ECONOMIC VALUATION FOR THE ESTABLISHMENT OF AN ULTRA LOW

SULPHUR DIESEL DISTRIBUTION NETWORK IN MEXICO – A POTENTIAL

PARTNERSHIP WITH PEMEX

Hector Eduardo Ceniceros Uribe

BSc Civil Engineering, Universidad Autónoma de Chihuahua.

BSc Topographic Systems Engineering, Universidad Autónoma de Chihuahua.

A final project submitted in part fulfilment for the degree of Master of Science in Oil
& Gas Enterprise Management at the University of Aberdeen
July 31st, 2018

DECLARATION
This final report is my own composition and has not been submitted previously for
any other degree. Where the work of others has been utilized this has been clearly
indicated and the sources acknowledged.

HC

Hector Eduardo Ceniceros Uribe

July 31st, 2018

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This page is intentionally left blank.

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Contents
i - Table of acronyms and abbreviations ...................................................................................................... 4
ii - Abstract: ............................................................................................................................ 5
I - Introduction:....................................................................................................................... 6
II - Context ............................................................................................................................. 7
II.A - What is ULSD and why does it matter? ................................................................... 7
II.B - Current ULSD available according to Mexico’s legal framework ........................... 8
II.C - Pemex’s current position and outlook ....................................................................... 8
II.C.1 - Refineries Status................................................................................................. 9
II.C.2 - Petroleum-Derivates Sales Revenue ................................................................ 10
II.C.3 - Investment Outlook .......................................................................................... 11
II.D - Potential competitors .............................................................................................. 11
III - Establishment and operation of a fuel distribution business ......................................... 11
III.A - Open Access to Pemex’s distribution infrastructure and its status – A
partnership opportunity ................................................................................................. 12
III.B - Infrastructure outlook......................................................................................... 12
III.C - Risk assessment ................................................................................................. 13
IV - Collected Data and methodology: ................................................................................. 14
IV.A - Current Market Trends .......................................................................................... 14
IV.A.1 - Size ................................................................................................................. 14
IV.A.2 - Supply and demand ........................................................................................ 15
IV.A.3 - Growth Forecast ............................................................................................. 17
V - Economic model-building .............................................................................................. 17
V.A - Bid Proposal for Pemex’s infrastructure ................................................................ 17
V.B - Key assumptions ..................................................................................................... 18
V.C - Sensitivity analysis ................................................................................................. 19
VI - Interpretation and results: ............................................................................................. 20
VII - Discussion:................................................................................................................... 21
VIII - Conclusions and recommendations: ........................................................................... 22
IX - Acknowledgements: ...................................................................................................... 23
List of figures and tables ...................................................................................................... 24
References ............................................................................................................................ 25
Appendix 1 Cost/Benefit Breakdown of ULSD usage 2018-2037....................................... 28
Appendix 2 Potential Competitors – Fuel Imports ............................................................... 29
Appendix 3 Potential Competitors – Fuel Transport and Distribution ................................. 30
Appendix 4 CRE Protocol for applying for licenses ............................................................ 31
Appendix 5 Operating a Fuel – Distribution Business in Mexico ........................................ 32
Appendix 6 Mexican Diesel Fleet by State (2016)............................................................... 33
Appendix 7 Economic Model Cash- Flow ........................................................................... 34
Appendix 8 Oil Products Infrastructure (SENER) ............................................................... 36

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i - Table of acronyms and abbreviations

# Acronym/Abbreviation Description
1 Banobras National Bank for Construction and Services
2 CAPEX Capital Costs
3 CNH Hydrocarbons National Commission
4 CO Carbon Dioxide
5 CONACYT National Council on Science and Technology
6 CRE Energy Regulating Commission
7 E&P Exploration and Production
8 EPA Environment Protection Agency (United States)
9 ICCT International Council on Clean Transportation
10 IEPS Production and Services Tax
11 IMCO Mexican Institute of Competitiveness
12 IMT Mexican Transportation Institute
13 INEGI National Institute of Statistics and Geography
14 Km Kilometre
15 Mbbl Thousands of Barrels
16 Mbbl/day Thousands of Barrels per day
17 MM Millions
18 MXN Mexican Peso
19 NAFTA North American Free Trade Agreement
20 NOC National Oil Company
21 NOM Mexican Official Norm
22 NOx Nitrogen Oxides
23 NPV Net Present Value
24 NRS National Refinery System
25 OPEX Operational Costs
26 Pemex Mexican Petroleum
27 PM Particulate Matters
28 ppm Parts per million
29 SCT Secretariat of Communications and Transportation
30 SEGOB Secretariat of the Interior
31 SEMARNAT Secretariat of Environment and Natural Resources
32 SENER Secretariat of Energy
33 SIE Energy Information System
34 ULSD Ultra-Low Sulphur Diesel
35 USD United States Dollar

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ii - Abstract:
The paper starts by giving context of Mexico, and its main traits relevant to its diesel fuel
consumption, such as its highways, heavy duty fleet, main consumer sectors, and general
demand over the commodity. By now it is common knowledge that fossil fuels have
shown as being harmful to both the environment and public health sector, so complying
with new international-regulations in clean fuels is a step that the country must take in
order to best try to reduce its emissions and cope with the impacts the usage of fossil fuels
has had over its habitants’ public health.

After its 2013 Energy Reform, the country passed several bills to make the effort of
supplying the cleaner fuels the country demands, but despite these efforts the domestic
market has not seen its results, so an analysis on the current National System of Refineries
is done, plus its expected investment and growth so a scenario can be set up.

Through several publications, open conferences and other means, Mexico’s National Oil
Company, Pemex has made public its interest of seeking business partners to optimize
the profitability its downstream subsidiaries, thus this paper builds an economical bid
proposal to the NOC with an win-win alternative for allowing a third-party company the
full operation of its downstream infrastructure, by paying Pemex a Barrel-Kilometre
based commission on transportation and a Barrel-Day commission on its storage
infrastructure.

As an illustrative instrument, a simple 20-year period economic model is built by

gathering data published by the country’s National Energy System (SIE) and the Energy
Department (SENER), which both collect historical figures from the last few years and
project them into the foreseeable future based on the anticipated growth of the country.
Plus, the missing information is assumed by creating the previously mentioned bid
proposal to Pemex.

Though several strong assumptions are built in the analysis, and since there is no accurate
methodology of measuring them, such as political instability due to the new president
elect, the actual availability to gather millions of barrels of ULSD from the United States,
and an assumption that Pemex would 100% to the proposed business model, other
conservative measures are taken as a mean of counter-balancing the unknown effects the
first ones might have in the eventual results.

