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Stillwater Associates LLC Newsletter

December 2015
The last newsletter of the year has a bit of a Mexican theme. Privatizing Pemex will bring lots of changes and opportunities. Barry Schaps examines the specific areas where change is required in order for Pemex to make the transition. Dave Hackett discusses the current supply chain in Mexico and how it will change after privatization. The December Bubble Map looks at how falling crude oil prices have impacted crude-by-rail from the Mid Continent. Finally, we offer an exclusive free preview of our new Low Carbon Fuel Standard Newsletter. 
Pemex Privatization - Something to Keep your Eye On
 
Around this time of year, many newsletters and blogs post screaming headlines about the "hottest" items to watch for next year. This is more of a "keep your eye on this space" notice as Stillwater Associates focuses its attention on the planned transformation of Petroleos de Mexico (Pemex). Make no mistake, the reorganization and privatization of major components of Pemex is a huge undertaking fraught with risks and complexities. Pemex, currently the government owned and controlled oil monopoly in Mexico, is determined to engage the private sector for much needed capital investment from the wellhead to the retail service station. This investment is needed to assist in its transformation to be a productive state "business" enterprise focused on the commercial realities of the oil and gas marketplace.

We thought we would list some specific areas where change is required in order for Pemex to make the transition, and leave the details for future newsletters. Some items and questions for your consideration:
  • In its nearly 80 years in business, Pemex will experience its largest financial loss ever this year.
  • Crude oil production in Mexico has fallen to 2.3 million barrels per day (mdb) from its peak 3.8 mbd in 2005. (By comparison, during the last six years U.S. oil production increased over 70%).

Deregulation in Mexico: Changes to the Petroleum Supply Chain

Major changes in Mexico's energy markets will start happening next year and it is important to understand what the landscape will look like in order to take advantage of the opportunities. On November 17th, Dave Hackett spoke about the state of the Mexican petroleum products market at the OPIS Mexico - U.S. Petroleum Summit. Dave's presentation, Product Flows and Markets: Today and Tomorrow, discussed the current petroleum product flows in Mexico, the export flows from the U.S. into Mexico, and what the deregulated Mexican market may look like in 2018.

Bubble Map Update: Drop in Oil Prices Takes the Steam out of the Mid Continent

The December Bubble Map shows crude oil prices dropping overall while differentials to WTI have remained relatively stable. Prices on December 9th show WTI dropping from $46 to $37 since our last blog in October. The WTI/Brent differential has widened slightly at $3 over WTI. The Bakken discount has widened to $8 under WTI. The Western Canadian Select discount has narrowed slightly to $14 under WTI. On the Gulf Coast, crude oil from the shale formations in Texas like Eagle Ford were priced at parity with WTI and Louisiana Light Sweet was $2 over WTI. On the West Coast, the Alaska North Slope differential was just cents over WTI. The San Joaquin Heavy discount remained at $5 under WTI on December 9th.
Expert LCFS Credit Market Analysis for Covered Entities
California's Low Carbon Fuel Standard is well under way and Covered Entities must participate in California's LCFS Credit Market. It is important that Covered Entities have the right information to make smart Credit Market decisions. Stillwater is pleased to offer a sneak preview of our California Low Carbon Fuel Standard Newsletter. This unique publication will offer weekly, monthly and quarterly looks at LCFS credit and deficit trends based on California Air Resources Board (CARB) data. Weekly reports will include a summary of the week's LCFS news, while monthly and quarterly reports will also include Stillwater's expert analysis of recent trends in the program. 

Complimentary Edition of Stillwater's LCFS Newsletter
This complimentary offer includes the latest weekly, monthly and quarterly reports. Please download and review the newsletter, and then let us know what you think. In a couple of days you will receive an email request to fill out a short survey on Stillwater's LCFS Newsletter. Your opinion means a lot to us; your suggestions will help improve the LCFS Newsletter as we prepare it for its commercial debut.

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Stillwater Associates is a transportation energy consulting firm. We help our clients understand how fuels get from the source to the service station. If your company is in need of expert advice, please let us know.

Sincerely,

David J. Hackett, President
Stillwater Associates LLC