Pemex awards breakthrough ethanol tender

OREANDA-NEWS. March 23, 2015. Mexico state-run Pemex selected six local companies in a ground-breaking tender for ethanol supply.

The firms will supply Pemex under 10-year contracts for a total of up to 123mn liters (2,119 b/d) of domestically produced ethanol a year.

The contracts, which begin in April 2018, are based on US corn ethanol prices.

Pemex plans to blend the ethanol into its Magna gasoline at a 5.8pc level.

The blending will take place at six Pemex distribution terminals: Veracruz, Xalapa and Perote in the Gulf coast state of Veracruz, Ciudad Mante in the neighboring state of Tamaulipas, and San Luis Potosi and Ciudad Valles in the central state of San Luis Potosi.

Contracts to supply another two terminals were not awarded. Ciudad Madero in Tamaulipas received no bids. None of the bids for Pajaritos in Veracruz fulfilled requirements, a Pemex official said.

Pemex plans to hold a new tender for the two terminals.

The tender, which was only open to Mexican firms, required companies to deliver ethanol from locally produced sugar cane or sorghum.

Antonio Garc?a Carre?o, whose company Bioenergeticos Mexicanos won three contracts to supply San Luis Potos?, Ciudad Valles and Ciudad Mante, said the company will build a new plant in Valle Hermoso in sorghum-producing Tamaulipas state.

The construction of the plant and operational costs will require an investment between \\$90mn-100mn, Carre?o told Argus.

Jalisco-based Alcoholera de Zapopan, another winning firm, already produces cane-based ethanol for beverages and chimneys.

"Those who are investing in a brand new plant are taking big risks," said Salvador Romero Valencia, founder of Alcoholera de Zapopan. "We are subject to a formula based on US corn ethanol, so if their ethanol is expensive, we win. If it?s cheap, we lose."

The cane industry opposes the US corn ethanol-based price index used by Pemex.

But Pemex says it is legally obliged to use a market-based price for its ethanol formula, which is set by a government biofuels commission that includes Mexico's energy, finance and agriculture ministries.

Under the pilot program, Pemex will start selling 60,000 b/d of gasoline mixed with ethanol in the states of Tamaulipas, San Luis Potos? and Veracruz. Overall, Pemex will invest \\$57.6mn in blending infrastructure.