The end-note of the hereof paper is the economic justification of considering making an
investment in Mexico, which brings a potential of billions of dollars in revenue over a
20-year period, by means of building a partnership with Pemex, plus the
recommendations and sensible variables to considered if the risk is to be taken.

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I - Introduction:
Mexico is a country with an extensive land-coverage of 1,960,189 km2 (INEGI, 2008),
with a high demand for transporting goods. The transport industry is considered to be one
of the biggest ones in the country, contributing to 9.3% of their GDP in 2017 (SCT, 2018).
Furthermore, Mexico does not count with a developed railway infrastructure, so the most
used way of transport is highways. The country currently has 180,606 km of paved
roadways and 150,758 km of non-paved ones (IMT, 2017). In addition to that, the most
used type of vehicles used for this matter are diesel-powered ones because of their big
load capacity, durability and fuel-efficiency, registering a fleet of 1,169,414 diesel
vehicles in 2016 (INEGI, 2017), with a consumption of 397.75 Mbbl/day (SENER, 2018).
However, the use of diesel-powered vehicles highly contributes to the emission of
nitrogen oxides (NOx), carbon monoxide (CO), and other environmentally and health
pollutants. Thus, controlling diesel-powered vehicles emissions has the potential to highly
improve air quality and help mitigate impacts on climate, and human health (Zavala, et
al., 2017).

In order to push the country’s effort to do so, after the Mexican Energy Reform was
approved in 2014, and in alignment to fulfil to their greenhouse gasses emissions
commitments laid out in the 2015 Paris Climate Accord, major changes/updates both in
the Mexican legislation and legal frameworks were approved. This allowed independent
parties to participate in the oil industry’s supply chain, from exploration and production
all the way to import, transportation, distribution, storage and sale of fuels.

The first relevant update in legal framework relevant to this was the update of Official
Mexican Norm from the Secretariat of Environment and Natural Resources
(SEMARNAT) NOM-044-SEMARNAT in 2014 and later in 2017. This norm’s main
objective is to regulate greenhouse gasses emissions from internal combustion engines
installed in heavy duty vehicles (overall body weight bigger than 3,857 kg) which sets
new fuel standards to comply with either the U.S. Environmental Protection Agency
(EPA) 2010 or Euro VI standards, both of which set a maximum allowable sulphur
content on diesel of 15ppm. Secondly the Commission of Energy Regulation was created,
and so its NOM-016-CRE which sets December 31st, 2018 as a deadline for all diesel-
distributors to comply with the maximum 15ppm sulphur content limit.

However, despite the approval of these two norms, the Mexican refineries have not yet
been capable of supplying the growing demand of ULSD the country currently has,
mainly because the cost of updating their infrastructure and technology rises to $3,089
Million USD (BANOBRAS, 2018), money which Pemex does not has available for
expenditure, at least for the downstream sector, since they’re historically been more
focused on E&P.

As a measure of coping with its limited budget for refining and logistics subsidiaries,
Pemex through a new announcement called open season has opened the market for
bidding the operation of its already available infrastructure1 resulting in an attractive
opportunity for foreign investment to operate their pipelines, but also is seeking for
commercial partners to venture in for the domestic production of ultra-low sulphur fuels
(PEMEX, 2018).

1
http://www.dof.gob.mx/nota_detalle.php?codigo=5422482&fecha=12/01/2016

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Thus, the niche for commercializing ULSD in the country, either by one company’s sole
effort, or by venturing with Pemex appears to be a substantially big market opportunity
for fuel distribution companies, complying with both the need of availability of the fuel
needed to reduce emissions, and allowance to vehicle manufacturers to offer their most
recent products, eventually giving the end-user the best alternatives for their operations.

The purpose of this paper is to analyse new market opportunities this has unveiled,
particularly the establishment of an ultra-low sulphur diesel (ULSD) distribution network
using the country’s current infrastructure network by building an economic model with
publicly available data published by different government agencies and companies such
as INEGI, SENER, Pemex, CNH, and CRE.

II - Context
This section will lay out the importance of having a ULSD fuelled fleet in such a big
country, followed by an insight on the current availability for end-users, Pemex’s current
position, other potential competitors who have set their eyes on the market, plus a brief
risk assessment of the fuel-trafficking cartel commonly known as “huachicoleros”.

II.A - What is ULSD and why does it matter?

ULSD, also known as “white diesel” is a cleaner fuel that has been refined to an average
sulphur content of 15ppm or less, which is 97% less than regular Pemex diesel (500ppm)
and which has shown to reduce particulate matters (PM) and oxides of nitrogen (NOx)
emissions, up to 98% and 96% respectively, resulting in both public health and
environmental benefits (Miller, et al., 2014). To put this in context, the country’s current
fleet of heavy duty vehicles represents only 15% of the total internal combustion engines
in the country but contribute to 81% overall of PM emissions (IMCO, 2015).

Since this is a different type of fuel than regular Pemex diesel, it is important to note that,
due to being a more refined fuel, slightly different technology needs to be implemented
for storage, dispense and usage of ULSD, resulting in a marginal increase in costs
(Blumberg, et al., 2014).

Prior to the update of NOM-044 in 2014, the ICCT (International Council on Clean
Transportation) carried out a cost-benefit analysis of implementing the countrywide usage
of ULSD in diesel vehicles and concluded that the overall benefits go as high as $133
billion USD, consisting mainly on public health and environmental benefits for the period
of 2018-2037, For more detail See Appendix 1.

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II.B - Current ULSD available according to Mexico’s legal framework

All fuel diesel sold in the country shall comply with a 15ppm sulphur content firstly for
the Country’s Northern Border, Mexico’s Valley, Guadalajara and Monterrey
Metropolitan Zones as well as all diesel imported to the country and diesel supplied in
the following eleven main corridors (SEGOB-CRE, 2016).

Main Corridors

1. Mexico City - Mexicali

2. Mexico City - Nuevo Laredo
3. Mexico City - Tampico
4. Mexico City - Mérida
5. Mexico City - Lazaro
Cárdenas, Michoacán
6. Mexico City - Acapulco
7. Mexico City - Matamoros
8. Mexico City - Monterrey
9. Minatitlan - Oaxaca;
10. San Luis Potosí - Durango
11. All highways leading to
Guatemala 500 km

Figure 1 NOM 016 ULSD Supply Chain Diagram (IMCO, 2015)

The rest of the country can still comply with the 500-ppm limit. However, by December
31st, 2018 all diesel sold in Mexico shall comply with the 15-ppm limit (SEGOB-CRE,
2016). Nonetheless, this same norm establishes on its 5th transitory article that, up to
September 2018 CRE, may revise the market conditions and (if necessary) establish
temporary exclusion zones in which supply of regular Pemex Diesel shall still be allowed
(SEGOB-CRE, 2016). This clearly creates a loophole and incentive for the Pemex to not
comply with the new regulation and keep putting aside the update on its refineries, at least
until further notice and until new and stricter frameworks are established, furthermore, at
least of the time of this paper being written, the actual availability of ULSD in the marked
areas of Figure 1 is not 100% accurate.

