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Fuel pipeline connecting Mexico City and Tuxpan shut for a third night after illegal tapping: Lopez Obrador

Highlights

Pipeline tappings are preventing vessels from offloading at Tuxpan

Seems like PMI is being less active in the market until bottleneck clears

Mexico City — Pemex's 173,000 b/d Tuxpan-Poza Rica-Azcapotzalco gasoline and diesel pipeline was shut Thursday night again after a new leak was found after being restarted earlier that day, President Andres Manuel Lopez Obrador said Friday.

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After 12 hours of repairs, pipelines are expected to be restarted on Friday morning supplying the Mexico City region, Lopez Obrador said in a webcast press conference.

As a result of this illegal pipeline tap, Mexico's fuel theft increased to 20,000 b/d on Thursday from about 3,000 b/d the previous day, he added.

To increase the reliability of the Tuxpan-Azcapotzalco and other five key strategic pipelines, the government will begin patrolling them by air, Lopez Obrador said.

In addition, the government is going to set army watch posts to safeguard the pipelines, which have a combined 400,000 b/d capacity, enough to move half of Mexico's total gasoline demand, he added.

The pipeline was attacked on Tuesday and Wednesday, preventing an efficient offload of refined products at the Port of Tuxpan. According to S&P Global Platts cFlow, six vessels are waiting to unload.

These vessels have a capacity of 228,000 mt or the equivalent of nearly two million barrels of gasoline. The vessel that has waited for the longest to offload is the Miss Mariarosa, which arrived the port on December 30.

According to analysts, it could take three to four days of consecutive days of pipeline operations to bring inventories to normal levels in Mexico's Central and Western regions, which have suffered from fuel shortages since the year began.

Starting on December 27, Lopez Obrador's administration has begun shutting down pipelines where illegal taps are detected as part of a new strategy to fight fuel theft, which caused $3.3 billion in losses to Pemex in 2018.

PMI APPEARS LESS ACTIVE IN THE MARKET

Shipping sources said that, with vessels stuck in Tuxpan in Pajaritos waiting to discharge, that PMI, Pemex's fuel marketing arm, has had to decrease their gasoline imports.

"The pipeline in Tuxpan has not resumed operations. Apparently, they will resume today. We still vessels in Tuxpan and Pajaritos a little less, like four or five. For what we know they had to cancel some shipments," a shipbroker said.

"It doesn't much sense. If you have 31 vessels waiting in Tuxpan in Pajaritos because you cannot move product internally, which one Mexican newspaper published Friday, then why bring more vessels?" the shipbroker added.

With the domestic distribution issues and the bottleneck of vessels in Tuxpan and Pajaritos, PMI has not been as active as usual in the USGC clean tanker market, which has pushed Medium Range freight costs down due to a lack of inquiry across most routes.

PMI's absence in the clean tanker market is unusual, according to a shipowner, and without the typical pull of vessels to East Coast Mexico by PMI, tonnage availability in the USGC has increased.

For example, in late December, PMI placed six vessels on subjects for the USGC-East Coast Mexico route in one day. The decrease in PMI's activity in the clean tanker market, coupled with refinery turnarounds and a lack of cargoes for Medium Range tankers, has slowed activity on the Americas clean tanker market this week and pushed freight costs downward, according to the same shipowner.

While vessels wait on the East and West coasts to discharge cargoes, demurrage must be paid to every vessel every day. According to a second shipbroker, demurrage costs for an MR in the Gulf was around $18,250/day, or 48 cents/mt per day, on December 27.

During that week, PMI placed six vessels on subjects to bring products from the USGC to East Coast Mexico. To pay demurrage for six vessels at this level, it would cost $109,500/day.

-- Daniel Rodriguez with Marieke Alsguth in Houston, newsdesk@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com