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Introducing Mexico`s First Private, 100 Percent Mexican Fuel-Storage Terminal

Edgar Gutiérrez - Hydrocarbon Storage Terminal (HST)
Director General

STORY INLINE POST

Fri, 09/14/2018 - 08:39

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Q: Why is there a need for a company like HST in Mexico?

A: When we started in 2014, we identified several favorable variables regarding storage and rail distribution of fuel. First, the competition lacked efficient processes. For instance, PEMEX terminals employ between 200 to 250 people, whereas we only need about 33. Second, the number of days required for storage. In Mexico we only have three days of storage, while in other countries a minimum of 30 days is required, highlighting our need for new terminals. Third, the number of nationwide terminals and the comparative cost between building a PEMEX terminal versus a private one. We found the latter could cost up to half of what PEMEX usually pays.
Every aspect of this business opportunity was enticing, with one major exception: the lack of regulation and transparency regarding the government’s plans for pipelines and if rail terminals were going to be regulated. We met with Kansas City Southern and discovered it was just as clueless as the rest of the industry. My partners and I decided to create HST with the sole purpose of introducing Mexico’s first private, 100 percent Mexican fuel-storage terminal. We formally launched the company in 2015 but could not get a permit from CRE because regulations for an operation like this were not yet in place. We built our project under PEMEX’s guidelines, hired design engineers who worked for the NOC and who are experts in NOMs. Once the rules came out in 2016, we were the third permit granted nationwide and the first ever with Service Providing Terms and Conditions (TCPS) provisions for the use of pipelines. Although new construction regulations pertaining to terminals were released some weeks after, it had a positive impact for us in the end because we were able to build a bigger terminal than we anticipated, increasing our capacity from 330,000 barrels to around 900,000 barrels, representing an investment close to US$70 million.

Q: How has HST developed its relationship with regulators and what impact has that had with clients? A: As market first-comers, several industry regulators approached us, both asking for our assistance and accompanying us on our learning curve. For instance, ASEA strongly recommended that our company be certificationspecialized to ensure our terminal’s design was compliant with industry standards. It suggested five companies and we contacted them all, but none had ever completed a certification process for a project such as ours. This input was crucial for designing a new legal framework in which certification companies could extend their reach beyond only certifying gas stations. As our relationship with regulators expanded, we were able to stay in the loop regarding the industry’s latest developments. 
Regulators are always in need of an overview from the entire value chain: terminals, gas stations, traders and shippers, to mention a few. We are happy to contribute. Our TCPS permit enabled us to participate in the Custody Transfer regulation on invitation from the Mexican Energy Council (COMENER). These constant interactions with Mexico’s energy regulators gave us the edge when talking with our clients as we pioneered Mexico’s first private terminal.
Q: What is HST doing to enhance Mexico’s inventory capacity for gasoline reserves? A: Increasing Mexico’s inventory capacity to the international average of 10 to 15 days means allocating additional, untouchable resources. There is also pressure from traders, shippers and gas station owners that are adamant in opposing inventory increases while terminals and regulators are favorable. PEMEX is in the middle of it all, without sufficient funds to build more terminals. Compromise is key. From an energy security standpoint, our three to five days of inventory is unacceptable. Countries such as Spain, Japan or even Peru have 90 days, while the world average is 30. I believe a gradual increase in our capacity is the way to go. HST remains connected to the process, providing our input when regulators seek modifications. We even advised a geographical restructuring to this end.
 

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