Private Sector Needed to Bridge Midstream Storage GapTue, 01/21/2020 - 20:11
Q: What are Tarsco’s main differentiators in the growing EPC market for storage terminals?
A: One of our core values is that Tarsco focuses only on the storage terminal market. We do not participate in infrastructure and other industries. We are experts in the design, engineering and procurement of terminals. We have been present in the US market for over 37 years and our human talent has more than 15 years of experience working with large companies. The biggest projects in Mexico range from US$150 million to US$180 million; our teams have the capacity and skills to handle projects that come in over US$800 million. In 2019, we want to fully develop an EPC contract. Currently, there are over 70 projects being developed and if only 10 percent of those projects were developed this year it would be a great year for the sector.
Q: What has Tarsco Mexico identified as the most challenging aspect of developing midstream infrastructure in Mexico?
A: Tarsco Mexico is a developer and not an operator of terminals in Mexico. Most developers focus on the financing aspect of the project. They work arduously to secure funds but do not place great importance on the commercial side. These companies need to close the circle of services by considering the funds, the project itself and the final user of the terminal, which in Mexico usually is not the developer. The government is now pushing to reactivate PEMEX’s assets, which will be useful, but these assets alone will not meet the country’s infrastructure demand. The country needs not only terminals but marine ports, railroads, roads and pipelines to move the product. There are many opportunities to grow and make the business more profitable. For instance, the Dos Bocas refinery will most likely not be in service in the next four years and until then, the need for private players to supply fuel is overbearing. The private sector needs to continue pushing and be more active in preparing projects and obtaining permits much more rapidly. It needs to invest to develop better locations for terminals and to support the professionalization of the midstream sector. The cost of building the refinery has doubled and capacity has also been cut so PEMEX cannot do it alone. We are not experts in refining but we know that with US$14 billion we can go to Texas and purchase refineries to continue providing oil to the Mexican market.
Q: What opportunities has Tarsco Mexico identified to work with PEMEX and boost Tarsco’s positioning in the market?
A: Tarsco Mexico, which is very healthy financially, wants to work more closely with PEMEX. In particular, we would like to partner with another company to work with the NOC and add the highest value possible. Our expertise is in the mechanical and piping business, and partnering with a company that already has experience working with PEMEX would help us provide an even better service. We believe that PEMEX needs to stabilize its objectives and strategies. PEMEX will not invest and therefore needs to open opportunities to private players to get things done. The industry has changed more than we expected in the last year. This is due not only to internal decisions but to external factors, like US customs tariffs, that have reconfigured the development strategies for projects in the Mexican industry.
Q: What could the government do to help developers and EPCs fill the midstream infrastructure gap?
A: The regulators must strengthen their presence. ASEA and CRE have evaluated many projects over the years but they do not have the capacity to be more efficient because they require people with more experience. They could be a filter for the industry and an organism that promotes the industry. When it comes to tenders, processes and terms need to be clear. Some tenders have been awarded through restricted bidding and the industry requires clarity regarding the requirements necessary to receive an invitation to these bids and who has the right to participate. It is part of the new process and the country was demanding a change in terms of transparency and corruption. From my personal point of view, the change was necessary but all changes have a cost.
Tarsco Mexico is a company specialized in the EPC of storage terminals and tanks. It is part of TF Warren Group, which has over 45 years’ experience in developing storage projects in the US, Caribbean and Mexico.