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GASOLINE OUTDOOR, OPPORTUNITY THAT KCSM USED

During the month of January there was a crisis of shortage of gasoline. More than 10 states were affected by the Mexican government’s plan to combat huachicoleo, a strategy that sought to reduce the theft of hydrocarbons. A strategic part of the plan was to close the valves of the pipelines that transport gas, crude oil and gasoline, which generated problems with the supply of fuel. In Mexico City, 85 of the 400 gas stations registered a problem. Mexico has 17,000 kilometers of pipelines belonging to Petróleos Mexicanos (PEMEX) and it is in these networks that the theft of hydrocarbons mainly occurs. In 2018, these robberies cost the Mexican state 60 billion pesos.
Thanks to the energy reform of 2013, the Mexican oil sector was opened to private investment, allowing various companies to sublease Mexican pipelines, which generates considerable savings in transportation costs, that is, it was possible to generate competitive conditions. But with the closure of these, they had to find another alternative to transport gasoline. PEMEX, where appropriate, reorganized its supply chain by transferring thousands of liters of gasoline in pipes. This shortage represented the first crisis of the government, however, a company took advantage of this crisis and managed to use it in their favor, increasing their sales.
Kansas City Southern de Mexico (KCSM) is a railway company dedicated to the transport of cargo and was used as one of the safest and least expensive options -including the pipes- to deal with the shortage of gasoline. This company is one of the most attractive options for the market – given the lack of private infrastructure to store gasoline and transport it via pipelines – and is investing to have a storage center in San Luis Potosí that will have a capacity of 300 thousand barrels . In such a way that the savings in the transportation of gasoline can reach up to 25% in relation to the use of pipes, besides that this option represents a safer option compared to the use of pipelines.
KCSM has a strategic alliance with ExxonMobil, a Texan oil company, with which it imported a total of 2.6 million barrels between 2017 and 2018. In February, in response to the crisis, KCSM had an increase of 135% in the volume of imported gasoline through their trains. And, according to the president of KCSM, José Guillermo Zozaya, it is expected that imports will continue to rise as companies -mainly international- do not want to have a shortage problem again; for what he has already added to Total S.A. as a new customer.
One of the advantages that KCSM presents is that its network is international, which places it as a leader in rail transportation of gasoline in Mexico. In addition, it has an adequate infrastructure for the use of advanced technology and is part of the Asset Health Strategic Initiative, which seeks to reduce mechanical service interruptions, improve the quality of wagon inspection and increase the efficiency of railway workshops. They also use 400 drones to monitor the most conflictive routes and monitor all trains through multiple security filters. These security measures have allowed the company to only have 0.02% vandalism.
In this way KCSM was able to take advantage of the crisis of the huachicol and was placed as the safest and most economical option for the transportation of gasoline. All thanks to an advanced security strategy, the use of technologies and the correct implementation of international protocols in the field.

Do you need help to see find opportunities in the midst of crisis? Write to info@riesgospoliticos.com.mx to provide you with the advice that your company requires.

 

Photo by Samuel Fyfe on Unsplash

EXXONMOBIL, LESSONS TO TAKE ADVANTAGE OF THE CRISIS

Since the Energy Reform of 2013, the oil sector in Mexico has been opened to private investment, both domestic and foreign. One advantage that this reform presents to investors is that of logistics. Companies can sublease Mexican pipelines – which saves them considerable transportation costs – and Pemex, in turn, gets a steady stream of revenue.

Thanks to this scheme, the large foreign oil companies have managed to occupy 30% of the hydrocarbon market in Mexico. However, according to a Forbes report, 95% of them directly buy Pemex oil products that, once processed, trade and sell directly to users. However, if a company depends on Pemex’s infrastructure for its own operations, it also absorbs its risks. Anticipating this situation, ExxonMobil decided to invest in its own logistics network, hire independent carriers and import fuel extracted from the United States. Thus, it is clear that a central part of ExxonMobil’s strategy in Mexico is not to depend on Pemex’s infrastructure, which adds value to its services.

ExxonMobil transports fuel via train from Texas to El Bajío. In this region the fuel is stored since that is where most of its gas stations are located. Subsequently, it is distributed to each locality through independent transporters. In addition, Exxon plans to diversify its supply network by sea instead of increasing ground transportation.

It is worth noting that a fundamental part of ExxonMobil’s business strategy in Mexico is the Demand Response Team, whose mission is to manage risks in the country and mitigate problems arising from Pemex’s operations. Thus, the Demand Response Team was created to deal mediately and operationally with the damages of a crisis, but strategies were also proposed to mitigate the damage in anticipation of a crisis. This team is part of the risk unit of the oil company called Operations Integrity Management System and was essential to overcome the crisis that caused the closing of pipelines of Pemex for the combat the ” huachicoleo “.