II.C - Pemex’s current position and outlook

Even though the Mexican market has recently opened its doors to new players, the biggest
one is still Pemex, and will continue to be so at least for the following years. Thus,
gathering intelligence on its current position is valuable. Pemex has at its disposal a
complete distribution system which has been used for the last decades non-stop. However,
production, storage and distribution requirements for ULSD slightly differ from regular
Pemex diesel standards, and the company does not currently own with this more modern
infrastructure (IMCO, 2015), such as refineries, tankers and disposal stations, etc.

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II.C.1 - Refineries Status

Most Mexican refineries were built around the 1960’s, which is definitively an indicator
of why their technologies are out of date and do not meet current standards for refining
ULSD. Nevertheless, in 2014 after the Energy Reform was approved Pemex made an
announcement of updating its refineries (among other infrastructure) in order to meet with
new standards, however this effort was halted on February 2015 by Pemex when it made
a new announcement of a $ 4 MM USD budget cut, which directly impacted the update
in its refineries (IMCO, 2015).

Figure 2 shows Pemex’s diesel and ULSD production from the last 10 years, on which it
is clear to see that ULSD production is just picking up to regular diesel production,
however overall production has been in decline since 2014 due to (1) 12.3% diminishment
of crude-oil production, (2) processing of heavier oils and (3) operational problems in the
National Refinery System (NRS) such as un-expected stops, poor maintenance
programmes (SENER, 2017), which lead the NRS to reaching levels of production of just
33% in February 2018. (SENER, 2017) as shown in Figure 3.

Pemex's yearly diesel production (Mbls/day)

THOUSANDS OF BARRELS PER

400
350
300
DAY

250
200
150
100
50
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Pemex Diesel 336.1 291.4 221.0 193.6 225.9 217.7 186.9 191.5 130.1 87.4 9.5
Pemex UBA (ULSD) 0.0 44.5 67.7 80.1 72.6 92.1 97.8 83.0 85.1 63.8 9.3

Figure 2 Pemex diesel production (PEMEX, 2018)

Figure 3 National Refinery System average usage March 2017 - March 2018 (SENER, 2018)

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II.C.2 - Petroleum-Derivates Sales Revenue

To better put into perspective the why ULSD production may have been left behind can
be seen when comparing how much the overall Pemex Diesel and ULSD revenue mean
to the company, as shown in Figure 4, the company’s biggest source of revenue on its
distribution branch are gasolines at 53.2%, and distribution of Pemex Diesel plus ULSD
barely add up to about 25.9% when put together.

PEMEX'S AVERAGE PETROLEUM SALES REVENUE

(2013-2017)

Asphalts Others
1.0% 0.5%
ULSD Fueloil LP Gas
3.7% 5.8% 9.1%

Pemex Diesel
22.2% Gasolines
53.2%

Turbosine
4.5%
LP Gas Gasolines Turbosine Pemex Diesel ULSD Fueloil Asphalts Others

Figure 4 Pemex's Average Petroleum Sales Revenue (2013-2017) Source: (PEMEX, 2018)

Even though it is not even close to being Pemex’s core business, the distribution of ULSD
is still a billion-dollar business opportunity, as shown in Figure 5.

Pemex Diesel Distribution Revenue (Billions of $USD)

$18.0 $17.0
$16.5
$16.0
$14.0 $12.4
$12.0 $11.1
$10.3
$10.0
$7.3
$8.0
$6.0
$4.0 $2.9
$2.0
$0.0
2013 2014 2015 2016 2017 2018 Average
TOTAL $16.5 $17.0 $10.3 $7.3 $11.1 $2.9 $12.4
Pemex Diesel $14.0 $14.6 $8.8 $6.3 $9.6 $2.6 $10.7
ULSD $2.5 $2.3 $1.4 $1.0 $1.5 $0.3 $1.8

Figure 5 Pemex's Diesel Revenue 2013-2018 Source: (PEMEX, 2018)

From what has been discussed up to this point, Pemex does not have the means, nor the
interest to develop infrastructure to set a supply chain of ULSD in the country, which of
course means other companies can take advantage of the situation and in the process of
doing so, aid the country comply with NOM-086.
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II.C.3 - Investment Outlook

In addition to the operational issues the NRS such as poor maintenance and unexpected
stops, several natural disasters affected its operativity, such as (1) Calvin (Tropical Storm)
which in June 2017 heavily impacted Salina Cruz, (2) the 8.2-magnitude earthquake also
impacted Salina Cruz in September 2017 and halted operations until November 2017. In
order to alleviate damages caused in the NRS, and the needed technology update, Pemex
authorized a budget for expenditure in its 6 refineries, mainly Madero and Minatitlan.
However, the budget is tight in comparison with the company’s other areas of interest
representing just over 10.5% of their authorized budget in their refineries, and 2.2% in
logistics, as shown in Table 1 , so the company is currently looking to venture with
international oil companies in order to meet the diesel and gasolines demand the country
has.

Authorized E&P - 82.3%

# Area Investment
(M USD) Refining - 10.5%
1 E&P $9,152.17 Logistics - 2.2%
2 Refining $1,163.04
Drilling and Services
3 Logistics $239.13 - 1.3%
4 Drilling and Services $146.74 Corporate - 2.6%
5 Corporate $293.48
Ethylene - 0.9%
6 Ethylene $97.83
7 Fertilizers $21.74 Ferfilizers - 0.2%
Total $11,114.13
Table 1 Pemex's Authorized budget for 2018 (PEMEX, 2018)

II.D - Potential competitors

As in any business, it is always wise to look at the competition, and even if Pemex is not
coping with the need to supply the market, there in fact exist several other competitors in
the country, fortunately SENER periodically publishes a list of companies with an active
one-year permit to import fuels intro the country, as of March 2018, 22 companies have
a license to introduce 235 Mbbl/day of ULSD into the country, 12 companies for 5 Mbbl
of storage, and 6 for railway transport. (SENER, 2018).

III - Establishment and operation of a fuel distribution business

In order to establish and operate a fuel distribution network, SENER has established a
protocol to which all companies must go through, which includes being granted with an
import, storage, commercialization and/or transport licence, with the duty of periodically
reporting data to CRE in compliance with the Mexican Hydrocarbon’s Law, for the sole
purpose of minimizing risks of shortage of supply, while at the same time not interfering
with the development of the market (SENER, 2017).

