March 27, 2019 / 2:59 AM / a month ago

UPDATE 1-Kansas City Southern sees surging fuel-by-rail growth in Mexico

(Adds investment figure)

By David Alire Garcia and Anthony Esposito

MEXICO CITY, March 26 (Reuters) - The Mexican subsidiary of U.S. railroad operator Kansas City Southern expects its gasoline transport business to grow at least 15 percent by volume this year, and possibly much more, a senior executive said on Tuesday.

Jose Zozaya, president of the Mexican unit, said the railway is being approached by new fuel importers, beyond existing clients that already supply their own retail gas stations in Mexico like U.S.-based ExxonMobil Corp and France’s Total SA.

“Companies are reaching out to us that weren’t before,” he said, without naming the firms, estimating fuel-by-rail growth of 15 percent to 20 percent this year.

Kansas City Southern later said in a statement that it would invest $123 million in Mexico this year.

Zozaya suggested 2019 growth could even approach the 130 percent figure the firm registered in the year to February if new fuel storage facilities open, and if private fuel importers contract for the firm’s transportation services.

Kansas City Southern’s bullish forecasts contrast with the stated desire of President Andres Manuel Lopez Obrador to wean Mexico off imported gasoline and make it self-sufficient.

The railway company, which derives a large share of its revenue from Mexico, currently services fuel storage facilities in San Luis Potosi and Guanajuato states.

The San Luis Potosi terminal, which it partners with Watco Companies and WTC Industrial, will in April add 300,000 barrels to its daily storage capacity, from 40,000 barrels now.

“It will grow from about one train to five, six or seven trains that can simultaneously arrive, unload and leave,” said Zozaya.

Over the past two decades, Kansas City Southern has moved imported fuels from the United States for state-owned oil company Pemex.

Since a 2013-2014 energy overhaul opened up the sector in Mexico to private importers, the railway has seen additional growth opportunities.

A clampdown on fuel thieves launched in late December by Lopez Obrador, in which several key pipelines were shut due to persistent illegal taps, has also spurred growth.

While more expensive than transporting fuels via pipelines, Zozaya touted so-called unit trains that only transport gasoline or diesel and make fewer stops as a safer option, even as other cargo trains operating in Mexico have been targeted by thieves.

“The vandals take advantage when trains slow down or when they stop,” he said, pointing out that freight trains transporting containers are more susceptible to theft than fuel tankers. (Reporting by David Alire Garcia and Anthony Esposito; Editing by Lisa Shumaker)

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