Fuel import – logistics

Tuesday, September 3, 2019

Fuel is a solid, liquid and gas substance that provides equivalent units of heat or BTU’s (British Thermal Unit), as well as energy units when it produces combustion. It is solid: coal and coke, used primarily to generate electricity and used for various industrial processes. Liquid: diesel, gasoline, turbos and fuel oil, among others, generally used for consumption of vehicle units. And gas: liquefied petroleum gas and natural gas, used domestically and industrially.

The import process for fuel is divided in 4: purchase, main transport, transfer storage and distribution.

First, the official provisions must be reviewed regarding the permits for import and the situation of international agreements. The next step is to monitor the international prices of fuel, linked to the US dollar price of crude oil and gas, primary inputs from refineries around the world.

For logistic purposes, it is important to consider the prices for fuels based on the applicable INCOTERM, the distance to be covered and the availability of connectivity infrastructure, from the point of origin to the destination in our country.

Fuels require a special handling and high visibility in all logistic processes from the points of collection at the origin to their distribution to the final consumer. For this purpose, there is a specific regulation issued by the United Nations (UN) for the handling and classification of these products. This regulation can be consulted in a compendium known as the “Orange Book”, which is published periodically in Mexico by the Chemical Industries National Association (ANIQ).

The railway transportation is one of the best alternatives to carry out operations by land over long distances for the import of petroleum products, which can be used in combination with the maritime mode.

As it is well known, Mexico’s largest supplier of refined petroleum products is the United States. It has a refining infrastructure distributed in different points of its territory.

To determine the mobility and processing of hydrocarbons is based on a classification called PADDs (Petroleum Administration for Defense Districts) which are classified as:

  • PADD 1. East Coast
  • PADD 2. Midwest
  • PADD 3. Gulf Coast
  • PADD 4. Rocky Mountain Region
  • PADD 5. West Coast

The measurement known as bbl/sd indicates the maximum number of input barrels that a distillation plant can process within 24 hours when operating at full capacity including maintenance shutdowns.

The PADD 3 district is the closest to the northern border of our country and that for the purposes of the movement of hydrocarbon imports, rail transport is the one that offers the lowest cost per barrel.

Gulf Coast (PADD 3). This area comprises the states of New Mexico, Texas, Louisiana, Alabama, Mississippi and Arkansas, and accounts for more than 50% of U.S. refining capacity and most of heavy crude oil processing capacity. It has 51 refineries in operation with a total capacity of 9.7 million bbl/sd.

The state of Texas has 26 oil refineries and has an installed capacity to process about 4.8 million barrels of crude oil per day, more than a quarter of all U.S. refining capacity.  

Within the different types of railway equipment known as Tank Cars are those of carbon steel construction that are most suitable for the movement of fuels and have different capacities both in number of barrels and in net weight to be transported. Considering the track capacities in terms of tonnage per car that can support, both those located in the United States and those connecting the center and north of our country, the most suitable type of equipment is known as the Jumbo tank car, capable of transporting up to 90 tons of product.