To jump-start this business, the company must apply for an import license, which is
granted by SENER via an online straight-forward request, filled out in the Mexican
Government’s Electronic Desk Webpage. This is a free procedure, and the requirements
to successfully obtain a one-year license are laid out in Appendix 11. After being granted
with all licenses, the company must report on a regular basis to CRE several data such as
volume of sales, storage and end-customer pricing.

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III.A - Open Access to Pemex’s distribution infrastructure and its status – A partnership
opportunity

Holders of storage and pipeline distribution licences, must give open access to third
parties subject to their available capacity2, condition which is now requires Pemex to
open the operation of its infrastructure to new companies via a bidding process 3 which
is a crucial piece for the commercial success of this market study. This is a key aspect
for this business-proposal to be profitable, and the bid proposal considered for this
paper will be better explained in the Economic Model-Building section of this paper.

The country’s current infrastructure consists of 9,591.489 km of fuel-pipeline (CRE,

2017) with a 3,980 Mbbl/day transport capacity, 77 storage and distribution terminals,
and 15 maritime stations (CRE, 2015), plus 23,389 km of operational railways (SCT,
2018), 331,364 km roads (IMT, 2017), all of which contribute to an overall nation-wide
distribution network as shown in Figure 6. See Appendix 8 for better detail

Figure 6 Available routes for import and distribution of diesel and gasoline in the country (CRE, 2017)

III.B - Infrastructure outlook

The network for gasoline/petroleum distribution is currently expanding, and will

considerably grow in the following years, example of which is the current construction
of four new pipelines accounting for a total investment of $1.3 to $ 2.3 Billion USD, for
a total added capacity of 320 Mbbl/day and a total length of 1,012 km in the Mexican
territory, plus 38 new storage units with a summed capacity of 2,850 barrels. (SENER,
2017).

2
Mexican Hydrocarbons Law Article 70
3
http://www.dof.gob.mx/nota_detalle.php?codigo=5422482&fecha=12/01/2016

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 Figure 7 Current construction of 1,012 km of new fuel Pipelines and 38 storage unit (SENER, 2017) s

III.C - Risk assessment

Fuel theft in Mexico has been an issue in the public eye for several years now, with
headlines of the infamous cartel named “huachicoleros” The word comes from the local
slang term huachicol, which refers to the adulterated gasoline used by truckers in the past.
(CNN, 2017).

Consequentially, the business purpose of the cartel is to steal fuel from pipelines and
further sell it to end-users or even some distributors. With 10,363 identified illegal points
of access and 18 million of litres of diesel and gasoline being stolen in 2017 (PEMEX,
2018).

Actions against this have been taken by the Mexican Senate, which approved a fiscal and
criminal reform that will strengthen combat against the so-called Huachicoleros. This
reform allows Mexico’s CRE to control the quality of fuels, its origin, the volumes that
distribution stations receive and their sales volume. These changes complement earlier
reforms which when approved raised penalties to up to 30 years in prison. Having said
that, this is the only considerable risk in the project, other than the business as-usual risks
that come with downstream industry.

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IV - Collected Data and methodology:
The main data collected for the project were the Mexican diesel fleet size and
consumption, plus an estimated growth forecast established by SENER, with the purpose
of minimizing the impact of uncertainties related to modelling and evaluating costs and
revenue, conservative assumptions were also inserted in the analysis. Such assumptions
include the proposed fee to Pemex for using their infrastructure, import tariffs, a
conservative demand growth and the additional marginal cost of ULSD; moderate to low
projections for growth of new heavy-duty vehicle sales.

Rather than analysing health and environmental monetary benefits, (as the ICCT did in
their 2014 study), the focus of this economic model is to measure key monetary figures
from a company’s perspective, such as maximum exposure, rate of return, expected
monetary value, etc.

IV.A - Current Market Trends

As in any market study, the size, supply/demand and estimated growth are of important matter
because they are the main drivers for going into business to begin with, this section describes
where the collected data gathered from different government agencies, plus some considerations
that affected their input in the economic model.

IV.A.1 - Size

The total fleet of heavy duty registered vehicles in 2016 consisted of 10,787,353 (INEGI,
2017) as shown in Figure 8.

Figure 8 Mexico’s registered diesel vehicles per state in 2016 from (INEGI, 2017)

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IV.A.2 - Supply and demand

From 2013 to 2017 the average diesel fuel consumption has been growing at an average
3.3% rate, and the biggest consuming sector is the transport, in its northeast, and centre-
west areas (SENER, 2018), as shown in Table 2 and Table 3.

# Sector 2013 2014 2015 2016 2017 %

1 Transport 320.49 323.62 317.18 322.08 317.70 79.04%
2 Auto-generation of electricity 1.71 2.19 1.79 1.89 1.84 0.45%
3 Public electricity generation 12.15 7.35 7.47 9.31 10.09 2.42%
4 Industrial 30.94 29.43 29.73 26.34 28.77 7.24%
5 Petroleum 22.24 20.76 19.84 10.29 7.49 4.12%
6 Railway 12.68 12.78 13.38 13.38 13.38 3.21%
7 Maritime 13.75 14.03 15.19 14.46 12.91 3.52%
Total 413.95 410.16 404.59 397.75 392.17 100%
Table 2 Mexico’s diesel consumption per industry sector in Mbbl/day (SENER, 2018)

# Region 2013 2014 2015 2016 2017 %

1 Northwest 59.22 60.26 60.14 63.40 60.14 14.93%
2 Northeast 93.87 94.38 92.30 88.66 96.02 23.00%
3 Center-West 93.38 91.57 89.17 92.61 90.41 22.70%
4 Center 73.40 76.75 76.95 74.55 69.12 18.30%
5 Southwest 94.08 87.19 86.02 78.52 76.48 21.07%
Total 413.95 410.16 404.59 397.75 392.17 100%
Table 3 Mexico's diesel consumption per region in Mbbl/day (SENER, 2018)

Figure 9 Mexico's 2017 diesel demand per state in Mbbl/day (SENER, 2018)

As shown in these tables, the country does have a big requirement of supplying fuel to
their different industries, and lately the import requirements have been substantially
growing being as big as 321 Mbbl/day in November 2017 which represents 75% of total
diesel consumption from that month, as displayed in Figure 10.

