New Regulations Set Tall Order for Retail Maintenance and UpgradeBy Peter Appleby | Tue, 10/06/2020 - 10:29
Q: How did Petroassist see out 2Q20 and how will the rest of the year play out?
A: 2Q20 was not a great quarter. Invoicing numbers fell drastically but we are now slowly catching up. Any major event creates delays and as a result, an accumulation of work that will provide a form of compensation for the work we lost. It will never be enough to cover the amount of work that we and other industry players have lost.
The crisis caused prices to tumble and this meant both major oil companies and smaller retailers had less acquisition power. They were also influenced by the uncertainty surrounding the industry. This meant investments across the board were halted and only critical functions were performed. Any noncritical maintenance work stopped. This directly impacted Petroassist. From the perspective of our clients, this behavior is understandable: companies do not want to take risks during a crisis. Because there was less business, there was less need for maintenance. Dripping nozzles are less frequent when pumps are not being used. However, we are now seeing business return to close to pre-pandemic levels. We are waiting for more investment, not only as a result of the increase in business but because of the NOM-005-SCFI-2017 regulation that forces retailers to invest in new field pumps for those pumps that cannot be upgraded, or upgrades for those that can.
Most retailers can provide update kits, and companies like ourselves will be required to go and install those kits. Many gas station owners are considering buying completely new dispensers due to the cost of the update kits against the lifetime of older dispensers. The deadline for the regulation is in early October but it seems that many companies are counting on another extension that is not going to happen. When the regulation is applied, inspections will be carried out and companies that do not comply with the regulation will be forced to close until they have met the requirements.
If companies choose not to invest and have their retail sites closed temporarily, there will be a huge backlog for us. This is not the ideal situation because it means many retail sites will see prolonged periods of closure. We cannot hire 15 to 20 extra service technicians thinking this demand may happen and then not have work for them afterward. All we can do is receive the orders and then carry out work as quickly and responsibly as possible. Nevertheless, we have been successful in expanding our client list and have begun working with Repsol, Shell and BP, among others. We are also hoping to collaborate with Total. However, we cannot yet work with the local, national retailers because they have their own maintenance teams.
Q: Which Petroassist services remain in highest demand?
A: Maintenance services continue to provide us with the majority of our activity. This remains our core business and generates the highest revenue rates. We are industry leaders in maintenance, meaning that we respect all service-level agreements, and start working whenever we visit a station for maintenance. We provide reports and develop client communication, detailing the problems we had and the solutions we enforce. This constant communication requires a strong organization and this is where we stand out in Mexico.
We offer maintenance for our own dispensers, as well as all other major brands – there are always new advances. This means that personnel must be absolutely prepared for the job and training is therefore required. The daily work of maintenance staff has an extra layer of complexity in regard to the specifications of each station that requires maintenance. This makes strong logistics and procurements skills necessary. None of this is easy to achieve and it is not a characteristic that all companies here provide. Petroassist offers a different mindset and our clients appreciate that.
Q: How is Petroassist preparing itself for the arrival of the Diesel Exhaust Fluid/AdBlue regulation that will come into force in Mexico this year?
A: AdBlue is an additive that uses urea to reduce pollution emitted by diesel engines. Diesel trucks have a second smaller tank of about 60L that accommodates this fluid. According to the new regulation that comes into force at the end of this year, all trucks sold in Mexico must use AdBlue to reduce emissions. This is a huge opportunity for us because we have sold AdBlue tanks and dispensers for many years in Europe. We are now starting to place this product in the Mexican market and awareness from the country’s major transportation and logistics fleets is increasing.
Retailers need to have specialized tanks, which are usually in the range of 10,000L, on site for truck drivers to refill their tanks. Petroassist has manufactured these tanks in Portugal and has now transferred some of its manufacturing to Toluca, State of Mexico. It is the same blueprint, although there are some adjustments made for the Mexican market that include reduced insulation for Mexico’s temperatures. We also manufacture and install these tanks. They are effectively a “plug-in-and-play” product that needs to be connected to electricity to function.
This fluid is not yet regulated because it is not a combustible. This means that the piping for transport at a site can be made from the same materials that would be used to pipe water. However, it corrodes steel very quickly. There are also important characteristics to consider with AdBlue, like the fact it should not be kept in areas where temperatures rise above 35°C. However, many retailers keep the fluid in plastic tanks in the sun and this can reduce the quality of the fluid as well as its ability to control emissions and could also potentially damage engines. Since this is a gradual process that can take up to several years, few companies understand the potential damage of using such poorly-stored additives. Our tank is ideal for commercializing this product because it is safe and is temperature self-regulated. We believe this market should grow at the same rate that logistics companies will need to upgrade their fleet.
Q: How does Petroassist overcome this casual approach to protective measures?
A: The Mexican market tends to be more short term and focused on price. Therefore, when we approach potential clients, we do not speak about the long-term benefits of our products. Our tank offers supreme protection, including a containment barrier for hazardous waste so that the additive does not spill or overflow and a fan that turns on automatically when a particular temperate is reached. While we have had some success in approaching clients with this tank, others that we would have expected to take the storage issue more seriously have not been as committed. We have found that when some companies begin to adopt certain technologies and products, others will follow. They will see that their performance is impacted without taking up this product.
Petroassist's main activity is focused on the production, commercialization and technical assistance of equipment and systems for the distribution and retail areas in the oil industry.