Mexico Pemex, US NuStar to form JV to build LPG, fuels pipelines

HOUSTON (ICIS)–Mexican state energy producer Pemex and NuStar have signed a letter of intent to create a joint venture that will build pipelines to transport refined products and liquefied petroleum gas (LPG) from the US to Mexico, the US-based midstream company said on Wednesday.

The agreement is one of the first of its kind to be signed between a US energy company and Pemex, according to a statement by Jose Manuel Carrera, director general of PMI, the international arm of Pemex. It signed the deal.

It is the result of Mexico’s recent energy reforms, Carrera said.

Under the proposed joint venture, the companies will joint fund the construction of new pipelines and storage, NuStar said. NuStar would manage the construction and operations of both.

LPG and refined products would be delivered from Mont Belvieu, Texas, and Corpus Christi, Texas, to Nuevo Laredo, Mexico, and Burgos-Reynosa, Mexico, NuStar said.

The new pipelines and terminals will be integrated with NuStar’s existing infrastructure, the company said. PMI will support the project by a throughput commitment.

The companies should complete the project in the second half of 2016, NuStar said.

“This is an ideal partnership that would bring together PMI’s vast presence in Mexico’s oil and gas market and NuStar’s logistics expertise and resources to provide a stable supply of LPGs and refined products to meet the significant demand in Mexico,” said NuStar CEO Brad Barron. “This is an outstanding growth opportunity for NuStar, and our preliminary estimates indicate that this JV opportunity should be immediately accretive to the earnings of both companies once the project goes into service.”

Despite Mexico’s hydrocarbon wealth, it has a deficit of every class of hydrocarbons except for oil. The country relies on imports to satisfy 50% of its demand for gasoline.

The recent NuStar agreement followed a memorandum of understanding and cooperation signed by Pemex and ExxonMobil. Under it, the companies would explore upstream and downstream business opportunities.

Both agreements follow the signing of the reform’s secondary laws by President Enrique Pena Nieto in August.

According to the new legislation, Pemex is free to form profit-sharing ventures with private companies and foreign companies in several strategic areas, including exploration and production, transportation and refining.

The reforms also allow companies other than Pemex to produce oil, natural gas and natural gas liquids (NGLs) such as LPG in Mexico.