Page 15 of 36
 Monthly Diesel Consumption (Mbls/day)
500
450
400
350
300
250
200
150
100
50
0
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar-
17 17 17 17 17 17 17 17 17 17 17 17 18 18 18
Local Production 158 193 212 194 195 174 157 142 112 96 111 103 136 95 108
Imports 242 269 195 213 218 246 260 242 279 299 321 301 261 285 278
Total Supply 400 462 407 407 412 420 417 384 390 396 431 404 398 380 386

Imports Local Production Total Supply

Figure 10 2017-2018 Monthly Diesel Supply (SENER, 2018)

The country does import diesel from several countries, but with the purpose of
simplifying the modelling, all calculations will be based as if brought from the United
States, given that 83% of diesel imports registered in 2018 have been from that country,
as shown in Figure 11.

Imported Diesel Countries of Origin

Japan - 8.15 Mbls/day

Canada - 4.19 Mbls/day
Colombia 1.58 Mbls/day
Malasia - 0.8 Mbls/day
China - 8.6 Mbls/day
United Kingdom - 26 Mbls/day
United States - 249 Mbls/day

Figure 11 - April 2017 - March 2018 Diesel Imports per country of origin (SENER, 2018)

Page 16 of 36
IV.A.3 - Growth Forecast

It is estimated that the nation’s diesel demand grows at a yearly rate of 3.3%, based on
three main assumptions that are (1) change in transport mode is to gradually be adopted,
shifting from personal vehicles to public transport, (2) new vehicles will gradually
improve their fuel mileage and (3) the adoption of the Marpol Convention in 2020 which
infers that maritime vehicles will need to comply with ULSD (SENER, 2017). However,
SENER reports three different numbers, which are a high savings scenario, a most
probable outcome and a high demand forecast. As shown in Figure 12.

Growth Forecast (Mbls/day)

700

600

500

400

300

200

100

0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
High Demand 426 437 450 467 483 498 512 523 538 552 563 575 588
Most Probable 341 341 348 363 382 398 412 428 443 459 473 488 505
High Savings 338 338 343 355 372 386 398 411 424 437 450 464 480

Figure 12 - 2017-2030 Diesel Demand Forecast (SENER, 2017)

V - Economic model-building
In this section, the assumptions and methodology used to build an economic cashflow,
are outlined, which mainly consists of data taken form Pemex’s databases, public bidding
documents and several quotes from actual Mexican suppliers. A 20 year-operational
time was considered and based on data gathered from SENER to predict future demand,
in order to calculate an expected monetary value of the project, discounted at a 10% rate,
and a sensitivity analysis in key variables such as fuel demand, fuel costs, CAPEX, OPEX
and the terms negotiated with Pemex for an allowance of using their infrastructure.

V.A - Bid Proposal for Pemex’s infrastructure

The model considers two main variables that affect the monetary outcome, even though
a bid proposal submitted to a government company as big as Pemex can get too overly
complicated with complex terms and conditions. Which are Pemex’s cut on transport and
storage of the fuel, as detailed in Table 4.

Page 17 of 36
V.B - Key assumptions

The key assumptions considered for the cashflow of this project are detailed in Table 4,
which is al data collected from different sources such as CRE, Pemex, INEGI, and other
Government Agencies, as shown in the Context chapter of this document.

# Assumption Value Background/Justification

Competitors have not coped with the
Project share of the 100% of most probable
1 demand, plus this is a venture-
market scenario
proposal with Pemex
USD/MXN Data is provided in USD for ease of
2 $ 18 MXN per $ 1 USD
Exchange rate interpretation
Houston’s retail price as of July 1st is
Fuel price
3 $ 2.5 USD/Gal - Pre-tax 3.10 USD / Gall, but Taxes account
acquisition cost
for $ .56 USD
7% must be added to fuel costs
4 Import tariffs 7% of DAF price delivered at frontier for customs
purposes
5 Transport costs $ 0.015 USD/Barrel/Km Gathered from CRE’s data base
Railway costs are four time bigger
6 Transport Method Pipeline
and Truck as high as 14 times
7 Storage costs $ 1 USD/Barrel/day Gathered from CRE’s data base
Average storage Minimum storage-time required by
8 15 days
time CRE to fulfil the country’s demand
Construction of new pipelines,
acquisition of storage units and fuel
9 CAPEX $ 6,848 MM USD
tankers which will be available in the
5-10-year term
Based on a standard fuel-retail
10 OPEX $ 1,619 MM USD
business
Mexican Special Tax added to
11 IEPS 33.63% on DAP Price
Production and Services
12 Income Tax 35% of Gross Income Standard Mexican Income Tax Rate
General Inflation Usually 2% is used, but considered
13 3% at a yearly rate
Rate 3% as safety measure
14 Discount Rate 10% at a yearly rate 10% as an industry standard
Establishment, and paperwork for
15 Start year of sales 2020 creating a new business might take
up to two years
Pemex's cut on Proposed cut to Pemex, based on
16 $ 2 USD/Barrel/Km
Transport the project’s scope
Pemex's cut on Proposed cut to Pemex, based on
17 $ 2 USD/Barrel/day
Storage the project’s scope
Table 4 Key Assumptions

Page 18 of 36
V.C - Sensitivity analysis

Since most of the assumptions considered for the project are not fixed ones, a sensitivity
analysis was executed on them, and found that the most sensible ones are the demand of
fuel, and the fuel sale-price to the end customer, as shown in Figure 13 and Figure 14,
both in the NPV, and company’s take context, respectively.

NPV Sensitivities
200,000.0

150,000.0

100,000.0

50,000.0
-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50%
Market coverage Diesel Sale Price CAPEX
OPEX PEMEX'S Cut on Transport PEMEX'S Cut on Storage

Figure 13 NPV Sensitivities

Company's Take Sensitivities

35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50%
Market coverage Diesel Sale Price CAPEX
OPEX PEMEX'S Cut on Transport PEMEX'S Cut on Storage

Figure 14 Company's Take Sensitivities

Furthermore, as Figure 14 shows, the eventual deal struck with Pemex on their cut is
one to be negotiated with carefulness since it heavily impacts the company’s returns and
share of the project.

Page 19 of 36
VI - Interpretation and results:
The establishment of a distribution network with a partnership scheme with Pemex looks
like an attractive and profitable opportunity, results show to be promising even with an
uncertainty of the “huachicoleros” risk that come with it.

It is worthy to note that the key aspect of this proposal is that of a business partnership
with Pemex, and their respective cut on the project by letting a new company operate their
infrastructure, as the sensitivity analysis shows, this is a highly volatile part of the
equation and must be negotiated with carefulness, even with an open change of
renegotiation on a periodic basis.

