Guilibaldo Pérez
President
Tytal
/
View from the Top

Transportation Arena a Storm of Opportunity

Wed, 01/18/2017 - 16:21

Q: What opportunities does Tytal see in the Mexican oil and gas market? A: There are seven companies in Mexico competing in the transportation arena. Tytal is the only one working with 100 percent Mexican capital and AAR certification to perform both minor and major refurbishing and repairs as well as to manufacture and certify rail and auto tanks. Given the market’s opening, the ever-increasing demand for energy resources and the lack of infrastructure, we are in the eye of an opportunity storm.

New players in the wholesale market want affordable transportation units. Tytal has embarked on the task of delivering transportation means that are both economical and high-quality. Energy resources have similar transportation costs regardless of whether they are produced inland or imported by ship or pipelines. Once these resources are in the deposit units they need to be transported to the final destination. With an aging and limited infrastructure, transportation costs will be a critical and differentiating factor in the market. Mexico has an average daily requirement of 500 million liters of both gasoline and diesel and regulations require companies to keep 15 days of stock, opening a total investment opportunity of US$30 billion. Apart from Mexico, the US, Russia, the Middle East and Asian companies are also looking to invest here.

Q: Is Tytal looking for opportunities to diversify its product portfolio?

A: Tytal is certified to manufacture not only rail and auto tanks for the transportation of energy, food and building industry products but also storage tanks. We want to increase our presence in both areas. The biggest commercial storage units in the private sector can store around 3 million liters and several small competitors are joining forces to install such units so they can compete against larger firms entering the market. The expectation is for Mexico to have 7,000 new gas stations within five years, with brands such as Shell, Exxon Mobile and many others.

Q: Are Tytal’s rail and auto tanks ready to work in both the US and Mexico?

A: US rules are very strict, which is why American DOT certification is used as a benchmark for all other regulations. Even in the US there are American companies that have not complied with DOT regulations and that is why we have an internal policy of always prioritizing investments in training and certification that allow us to comply. Tytal achieved a major milestone by getting both DOT and DIN-certified, which allows the free movement of our transportation units in both the US and Mexico. This could mean losing some load capacity but the tactical advantage that our clients achieve by having units that can move in both countries is a major advantage in a liberalized market such as the one Mexico has established.

Q: What added value does Tytal offer its customers?

A: We are always looking to improve our products and we enjoy the challenge of tailoring new designs or meeting requests for re-engineering. Tytal has engineering and quality departments that work closely together to achieve ambitious goals and deliver products certified under regulations such as ASME, AAR, NBBI, DOT and the MC-331 certification for hazardous materials transportation. Our commitment has allowed us to export transportation units to Saudi Arabia, Colombia and the US. We cannot deliver bad quality because that would affect our worldwide presence and business. Every customer must receive the same high-quality product because if one of our tanks fails anywhere in the world, every other region would know about it and raise an alert regarding the units that are at work in the country.

We are also the only auto tank company with its own production line. Using engineering software from SolidWorks, we can design, load and apply stresses in our draft designs to quickly check for failures, correct if necessary and send the final design directly to the manufacturer, resulting in shorter production times and increasing our competitiveness. Customers are in pursuit of high quality, low prices and fast delivery times. Other companies have tried to replicate our products but they do not have the same high standards, design competencies and highly qualified workforce that we have, resulting in them producing low-quality products.

Q: Which of Tytal’s projects showcases the company’s engineering services?

A: One engineering development we are working on is a 40,000m3 auto truck, which is an improvement from the 20,000m3 auto truck we currently offer. We want this auto truck to have two sections to carry two kinds of products, which means it must comply with more regulations. Such development requires coordinated efforts between lawyers and engineers to produce an auto truck that complies with all the requirements and laws that will allow it to be driven in cities and on highways in both the US and Mexico. This is a challenge but such an accomplishment would allow us to offer a higher value and range of services to our customers.

We have also designed an insulated rail tank that maximizes the amount of product that can be transported. Traditionally, insulating a tank greatly reduces the amount of product it can hold, dropping from a capacity of 30,000 gallons without insulation to 25,000 gallons. Thanks to our engineering efforts we were able to maximize its carrying capacity, achieving up to 29,000 gallons and therefore offering more savings to the client.

Q: What challenges is Mexico, and specifically Tytal, going to face in the coming years?

A: There is a serious lack of infrastructure in Mexico. Rail companies such as Ferromex and Kansas City Southern are already investing but this will likely fall short of the country’s needs in the coming years. They should have started preparing earlier but that is not their fault. The government should have published all the regulations two years ago so companies could know what was coming. Because the process took so long, companies were afraid it would not materialize and they were reluctant to start investing. Now everyone wants a license to enter the wholesale market but licenses demand many requirements that cannot be met right away. An example is the case of ship-imported oil. Ships need to be discharged as soon as they hit harbor because costs skyrocket every minute they are stopped. Without proper infrastructure the only option is to discharge everything to rail and tank trucks. This, of course, represents a major opportunity for Tytal.

There will be a lot of movement in the northern region of Mexico due to its proximity to the border, and most orders will be directed to the country’s central region. Cities like Houston already have massive deposit tanks that make them first-class transaction centers. Mexico has a strong automotive infrastructure and we already produce auto tanks to allow the mobility of energy products along its highways but with an ever-increasing need for these products railroads will become crucial.