In its ongoing open season that started two months ago, Ferropuerto Midstream has received interest to tie volumes that exceed its projected 220,000 bbl per month capacity for this fuel-by-rail terminal project, he said. The official said that the estimated overwhelming volume came from initial negotiations with U.S. oil and gas companies during the open season.

Despite the strong interest, the project has yet to take off as planned.

The company is still waiting for the final approval from the Agencia de Seguridad, Energia y Ambiente (ASEA) on an environmental revision. ASEA is a government agency. Construction for this project could only begin after the receiving the final government approval.

This project was originally expected to begin construction in April, but it has yet to do so as of late April.

Aguascalientes is located 104 miles west of San Luis Potosi, 176 miles northwest of San Jose Iturbide and about 137 miles northeast of Guadalajara. Aguascalientes is the capital of the state of Aguascalientes, and it has a population of about 1 million people. It is noted that Watco is building a rail terminal for oil products imports at San Luis Potosi, and Howard Energy Partners started up its oil products rail terminal at San Jose Iturbide in January.

The “early operation” or initial delivery of fuel into the heart of Mexico from Houston for the project was originally scheduled for November 2017, but this timetable could be delayed due to the waiting period for the environmental permit.

Ferropuerto has already tied up products shipping agreements with some U.S. companies. PMI, the main oil products importer into Mexico, could also be a player at this location down the road. PMI is the trading arm of state-owned oil and gas firm Pemex.

The first phase of the project should see a maximum delivery capacity of about 220,000 bbl per month to Aguascalientes by early 2018. The terminal will cater to gasoline, diesel and liquefied petroleum gas. Unit trains could offload products onto tank trucks as well as storage tanks on site.

The new terminal is to have a total products storage capacity of 130,000 bbl, including two 23,000-bbl tanks and two 42,000-bbl tanks.

Sources said that each unit train could deliver up to 150 tank cars of fuel. Besides oil products, the Aguascalientes terminal will also receive containers.

Ultimately, Ferropuerto has plans to increase the terminal’s fuel handling capacity to as high as 1 million bbl per month in 2020. The actual timetable for expansion will depend on market requirements and customers’ demand.

Earlier this year, industry sources had said that this Aguascalientes project was already approved by the Comision Reguladora de Energia, Secretaria de Energia, Agencia de Seguridad, Energia y Ambiente and Instituto Mexicano del Petroleo.

OPIS notes that Mexican energy reform has triggered a wave of high interest among Mexican and U.S. companies to build infrastructure in Mexico to facilitate more fuel imports and possibly lower the Mexican government’s financial burdens linked to domestic fuel price subsidies.

As seen with past hot market trends such as building out storage capacities in Cushing, Okla., and constructing new condensate splitters, not all projects will materialize due to strong market competition and project funding. The first few projects to get off the ground appear to have better economic advantages than those that are stuck in planning stages. Each regional market requirement for fuel imports and infrastructure could be saturated by new projects.

Also, new fuel import players will need to compete for market shares in Mexico with the current dominating player, Pemex, which is supported by its refinery production and imports. New players are expected to target niche markets in Northern Mexico and Central Mexico, where Pemex is not supplying fuel efficiently. These markets experience some supply shortages as a result of Pemex’s inability to deliver products to these areas consistently due to limited supplies and high logistics costs.

Mexico City is also a hot market for new players because of its large metropolitan fuel demand, but Pemex is expected to step up price and supply competition to protect its market share.

Some major U.S. refiners are currently not supplying fuel on a delivered basis to buyers in Mexico. Some are selling on a free-on-board basis or at refinery gate.

However, this may change in the near future. Some refiners are looking actively into delivering fuel to Mexico via rail and trucks, and some are looking to build terminals for waterborne deliveries.

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