: engine companies will increase the presence of natural gas engines in the market while Neomexicana will invest more in its dedicated service scheme to accommodate the growing presence of CNG-fueled fleets. An important advantage for natural gas is its price, and Neomexicana took the stability of natural gas prices in comparison with other fuels into consideration when creating its current 15- year operating plan. Although the company does not have an operating automotive project for Mexico, Allier expects that by the end of 2014, Neomexicana will have a couple of projects in this sector and aims to become the Mexican market leader.

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