This risk management group is made up of 40 people, with operations in both Mexico and the United States and, in this case, had the task of addressing the interruption in the supply of fuel in Mexico as quickly as possible. Thanks to crisis mitigation strategies and the fuel logistics network sold by ExxonMobil stations in Mexico, the oil company increased its sales in the Bajío, a region in which most Pemex-dependent gas stations ran out of fuel.
Before the shortage, ExxonMobil moved to its Bajío storage centers enough inventory to continue operations for 20 days. In the same region, Pemex only had inventory for less than three days.

During the shortage, one of the gas stations of ExxonMobil published a tweet that said the following: “Shortage? In Mobil stations we do not have that problem, “with an image of a pipe filling the gas station. Given the sense of panic in the general population, this type of communication favored that various media presented to ExxonMobil under headlines such as: “The company that is saving Guanajuato from cases of shortage” or “Keeps Exxon constant supply”, which positioned the mark remaining in the mind of the users who did not find fuel in the stations of the competition.

Do you need help to organize a risk unit in your company? We help you, write to info@riesgospoliticos.com.mx .

A SUPER BOWL WITHOUT GUACAMOLE?

Without a doubt, the Super Bowl has become a national holiday in the United States. Its popularity has made it the most anticipated sporting event of the year and its fame has been extended beyond its borders. Added to that, the figures that surround the event also make it one of the most expensive events in the United States. In 2017, 418 million dollars were generated in advertising; companies came to pay up to 5 million dollars for 30 seconds of airtime during the event, not to mention the production costs of the commercial itself.

On the other hand, beyond the sporting field, the Super Bowl is one of the most anticipated events for Mexican avocado producers. During the game, Americans consume more avocado than any other day of the year; According to figures from ProMéxico, 15 days before the game, about 40,000 tons of avocado are exported. During the week of the Super Bowl , consumption reaches about 100,000 tons, which corresponds-roughly-to about 290 million pieces.

By virtue of these figures, the importance of the Super Bowl for Mexican avocado producers is clear . In 2017 alone, Mexico consolidated its position as the world’s leading avocado producer with nearly 2,000,000 tons of the product. According to SAGARPA statistics, the United States is the main market for Mexican avocados; reaching purchases of up to 85% of national production.

The US market has become so important to avocado growers that in 2013 the Mexican Hass Avocado Importers Association (MHAIA) and the Association of Producers and Packers of Mexico (APEAM) founded “Avocados From Mexico”. This non-profit organization is responsible for promoting the consumption of Mexican avocado around the world and coordinating marketing activities to broadcast commercials during the Super Bowl .

However, the economic spillover generated by the Super Bowl to the Mexican avocado industry was about to be lost. At the beginning of the year, the plan of the current president, Andrés Manuel López Obrador, was launched to combat fuel theft, the so-called ‘huachicoleros’. The strategy was to close the valves of some of the 13 oil pipelines of Petróleos Mexicanos (Pemex) to prevent bands of fuel thieves from extracting gasoline from the pipelines. The foregoing caused the interruption of the supply of gasoline throughout the national territory, including the state of Michoacán. The origin of this crisis was not the lack of fuel but the lack of logistics to distribute it in the affected states.

The Ministry of Economic Development of Michoacán estimated projections for losses exceeding five billion pesos. The fuel shortage caused uncertainty in the ability to meet delivery dates avocado supply shortages, low productivity and absenteeism.

However, the APEAM, on its website, announced that land transportation of shipments of avocado to the US. UU They have been done normally. The association highlighted that the trucks that transport the avocado use diesel as fuel, which has not suffered from shortages; however, there is concern if the situation of fuel shortages worsens. As noted, complications have been found to move the crops from the orchards to the packing houses, since this equipment does use gasoline as fuel.

It seems that this time, the avocado industry is avoiding falling into a million-dollar crisis. However, we can not lose sight of the fact that on many occasions the political risks are very complicated to foresee. The decisions of actors in the government can lead to companies of all kinds falling into crisis, even entire sectors. The affectation caused by the slow replenishment of fuel continues being an alert on the complications that the national productive sector can face with the decisions – not consulted with the businessmen – of the so-called fourth transformation.

However, crises always represent an opportunity to learn and improve. The avocado industry has the opportunity to rethink its distribution and export strategies to be better prepared before scenarios such as the one already lived.

 

Riesgos Políticos, SC, can support that your company is better prepared in the face of crises caused by political decisions, please contact us at info@riesgospoliticos.com.mx .

 

Photo by HENCE THE BOOM on Unsplash