Fuel pipeline will go from Mexico to U.S.

By Vicki Vaughan, San Antonio Express-News

NuStar Energy and Pemex unitto partner on project expected to go into service in 2016

Three of the four crude oil storage tanks that hold 400,000 barrels at NuStar Energy Terminal at the Port Corpus Christi where the Eagle Ford Consortium is meeting through Wednesday.

Just two months after Mexico opened its energy industry to foreign investment, NuStar Energy said Wednesday it plans to develop a pipeline in partnership with an arm of state-owned Petróleos Mexicanos, or Pemex.

San Antonio-based NuStar and Pemex affiliate PMI said the pipeline will transport liquefied petroleum gases and refined fuels such as gasoline from the United States into northern Mexico.

The deal is the first of its kind for both companies, their officials said in a statement. The terms weren’t disclosed.

NuStar and PMI will jointly pay for construction of the pipeline and storage assets, and NuStar will manage construction and operation of the system.

LPGs and refined products will be delivered from Corpus Christi and Mont Belvieu, which straddles Liberty and Chambers counties east of Houston, to Nuevo Laredo and Burgos-Reynosa, Mexico, the companies said. The project is expected to go into service in the second half of 2016.

PMI Director General José Manuel Carrera called the deal a “landmark alliance” and one of the first commercial agreements between energy companies from the U.S. and Mexico to create a joint venture focused on infrastructure.

1280x1280 2Mexico’s reforms call for major investments in energy infrastructure and encouraging foreign investment in Mexico’s energy sector, he added.

NuStar CEO Brad Barron called the planned venture “an ideal partnership” that will bring a stable supply of products to meet significant demand in Mexico.

Barron said the joint venture “is an outstanding growth opportunity for NuStar.”

The planned pipeline and related infrastructure will meet northern Mexico’s growing demand for liquefied petroleum gases and fuels, such as propane and butane, Carrera said.

Also, it would “give PMI access to multiple LPG and refined product suppliers” along the Gulf Coast.

NuStar’s units rose by $4.50, or 8 percent, to close at $59.60. NuStar has been focused on growing its stable, fee-based pipeline, storage and terminal operations after completing a restructuring last year.

While Pemex has worked with some U.S.-based energy companies since Mexico took a first stab at opening its energy market in 2008, that “was nothing like the scale of the energy reform that’s underway now,” said Tom Tunstall, research director at the Institute for Economic Development at the University of Texas at San Antonio.

After Mexico’s Congress passed legislation in August allowing foreign investment in its energy sector, there have been no impediments to ventures such as the NuStar-PMI deal.

“The gates are open,” said Jorge Piñon, interim director of the Jackson School of Geo-sciences at the University of Texas at Austin. “It’s moving quick, and that’s good news.”

The NuStar-PMI plan to deliver liquefied petroleum gases to northern Mexico makes sense because “LPGs are a very important fuel in Mexico because many homes use them for cooking,” Piñon said.

Pinon said the NuStar deal is an indication of the possibilities for U.S. energy companies.

“Mexico’s reform is much broader than most people think,” he said. “It’s not limited just to exploration of oil and gas. The whole value chain in Mexico is now open” to investments across a wide spectrum.

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