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Valero signs long-term refined-products supply agreement to Northern Mexico

Mexico City — Valero Energy has signed a long-term agreement to supply Mexico's northern region with refined products via NuStar's midstream infrastructure, the company said Tuesday.

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The announcement follows several other planned projects, as refiners and midstream companies look to grab market share in Mexico.

The agreement will allow Valero to move refined products to Nuevo Laredo, Mexico, from its Corpus Christi and Three Rivers refineries in Texas. Valero will supply this region via NuStar's pipeline and terminal in Nuevo Laredo by year end.

Valero already has an agreement to import refined products into Central Mexico via IEnova's Port of Veracruz terminal, as well as two inland storage terminals near Puebla and Mexico City to be supplied by rail.

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"IEnova expects the Veracruz terminal to start operations by the end of second-quarter 2019, with the inland terminals coming online in third-quarter 2019," Valero said in a release Tuesday.

Valero could not be reached for comment.

In April, NuStar announced it was expanding its existing pipeline in South Texas as well its terminal in Nuevo Laredo to supply refined products into Mexico. Refined products will be put on rail cars from NuStar's facilities at Corpus Christi, the company said at the time.

Multiple companies are looking to supply northern Mexico, which has been traditionally supplied by Pemex's 285,000 b/d Caderayta and 190,000 b/d Madero refineries. Those refineries have been operating below capacity, and as a result Mexico has increasingly relied on imported refined products.

In February, combined refined products demand in the northeastern states of Coahuila, Nuevo Leon and Tamaulipas was 171,800 b/d, with imports making up close 40% of that, according to Mexican government data.

ExxonMobil has said it is looking to supply the Monterrey metropolitan area. Oxxo Gas -- a subsidiary of giant Mexico's Coca-Cola FEMSA with a retail stronghold in Monterrey -- also has said it is looking to develop infrastructure to supply Mexico's northern region.

Kansas City Southern Mexico (KCS) and its partner Bulkmatik are operating a unit train terminal in the greater Monterrey metropolitan area.

As well, Howard Energy Partners is developing infrastructure to supply the region. In early May, the company began operating its unit train terminal in Corpus Christi.

PMI, Pemex's marketing arm, is a major customer of Howard's Corpus Christi terminal, which could have a final storage capacity of 1 million barrels, Howard has previously said.

Howard is also developing a unit train terminal at Monterrey, and the Dos Aguilas pipeline project, which will ship fuel from Corpus Christi to Monterrey via Laredo.

Mexico's Avant Energy is developing in partnership with KCS and Savage, a marine fuel terminal at the Port of Altamira in the Northeastern state of Tamaulipas, which is expected to begin operating in 2019.

In addition, Mexico's Grupo Nexum has announced it is developing a marine fuel terminal as well at the Port of Altamira, which is expected to be operational in August 2019.

--Daniel Rodriguez,

--Edited by Derek Sands,