The final results show that the cumulative net present value, discounted at a 10% rate of
the 20-year project is worth $ 124.985 Billion USD, with a 22.13% take for the company,
as shown in Figure 15, for better detail see Appendix 8 for the full and detailed cashflow.

20-year NPV @10% Discount Rate Share

22.13%

32.02%
Disc Company's take after tax and
pemex take
Goverment Take (Tax)

Pemex's Take

45.86%

# Take over the 20-year period $ MM USD %

1 10% Discounted NPV $ 124,985.80 100%
2 Discounted Company’s take after tax and Pemex’s take $ 27,653.88 22.13%
3 Government Take (Tax) $ 57,317.36 45.86%
4 Pemex's Take $ 40,014.56 32.02%
Figure 15 20-Year Net Present Value's distribution at 10% rate

The sensitivity analysis shows that the three main variables to keep controlled are (1) fuel
sale-price (2) demand or percentage of market covered, and (3) the eventual arrangement
signed with Pemex. This three are crucial for the business to be profitable due to their
high sensitivity, so a careful management of these during the lifespan of the project will
certainly account for millions of dollars of greater revenue, and it is recommended that
an expert’s eye is always overlooking them.

From a business stand point, the single most important recommendation would be that of
negotiating with Pemex a sound deal, one which gives the NOC good revenue but does
not create the feeling among their shareholders that they’re giving up too much power to
new companies.

Page 20 of 36
VII - Discussion:
The economic analysis built for this study, as detailed in some variables as it may be,
might be found to be simplistic in other ones, since it does not consider unmeasurable
socio-political inputs that may affect the outcome of, such as political instability due to
the new president elect, whose one of main presidential promises was to revert the 2013
Energy Reform, and the construction of two new domestic. Furthermore, the model
makes strong assumptions regarding the availability for import of 300-500 Mbls/day of
ULSD from the United States. which might also be impacted by the current renegotiations
of NAFTA that are being discussed by our policy makers as this analysis was executed.

Other variables built into the model also might be appreciated as being overly optimistic
such as the fact that Pemex would agree to give up 100% of their diesel-sales market.
However, as stated in Chapter II.C.2, this department of their business represents barely
one quarter of their revenue, plus giving the multiple public announcements the company
has made the last couple of years letting investment now they’re ready to work with third
parties, does not seem like an unreal assumption.

As a counter-balance measure for the optimistic variables and their uncertainty of actually
being plausible, some other ones were built in a conservative approach, such as (1) the
general inflation rate of 3%, rather than the industry common 2%. (2) The published
acquisition price of USLD in the United States of $ 2.5 USD per gallon, which almost
certainly could be lowered by a big-volume purchase negotiation.

Even though several Government around the world have made commitments to
completely ban the consumption of fossil fuels in their country, and Mexico is not one of
those. For what has been published by SENER one can realistically assume that the use
of diesel vehicles will continue to substantially grow -at least in the foreseeable future,
particularly in a country with traits such as Mexico, with big petroleum reserves, a
steadily growing economy, and big industrial sector, thus the need for fuelling the fleet
with a cleaner alternative is point of discussion that shall not be left behind.

As analysed by the ICCT, numbers show that the implementation of a 100% ULSD fleet
will beneficially impact the country in matters of prevention of health issues and
environmental impact, which as discussed previously can be seen as a business
opportunity, and the analysis in the hereof shows the potential this opportunity unveils
for fuel distributors, with a short return of investment, and sensible risks, plus a good
level of regulation and public access to information provided by the government.

The compilation of all these factors though some uncertain, surely still show to be a $ 124
billion USD opportunity, over the course of 20 years, in particular if a good deal is struck
between Pemex and the venturing company. This would allow good revenue for the
Government in its tax collection, freedom to Pemex to better invest resources in other
departments, and a yearly billions-dollar revenue, with a low to medium operational risk
for a third-party company that may be willing to invest in new markets.

Page 21 of 36
VIII - Conclusions and recommendations:
As expected, the necessity of the country for a supply of ULSD, plus their economic
growth are attractive traits for an international company to invest in the market, plus with
the proposed venture with Pemex, an all-win deal can be settled.

The fact of the matter is that the necessity overlaid by the ICCT in their 2014 study which
shows a great need of the country for a 100% ULSD operated fleet, which later was made
law by congress in 2014, and sets a deadline for implementation in December 2018. Plus,
the multiple open announcements Pemex has made seeking for partners in their
downstream operations are clear indicators that investing in this opportunity will most
surely give investors a good taste of mouth by the end of the day.

To summarize, the benefits establishment of an ULSD network, through a partnership

with Pemex, can be summarized by stating that, (1) consumers will pay virtually the same
price for fuelling their fleets through a much cleaner diesel, which will beneficially impact
the Mexican citizens and government in their public health sector by preventing lung
diseases. (2) The partnership with the NOC is essentially a bailout of its subsidiary Pemex
Logistics, which has been forgotten by their corporate headquarters that seem just to
invest in E&P, (3) the potential of tens of billions of dollars in revenue through a low risk,
low operational costs business for reputable international companies willing to invest in
new markets.

The fact that Pemex is such an crucial part of the Mexican economy, and that the Mexican
citizens feel a pride for the company, makes a partnership an attractive way of venturing
into the market by giving the end customers a kind of assurance that new players are not
in the country to destroy their NOC, but rather work together by each companies’ best
means, and deliver the country the commodities so desperately needs, in this case ULSD.

If truly a 100% ULSD fuelled fleet is achieved in a near future, through a harmonization
process, Mexico can certainly expect to reap the benefits of research and development
efforts of reducing both fuel consumption and emissions that have been developed over
the last decades but hadn’t been able to do so up to this point due to lack of investment.

Page 22 of 36
IX - Acknowledgements:

This project would not have been possible had the original spark not been born while my
time at IPEC, my former employer company in which the issue of not having any sort
reliable ULSD supplier, nor an exact clear date on when that might be so, made me think
of the opportunity to develop this market and its monetary potential.

Moreover, a profound gratitude to CONACYT for its financial aids in regards of the
tuition and living costs during the MSc programme which makes the effort of developing
our country just that much easier.

I am also grateful to the University of Aberdeen staff of the School of Geosciences: Dr

Colin North, Dr David Kemp and Ashley Fyffe for their always present support,
assistance, and critical feedback.

To my lifelong mentor, my Great-Uncle Francisco ‘Quico’ Espino, for always being a

figure of endurance, respect, and hard work, but most importantly what rectitude,
politeness, and honest relationships mean above all other values in the business world.

Finally, and most important above all other, I must express my endless gratitude to my
parents, brother, and grandparents Hilda, Francisco, Raúl and Sylvia for providing me
with unfailing support, and continuous encouragement throughout my many years of
study and through the process of living abroad. This accomplishment would not have
been possible without them.

