Carlos Ortiz
President and CEO
CAXXOR Group
/
View from the Top

Modular Refining, Logistics Key to Connecting LATAM Region

By Peter Appleby | Wed, 09/23/2020 - 10:39

Q: How has CAXXOR Group participated in Mexico’s oil and gas industry?

A: CAXXOR Group is involved in a host of industries, many of which are connected to oil and gas. The group’s investors have a range of 54 different operations to invest in and at the moment, we are focused on two main areas in Mexico. First, logistics systems that are related to oil storage and energy, with a particular interest in modular refineries. Second, we hope to be involved in a natural gas project but there is no set date for that yet, and we are not involved in any part of the upstream sector.

CAXXOR Group is involved in four logistics projects related to oil and gas in Latin America. One is to connect the north of Mexico with the US, another is to connect southern Mexico with Central America, another is in Colombia and the final one is located in Ushuala Port at the southern tip of Argentina. Our refinery projects are focused around the links we have with a number of oil and gas players in Mexico. We have eight serious private modular refinery projects in the pipeline that will expand the refining potential of Mexico and across the region. Modular refineries have been popular regionally and we believe they will fit well into the Mexican market.

 

Q: What will be the capacities of your four Mexican storage facilities?

A: Our Chiapas project is the one that has grown most rapidly. When the project began, we expected to have a capacity of around 600Mboe of storage, most of which was to be dedicated to diesel storage. However, the project has now grown and we will have capacity for almost 1 million boe of diesel. There is also storage exclusively for vessels of around 200Mboe. In Veracruz, we will be constructing storage capacity of 600Mboe. In Soto La Marina, capacity will be close to 1 million boe. We also have a smaller project on the Nuevo Leon border where 100Mboe will be stored. Each of these storage projects is located in ports and will help build the country’s storage capacity. At present, there are around 70 storage projects in the country.

 

Q: How will these projects help the local economy and communities?

A: Each one of our storage projects will generate employment for local workers. On average, we expect each project to generate 3,000 jobs. But because these projects are based in ports, the social impact is multiplied by four to seven times, according to our predictions. This is because other projects located around or close to the ports, including industrial parks and warehouses, will be built or strengthened. This means that the port becomes an industrial hub empowering the local economy, which benefits from the investment that is poured into the local area.

Our projects are involved in oil and gas and are rather complex. Although we say that we are involved in four projects, the number is really higher. One project is the portside area for the arrival of ships, another is the industrial terminal site itself and the other is the development of the industrial parks associated with the port in general. Added to this, we have the necessary logistical system to surround the port. In Chiapas, we have received letters of intent from a variety of original equipment manufacturers in the automotive sector to install factories close to the port. Mexico has a huge deficit in port area development and this is an area where projects like ours can help.

 

Q: What advantages do modular refineries offer over traditional, large-scale models?

A: We are betting on modular refineries and believe this will be a unique technological contribution to the country. Modular refineries provide a number of technological benefits for Mexico and have been proven successful in other countries in Latin America.

We have almost all the permissions we require for the construction, except for the SENER permit. In Tamaulipas and Matamoros where the projects are more advanced, we have made some small changes to our original plans. This means that we have had to adapt the permissions but we hope to have them approved by the end of the year. CAXXOR Group’s goal is to be among the first companies to receive permission to build a private refinery and we intend to reach that objective.  But we do not want our refineries to simply be token assets. They will contribute to Mexico’s private refining capabilities. Therefore, our refineries will be refining between 20Mboe/d and 40Mboe/d. A modular refinery that can process 20Mboe/d costs approximately US$250 million plus the infrastructure that we will have to install around the site. This is a large investment that we believe will total about US$350 million. We have a working relationship with a Mexican company called Refmex, which wants to have six refineries in Mexico. We chose to support the company with two of its refineries in Mexico, as well as others in other countries of the region. We believe that diversifying the risk between countries makes for a more attractive investment for investors and builds a stronger distribution network.

 

Q: What opportunities has that the company identified in private refining?                                 

A: The growth of investment into oil and gas in Mexico and the introduction of private players in the upstream segment means that the country will have ample strength in production. However, this is not necessarily the case in the export of refined goods. The lack of storage on a global level, and particularly in Mexico, added to the problems that led to the price crash. In that sense, there is clear opportunity for a series of strategically placed modular refineries and storage terminals to fill gaps in the Mexican market. CAXXOR has chosen the locations of its projects for strategic reasons that take into account our logistics plan across the region. There is a need for infrastructure in logistics, which we believe we can fill.

The technology behind the modular refineries means that construction is extremely quick, ready within two years, and that investors can recoup their investment in about four years. This is far more attractive than investment in other infrastructure, for example a freeway, which has an ROI of at least eight years.

 

Q: How does CAXXOR Group rate Mexico’s regional competitiveness in the new normal?

A: In regard to investments, Mexico is attractive for the long-term future. This is due to the emerging nature of the country, its young population and its geographic location. 

For the short term, there are other countries that may be more attractive to investors. Short-term projects are where Mexico loses some competitiveness against other countries.

CAXXOR Group believes that Mexico could be more aggressive when it comes to attracting investment. Due to the global situation caused by COVID-19, other countries, including developed countries, are having to attract outside investment. This, together with the country’s credit rating, will mean that Mexico must redouble its efforts to attract investments. A lack of investment may not be seen this year but the investment landscape in 2021 could certainly be more difficult. Latin America remains an attractive region generally, and it is an exciting time.

 

CAXXOR Group works throughout Latin America financing major infrastructure projects that generate development across the region and strengthen commercial opportunities.

Peter Appleby Peter Appleby Journalist and Industry Analyst