February 12, 2016
Last week, a delegation of KCS executives and strategic partners visited government and private-sector leaders in Monterrey and Mexico City to discuss new business opportunities made possible by Mexico’s energy reform. Among the delegates were KCS president Pat Ottensmeyer, executive vice president and chief marketing officer Brian Hancock, KCSM president, general manager and executive representative Jose Zozaya and sales and marketing vice presidents David Eaton, Darin Selby and Carlos Velez.
In 2013, the Mexican government changed its constitution to allow private-sector participation in the energy sector. Pemex and CFE no longer have monopolies on the hydrocarbon and electricity markets. As a result, a variety of opportunities are opening to private participation, and KCS is aggressively pursuing those opportunities to grow its energy business.
The State of Nuevo León is poised to be a focal point for activity under energy reform. The delegation had encouraging dialogue with Governor Jaime Rodriguez Calderon and the secretary of economic development Fernando Turner in Monterrey about energy opportunities in the state. High-level meetings took place in Mexico City with policymakers including the secretary of energy, American chamber of commerce, U.S. Embassy, Pemex Logistics and ProMexico. KCS also met with developers of large rail terminals that will serve as load centers for liquid energy.
Focus areas for the development of KCS’ energy business include southbound movements of refined products and liquefied petroleum gases (LPG), as well as fuel oil export moves. Other factors include:
• To address the LPG deficit in Central Mexico, KCS will move product to a new specialized rail terminal in San Luis Potosi. Terminal construction began in early 2015.
• KCS currently moves fuel from Pemex refineries to export. Energy reform opened doors for private-sector participation in terminals and more flexible contract guidelines.
• Mexico’s demand for refined products (gasoline, diesel and biofuels) is increasing. Mexico’s current refining capacity is insufficient, and pipelines are not a near-term option due to theft and long development horizons. KCS will fill the need by moving these imported products.
KCS is embracing Mexico’s energy reform and is well-prepared with locomotives, crews, track capacity, rolling stock and technology solutions to serve this growing market sector.