Thanks for all your encouragement!

HC

Page 23 of 36
List of figures and tables
FIGURE 1 NOM 016 ULSD SUPPLY CHAIN DIAGRAM (IMCO, 2015) .......................................................... 8
FIGURE 2 PEMEX DIESEL PRODUCTION (PEMEX, 2018) ............................................................................... 9
FIGURE 3 NATIONAL REFINERY SYSTEM AVERAGE USAGE MARCH 2017 - MARCH 2018 (SENER, 2018) ... 9
FIGURE 4 PEMEX'S AVERAGE PETROLEUM SALES REVENUE (2013-2017) SOURCE: (PEMEX, 2018) ........ 10
FIGURE 5 PEMEX'S DIESEL REVENUE 2013-2018 SOURCE: (PEMEX, 2018) .............................................. 10
FIGURE 6 AVAILABLE ROUTES FOR IMPORT AND DISTRIBUTION OF DIESEL AND GASOLINE IN THE COUNTRY
(CRE, 2017) ...................................................................................................................................... 12
FIGURE 7 CURRENT CONSTRUCTION OF 1,012 KM OF NEW FUEL PIPELINES AND 38 STORAGE UNIT (SENER,
2017) S............................................................................................................................................... 13
FIGURE 8 MEXICO’S REGISTERED DIESEL VEHICLES PER STATE IN 2016 FROM (INEGI, 2017) ................... 14
FIGURE 9 MEXICO'S 2017 DIESEL DEMAND PER STATE IN MBBL/DAY (SENER, 2018) ............................... 15
FIGURE 10 2017-2018 MONTHLY DIESEL SUPPLY (SENER, 2018) ............................................................ 16
FIGURE 11 - APRIL 2017 - MARCH 2018 DIESEL IMPORTS PER COUNTRY OF ORIGIN (SENER, 2018) ......... 16
FIGURE 12 - 2017-2030 DIESEL DEMAND FORECAST (SENER, 2017)........................................................ 17
FIGURE 13 NPV SENSITIVITIES ................................................................................................................... 19
FIGURE 14 COMPANY'S TAKE SENSITIVITIES .............................................................................................. 19
FIGURE 15 20-YEAR NET PRESENT VALUE'S DISTRIBUTION AT 10% RATE ...................................................... 20
FIGURE 16 NET PRESENT VALUE OF ANNUAL BENEFITS AND COSTS OF NOM 044 (2018-2037) (MILLER, ET
AL., 2014) .......................................................................................................................................... 28

TABLE 1 PEMEX'S AUTHORIZED BUDGET FOR 2018 (PEMEX, 2018) ......................................................... 11

TABLE 2 MEXICO’S DIESEL CONSUMPTION PER INDUSTRY SECTOR IN MBBL/DAY (SENER, 2018) ............ 15
TABLE 3 MEXICO'S DIESEL CONSUMPTION PER REGION IN MBBL/DAY (SENER, 2018) .............................. 15
TABLE 4 KEY ASSUMPTIONS ...................................................................................................................... 18
TABLE 5 COST/ BENEFIT OF COMPLYING WITH NOM 044 FROM 2018-2037 (BLUMBERG, ET AL., 2014) .... 28
TABLE 6 CURRENT COMPANIES WITH A PERMIT TO IMPORT ULSD INTO THE COUNTRY. SOURCE: (SENER,
2018) ................................................................................................................................................. 29
TABLE 7 SENER AND CRE REQUIRED BUSINESS-OPERATION DATA........................................................... 32
TABLE 8 HEAVY DUTY REGISTERED VEHICLES IN 2016 (INEGI, 2017) ..................................................... 33

Page 24 of 36
References
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EXISTENTES, DE DIÉSEL DE ULTRA BAJO AZUFRE (DUBA), E INSTALACIÓN DE
NUEVAS PLANTAS EN SEIS REFINERÍAS EN LOS ESTADOS DE TAMAULIPAS,
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CUMPLIMIENTO, Mexico City: Instituto Mexicano para para Competitividad A.C
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[Último acceso: 5 June 2018].
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duty Emission Standards (NOM 044), s.l.: The International Council on Clean
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information/Reporte%20de%20Resultados%20no%20Dictaminados%20%20Archivos/
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Estadisticas/PE-2016.pdf
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25. SENER, 2017. Prospectiva de Petróleo Crudo y Petrolíferos 2017 - 2031, Mexico City:
SENER.
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Page 27 of 36
 Appendix 1 Cost/Benefit Breakdown of ULSD usage 2018-2037
1 Costs Determined costs
The process of desulphurisation adds costs to all the refining,
Cost of meeting new
transport, storage and distribution phases. However, this
1.1 fuel standards –
incremental cost is estimated to be $ 0.25 USD (Hart Energy
and MathPro Inc, 2012)
Euro VI / EPA 2010 deigned vehicles require the use of DEF to ensure
their Selective Catalytic Reduction (SCR) systems function properly
(Blumberg, et al., 2014). DEF is a carefully blended aqueous urea
Diesel Exhaust Fluid
1.2 solution of 32.5% high purity urea and 67.5% deionized water needed
(DEF)
to lubricate the vehicle’s exhaust (Cummins Filtration, 2009).
However, it is not a notable impact concern in regards for building a
supply chain due to:
2 Benefits Determined benefits
• 17,000 tons of black carbon
• 24,000 tons of PM
2.1 Climate impact
• 410,000 tons of NOx
• 54 million tons of CO2
• Prevention of 55,000 premature deaths from cardiopulmonary
2.2 Health impact disease, lung cancer and acute respiratory disease caused by
exposure to PMs
• Reduction in operating costs between 2007 and 2010 of four
2.3 Fuel Consumption to nine percent (depending on vehicle type), considering both
reduced fuel consumption and the increased cost of DEF
Table 5 Cost/ benefit of complying with NOM 044 from 2018-2037 (Blumberg, et al., 2014)

Figure 16 Net present value of annual benefits and costs of NOM 044 (2018-2037) (Miller, et
al., 2014)

