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The Mexican Market for U.S. Petroleum Grows

But the 2018 Mexican election could put a kink in the hose.

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Oil company investments in Mexico have been growing, and firms such as Exxon, Chevron, and BP are planning to open direct-sale service stations in Mexico.

For U.S. oil companies, there is a growing belief that there is gold to be made in Mexico, partly because of energy reforms in Mexico and an ending of the U.S. ban on petroleum exports in December 2015.

Joe Gorder, the CEO of San Antonio-based Valero Energy Corporation, last week told a free trade group that his company is “aggressively pursuing” new business opportunities in Mexico. The energy reforms will not only allow foreign companies a greater opportunity to export oil to Mexico, but also will allow them to directly serve Mexican consumers.

“Valero does a lot of business in Mexico, but with the reforms that have been implemented, we can now not only sell the barrels to Mexico but we can control the barrels and own the barrels in Mexico and move them further inland,” Gorder said, according to the San Antonio Business Journal.

President Trump in June announced that the Department of Energy had given the green light to the construction of NuStar Energy LP’s New Burgos Pipeline to haul 108,000 barrels a day of gasoline and diesel fuel from Edinburg to Pemex’s Burgos processing play in Reynosa, replacing tanker trucks that currently do the job. While the pipeline is only 46 miles long, it is expected to improve the flow of petroleum products to Mexico.

In an aside, Trump joked about the pipeline crossing his proposed wall with Mexico. “My administration has just approved the construction of a new petroleum pipeline to Mexico, which will further boost American energy exports, and that will go right under the wall, right?” Trump said, making digging motions. “Have it go down a little deeper in that one section.”

U.S. crude oil and petroleum exports to Mexico hit a low of 6.3 million barrels a month in April 2009. The lowest monthly export number to date in 2017 has been 26.5 million barrels. In 2016 the U.S. export value was more than twice the value of energy imports from Mexico, according to the U.S. Energy Information Administration.

Oil company investments in Mexico have been growing, and firms such as Exxon, Chevron, and BP are planning to open direct-sale service stations in Mexico. Also, major offshore discoveries have been made in the past year. But much of the change has come from President Enrique Peña Nieto’s energy reforms, and he is due to leave office next year. The leading candidate to replace him at the moment is Andrés Manuel López Obrador, who is promising to hold a referendum on the energy reforms. López Obrador complains that the energy reforms have not reduced fuel or electricity prices as promised.

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