August 09, 2019

Mexico Energy Reform Impact on Retail Market

Stratas Advisors

Mexico’s total transport fuel demand in 2018 is estimated at 1213 MBPD with gasoline accounting for 65% of the total. The share of gasoline is expected to increase to 66% in 2025 against the backdrop of rising ownership of gasoline-driven cars. Future sales of automobiles will primarily consist of gasoline-driven vehicles. We project gasoline demand to grow at a CAGR of 0.7% between 2018 and 2025. Diesel consumption comes mainly from commercial transport services, and demand growth largely depends on the performance of the economy.  Recovery in commodity exports may bolster diesel demand from both transport and productive sectors. We project diesel demand to grow at a CAGR of 0.5% throughout the forecast period.
 
Mexico’s oil product supplies from domestic refineries suffered a significant setback in recent years due to the lack of investments in refineries and the cancellation of planned investments. As a result, the overall supply and demand imbalances have grown significantly since 2015. Gasoline production will increase at a CAGR of 8.9% between 2018 and 2025, resulting in a marginal reduction in imports. However, gasoline demand will continue to outpace supply throughout the forecast period maintaining reliance on imports. Total gasoline imports are projected to decrease to 469 MBPD in 2025 from 592 MBPD in 2018. Diesel production similarly declined over the past years with full production from refineries falling to 122 MBPD in 2018.  Diesel imports, as a result, had climbed to 298 MBPD in 2018. Diesel supplies are forecast to grow at a CAGR of 10% between 2018 and 2025. Overall diesel production will reach to 238 MBPD in 2025. The following two charts show supply-demand trends of gasoline and diesel.

DownstreamGasDemandChart

Source: Stratas Advisors

DownstreamDieselDemandChart

Source: Stratas Advisors

Pemex previously had a monopoly on Mexico’s energy retail sector for decades, which is expected to change considering the Mexican government reform to open oil exploration, oil production, and the refinery product retail market to foreign investors passed in 2014. Post reform Pemex share in retail market is expected to decrease while non-Pemex will increase. Following is the expected number of retail gas stations pre and post energy reform.

Number of Gas Stations by Company

Company

2015

2018

2021

Pemex

11196

9102

7874

Gulf Mexico

0

128

1398

BP

0

400

1151

G500 Network

0

320

1056

Repsol

0

195

879

ExxonMobil

0

178

806

Oxxogas

307

539

739

Grupo Gasored

0

100

406

Chevron

0

100

381

Arco

0

149

279

Petro-7

0

185

224

CorpoGas

0

150

224

Hidrosina

0

150

214

Gruoup ECO

0

127

129

Redco

0

106

108

Gasmart

0

104

106

ORSAN

0

103

105

Shell

0

89

91

CombuExpress

0

85

87

Rendichicas

0

64

65

Nexum

0

62

62

FullGas

0

58

58

VIP Gas

0

41

41

Phillips66

0

30

30

Gasmex

0

20

20

La Gas

0

13

13

Gas Top

0

6

6

WalMart

0

6

6

Appro

0

5

5

Costco

0

5

5

Combu Red

0

2

2

Smartgas

0

2

2

Rendimax VIP

0

2

2

Source: Stratas Advisors

Market Share Pemex vs Non-Pemex Gas Stations

 

2015

2018

2021

Pemex

97%

72%

48%

Non-Pemex

3%

28%

52%

Source: Stratas Advisors

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