Monday, January 30, 2017

Zenith Energy to Develop Fuel, LPG Rail, Storage Terminals in Mexico

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Zenith Energy, an international liquids and bulk terminaling company, said on Wednesday that it has signed an agreement with one of the largest companies in Mexico to market and develop existing logistics assets for oil storage and distribution in Mexico to support the growing demand for oil products.

The agreement provides for the use of certain facilities in Mexico of CEMEX, S.A.B. de C.V., a global building materials company. Zenith has been awarded the rights to develop these sites for fuel and LPG storage and distribution.

These terminals will receive fuel and LPG primarily from the Gulf Coast and Texas via rail but Zenith believes there are some marine facilities that could be available for international delivery by vessel, Jay Reynolds, chief commercial officer of Zenith, told OPIS.

This is the first time Zenith is working in Mexico, but the Zenith management team has previous Mexican experience, he said. Zenith has established a company in Mexico with an on-the-ground representative and former terminal manager for Exxon Mobil in Mexico.

CEMEX's facilities in Mexico include more than 90 storage and distribution locations, in both inland and coastal cities, most of them connected to the Mexican railroad network, many with unit train capability, and include both operational and dormant locations. The development of these sites will not interfere with CEMEX's normal business activities in Mexico.

Zenith's preliminary plans and layouts include significant development at the terminals in Mexico, Reynolds said. The work will include building tanks together with associated infrastructure such as loading and unloading facilities.

"We have had a number of initial conversations with potential customers which have been very positive and the next step is to fine tune our plans. It is worth noting that we are developing these assets because of their potential and the significant market demand," he said.

"Our development time is likely to be significantly less than other competitors, primarily because we will not have to add rail tracks. Depending on the final plans, we could have a facility fully operational in 12-18 months. This is clearly dependent on permitting and customer requirements," Reynolds said.

The capacity is flexibility and location dependent with some locations having capacity of up to 1 million barrels and unit train handling and other locations being smaller with manifest rail capabilities, he said.

The total capacity will be driven by customer demand and market size, Reynolds said. If all locations are developed, Zenith could have several million barrels of storage in Mexico over the next couple of years. The pace and scale of development will necessarily depend on the evolution of related regulations and other external factors.

"Based on the advantaged locations in major metropolitan areas and the customer demand for reliable operating facilities in Mexico, we believe that this solution will be very attractive to the market, particularly those looking for alternatives to uncertain and expensive pipeline projects," said Reynolds.

Jeffrey Armstrong, CEO of Zenith, said, "we are excited to announce this initiative at this important time in Mexico's ongoing energy reform. We see a growing number of promising opportunities to invest in the country's developing midstream sector, particularly with the ability to utilize existing assets in key distribution markets inside the country."

With headquarters in Houston, Zenith Energy is an international liquids and bulk terminaling company that owns and operates over 15 million barrels of crude oil and petroleum products storage in Amsterdam, Ireland and Colombia.

Zenith is pursuing opportunities to buy, build and operate terminals primarily in Latin America, Europe and Africa. The company is focused on the storage and distribution for petroleum, refined products, natural gas liquids and petrochemicals. The company also will acquire and operate logistics and distribution assets that support terminals, such as pipelines, truck racks and barges.

In August 2014, Warburg Pincus, a leading global private equity firm focused on growth investing, led a line-of-equity commitment in Zenith of up to $600 million. 

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