Storage Expansion to Deliver Energy SecurityBy Peter Appleby | Thu, 05/14/2020 - 14:35
Q: How has the impact of COVID-19 challenged Bulkmatic and how has the company dealt with these challenges?
A: COVID-19 has certainly presented challenges. It has impacted our business in the sense that it has caused a lower demand for fuels, because the lockdown means that people are staying home. We, therefore, have less demand for movement from rail-to-truck. Demand has decreased up to 40 percent in Nuevo Leon and in the larger metropolitan Mexico City area. These regions, as well as Hermosillo, are the areas where we are present.
At our storage facility in the Salinas Victoria terminal, clients are telling us that they are continuing with their original plans to supply Mexico’s fuel market. But as the demand decreased, our storage tanks filled up. The first three tanks we have in operation in Salinas Victoria are now full. Our clients, does not have storage capacity in their refineries nor terminals in the US. However, they are positive that in the coming months there will be a gradual recovery in the consumption of fuels. This may take three to six months or maybe more, in all cases volumes will rise in accordance with the gradual back to the new normal.
Q: What are Bulkmatic’s plans for expanding its storage capabilities?
A: The expansion project at the Salinas Victoria 2 terminal will result in up to 900Mboe of storage capacity. PEMEX in Nuevo Leon also has approx. 900Mboe capacity. Therefore, we are matching the NOC. In the first phase of the Salinas Victoria terminal, we built 480Mboe capacity, which will increase in the subsequent phases. We already have a long-term 20-year agreement in place with a client for the entire 480Mboe capacity. We are looking at options for future capacity and have had some offers, but with COVID-19 and the subsequent demand drop we will wait to see what the future holds before closing a deal.
The main driver behind our decision to build additional storage was the Energy Reform. The expansion of Bulkmatic’s storage capabilities has been four years in the making. In 2017, we started dealing with LGP that came from Canada and the US and received 2,500 railcars in the first order. This came to our Salinas Victoria, Tula and San Luis Potosi terminals. We later switched to gasoline, which is what we are dealing with at the moment.
The issues of fuel shortages last year that arrived with the fight against huachicol actually demonstrated Bulkmatic’s importance to the region. In Nuevo Leon, most of the gas stations ran out of gas. The only gas stations with product available was Mobil – one of our clients. It did run out for only a few hours but that was due that there were not enough trucks to go back and forth from the Salinas Victoria 2 Terminal to the gas stations. Even so, Mobil only ran out for a few hours, while others ran out for days.
Part of our strategy for the future is not just to develop storage infrastructure, which are huge projects and require heavy investment. Our three main projects are in Salinas Victoria, Tula and Hermosillo, but we recognize that one of our strengths is in operation. To follow this line, we want to replicate our rail-to-truck terminal abilities in small hubs in various areas. We also want to help other companies to develop large-scale storage infrastructure to operate. We therefore intend to offer our services as an O&M. This would provide us with strong and rapid growth in comparison to building facilities, which takes time and requires a larger investment.
At the moment, we are staying out of ports because that is an extremely costly area and one that is quite busy, when you look at the number of projects going on in Tuxpan, Altamira or Manzanillo it seems pretty crowded.
Q: How does Bulkmatic cover security in Mexico?
A: Bulkmatic invests heavily in security to keep products and personnel safe. We decided to put together a system, including armed security guards, all around our terminals. We conduct trust tests with potential employees on an ongoing basis, and we coordinate closely with the authorities in each of the states in which we have a presence. We oversee all of this from our monitoring center. This is a 24-hour-a-day operation that guarantees the maximum level of video surveillance and response.
Q: Where does Bulkmatic hope to grow in the next 12 months?
A: We have just signed a storage terminal contract in Hermosillo, so at the end of the quarantine we will begin construction. The final capacity should be 350Mboe. We intend to start operations there in 4Q20, just rail-to-truck, while we build the tanks. We want to have available fuel storage capacity in Hermosillo at some point in 2021. Because the area’s consumption is around 20Mb/d of fuel, we expect to capture 50 percent of the market, supplying 10Mb/d to 12Mb/d of fuel.
Another objective is to sell the remaining capacity in Salinas Victoria 2 and develop Tula. Tula is a very particular project because it is so close to the PEMEX refinery and the pipelines that come from Tuxpan toward Mexico City, El Bajio and Guadalajara. The pipeline connections for these destinations are right next to our development, so we hope clients will find this strategic position attractive.