Creating Competitive Access to Raw Materials, FuelsBy Cas Biekmann | Fri, 06/25/2021 - 12:26
Q: How has the company expanded its portfolio over the past year, given its port terminal supplying liquefied natural gas (LNG) and ethane in Veracruz?
A: We have been working in Veracruz for about a year and a half. We receive around three ships per month, so the 24/7 terminal has been busy and operating safely with no incidents, even during the pandemic. We have been growing the operation, adding 50 percent more trailers to the carrousel than we originally planned. The important factor for Énestas is the business model we handle. We provide a place for small, modular and mobile terminals for clients that do not require a massive terminal. In Mexico, there are many mid-sized companies looking to improve their logistics and access to fuels. These terminals can be placed anywhere in Mexico, so we have been promoting them. If a client signs a short-term contract, we are willing to build the terminal and operate it.
Énestas defines itself as a company that creates and promotes competitive access to raw materials and fuels. This can either happen through terminals or small regasification or distribution stations directly at the customer’s location. The raw materials we focus on are mostly cryogenic in nature because other cryogenic materials use the same infrastructure for storage and distribution.
Q: How has the company grown its distribution network to ensure its clients’ access to such resources?
A: We started focusing on LNG, then added natural gas trading to our portfolio and finally added the temporary terminal business. To this end, we are now present in various Mexican states. For now, we are looking for specific solutions companies that require access to raw materials and fuels. Some companies rely on natural gas but buy raw materials elsewhere and we would like them to use our logistics services. We want to serve them as a source for logistics, infrastructure and supply.
Q: Given the unusual natural gas shortage Mexico has experienced, how can Énestas help clients circumvent such a direct cut-off in supply?
A: Our LNG customers did not actually suffer from impact of the winter storm in February. This is because our business model provides five to six days of LNG storage at the customer’s location, meaning they experienced this crisis without issues. What is important for companies, even those with access to pipeline gas, is to consider LNG as insurance. Having a supplementary station with LNG that can be used at the same time as their pipeline gas supply acts as a safety net. Having your entire factory stop for three days just because of a lack of natural gas for whatever reason is a huge blow for companies. We call the shortage unusual but it occurs once every 14 years or so. If there is any disruption of any kind, such as maintenance, we can offer economical solutions to clients that will allow them to operate normally during these force majeure occasions.
Q: How do you envision LNG’s broader role in helping solve Mexico’s ailing storage infrastructure?
A: You can store natural gas in dried up caves or old oil wells, but also as LNG. When February’s freeze occurred, the Manzanillo and Altamira LNG terminals were able to supply the natural gas they had stored. It is already a key part of the infrastructure. One of LNG’s important advantages is that it can be placed wherever you want to place it. It is not tied to caves or wells. It allows for a more desirable distribution layout, with better control over the security of supply.
Q: How can Mexico further take advantage of LNG’s benefits?
A: What Mexico needs first is regulatory support. Many permits are required to distribute LNG and operate stations. This does not only include CRE but also environmental permits. Help from the government in the form of reduced bureaucratic burdens related to processes and permits is required to broaden the distribution of natural gas distribution. It can take up to six months to gain a distribution permit but customers need an immediate solution. Secondly, customer education is an important factor. Many companies are unaware that this type of solution even exists. We need to knock on doors and spread the word, and explain to potential customers that our technology and solutions are proven, safe, reliable and cleaner than other fossil fuels. Importantly, it is also less expensive than these other options. By reducing regulation and educating customers, a higher adoption rate can be achieved. Heavy-vehicle demand could take a part in this, since using LNG engines makes a great deal of sense for these vehicles, both economically and environmentally.
In regard to identifying gaps inside LNG’s own value chain, we have a lack of liquefaction facilities in Mexico. This is crucial to creating the operational radius necessary to make the fuel competitive. However, this will come naturally when more customers start using LNG. Importing and liquefying small amounts of gas makes little economic sense. It becomes somewhat of a chicken and egg situation, but this can be overcome if customer demand drives the value chain.
Q: Where does Énestas identify the biggest opportunities this year?
A: At the moment, there are no companies using LNG for transportation in Mexico. This represents a huge opportunity. LNG is already being used for transport in the US and Europe. For this opportunity to materialize in Mexico we need assistance from truck manufacturers to bring LNG vehicles into the country and then build a complete solution within a virtuous circle. This represents a big opportunity for Énestas, as does serving the marine industry. Mexico might not be a part of IMO 2020 but international shipping lines are and I believe we are positioned well to serve all ships that come to Mexico.
Énestas is involved in the creation of natural gas access and solutions in Mexico. With activities in the generation, distribution and retail of natural gas for vehicles, Énestas is working to become the preferred company for natural gas-related services.