Page 28 of 36
 Appendix 2 Potential Competitors – Fuel Imports
No. Company QTY Permit N° Expiry
(Mbbl/day) date
1 Blue Energy and Electricity SA P I De 3.45 1701C117013703 16-Oct-18
CV
2 Combustibles Biologicos De Mexico SA 5.17 1701C117013718 20-Oct-18
De CV
3 Transporgas Industrial SA De CV 16.89 1701C117013740 01-Nov-18
4 Blue Energy and Electricity SA P I de CV 15.72 1701C117013765 07/11/2018
6 Disolensa Mexico S De Rl De CV 8.62 1701C117013828 08/12/2018
5 Ledilum Sa De CV 1.72 1701C117013819 08/12/2018
8 Combustibles Enermex Sa De CV 8.62 1701C117013836 11-Dec-18
7 Targa Fuels Sa De CV 8.62 1701C117013822 11-Dec-18
9 Novum Mexico Trading S De Rl De Cv 65.75 1701C117013813 12-Dec-18
10 Doble Erre Continentales Sa De Cv 3.45 1701C117013871 14-Dec-18
11 Doble Erre Continentales Sa De Cv 3.45 1701C117013872 14-Dec-18
12 Mexoil Offshore Sa De Cv 0.01 1701C117013839 15-Dec-18
14 Altos Energeticos Mexicanos Sa De Cv 1.72 1701C117013867 18-Dec-18
13 Chevron Combustibles De Mexico S De 5.48 1701C117013866 18-Dec-18
Rl De Cv
18 Agencia De Consultoria Internacional Sa 12.06 1701C117013895 19-Dec-18
De Cv
15 Chevron Combustibles De Mexico S De 2.74 1701C117013892 19-Dec-18
Rl De Cv
16 Jag Energy Company Sa De Cv 12.06 1701C117013893 19-Dec-18
17 Jag Energy Company Sa De Cv 12.06 1701C117013881 19-Dec-18
19 USD Marketing Mexico S De Rl De Cv 5.43 1701C118000012 15-Jan-19
20 USD Marketing México S De Rl De Cv 0.60 1701C118000011 15-Jan-19
21 Proveedora De Combustibles Del Mayo 0.17 1701C118000082 22-Jan-19
Sa De CV
22 Jz-Link Sa De Cv 8.62 1701C118000086 23-Jan-19
23 Teotl Oil & Gas S De Rl De Cv 6.52 1701C118000100 24-Jan-19
24 Teotl Oil & Gas S De Rl De Cv 6.52 1701C118000099 24-Jan-19
25 Promotora La Española Sa De Cv 2.07 1701C118000133 30-Jan-19
26 Consorcio Desarrollador Y Comercial El 12.06 1701C118000186 13-Feb-19
Fresno Sa D
27 Suministros De Energeticos Del Noreste 2.07 1701C118000223 22-Feb-19
Sa De Cv
28 Petrorack Sa De Cv 3.45 1701C118000291 07-Mar-19
Table 6 Current companies with a permit to import ULSD into the Country. Source: (SENER, 2018)

Page 29 of 36
Appendix 3 Potential Competitors – Fuel Transport and
Distribution

Page 30 of 36
 Appendix 4 CRE Protocol for applying for licenses
COMPANY’S GENERAL INFORMATION
# Field Answer
1 Company’s name TBD
2 Company’s core business Petroleum distribution
3 Tax id TBD
4 Contact email TBD
5 Fiscal address TBD

REQUEST-SPECIFIC INFORMATION
# Field Answer
1 Tier (first time, extension or modification) First time
2 Regime (Temporary or definite) Temporary
3 Sort of request (Import or export) Import
4 Length (1 or 20 years) 1 year
5 Commodity description Ultra-low sulphur diesel with 15ppm
6 Tariff tier TBD
(According to the General import and export taxes law) 2710.1904
7 Unit of measurement Barrels or litres
8 Requested quantity to import TBD (The result of this project)
9 Proforma invoice in USD TBD
10 Country of origin United States of America
11 Intended use of the commodity Internal combustion engines
12 Argument and/or benefit for importing the commodity Complying with NOM-016
13 Comments (if needed) N/A
14 Federal Entity TBD
(State’s name in which the request is being filled-out)
15 Authority to grant license SENER

There also exists, a long-term license for a 20-year permit, for which any company can
apply after the 1-year license expires, and for being granted with one of this, the solicitor
shall also provide SENER with the following:
20-YEAR LICENSE REQUEST INFORMATION
# Field Answer
1 Market proof of demand Signed contract with customer or market research
2 Proof of previous license(s) Attach previous licence(s)

Page 31 of 36
 Appendix 5 Operating a Fuel – Distribution Business in Mexico
Once the permit is granted, and business is operational the company must submit to
SENER and CRE statistical and economic data4 as shown in

# Periodicity Reported Data

1 Daily
2 Quarterly
3 Yearly
Table 7 SENER and CRE required business-operation data
Sales volumes and prices
Statistical data
• Fuel Type
• Purchases volume
• Sold / Transported volume and prices
Economic data (for storage and transport)
• Income
• Destination
• System capacity
• Stored and transported volumes
• Insurance policies
• Complaints files
• Invoices of purchases fuels
• Maintenance programme report
• NOM-016 compliance report issued by CRE

4
Mexican Hydrocarbon’s Law Article 48

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 Appendix 6 Mexican Diesel Fleet by State (2016)
id STATE Registered Vehicles %
1 México State 1,169,414 10.85%
2 Jalisco 1,054,565 9.78%
3 Michoacán 886,309 8.22%
4 Veracruz 632,268 5.86%
5 Guanajuato 590,360 5.48%
6 Chihuahua 473,069 4.39%
7 Nuevo León 449,332 4.17%
8 Puebla 448,845 4.16%
9 Hidalgo 405,473 3.76%
10 Sinaloa 404,025 3.75%
11 San Luis Potosí 358,650 3.33%
12 Tamaulipas 341,433 3.17%
13 Sonora 321,220 2.98%
14 Chiapas 309,686 2.87%
15 Coahuila 304,094 2.82%
16 Guerrero 270,887 2.51%
17 Baja California 260,932 2.42%
18 Durango 208,399 1.93%
19 Oaxaca 206,207 1.91%
20 Zacatecas 198,001 1.84%
21 Nayarit 169,847 1.58%
22 Aguascalientes 150,382 1.39%
23 Tabasco 148,248 1.38%
24 Baja California Sur 144,236 1.34%
25 Ciudad De México 135,872 1.26%
26 Yucatán 129,114 1.20%
27 Querétaro 124,691 1.16%
28 Morelos 124,562 1.16%
29 Quintana Roo 108,330 1.00%
30 Colima 99,485 0.92%
31 Tlaxcala 92,627 0.86%
32 Campeche 60,790 0.56%
TOTAL 10,781,353 100.00%
Table 8 Heavy Duty registered vehicles in 2016 (INEGI, 2017)

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Appendix 7 Economic Model Cash- Flow

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Economic Model Cash- Flow (Continuation)

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Appendix 8 Oil Products Infrastructure (SENER)

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