OREANDA-NEWS. November 14, 2016. US independent refiner Delek recently exported two test cars of diesel to Mexico by rail from its 73,000 b/d Tyler, Texas, refinery and wants to increase shipments over time, eventually expanding to gasoline.

"We are a niche player so we focus on niche markets, and rail is a pain to manage, meaning little guys are more willing to deal with it than big guys," Delek executive vice-president for business development and strategy Dan Gordon said today at the Argus Mexican Refined Products Markets conference in Houston.

Delek owns a fleet of post-October 2011 CPC-1232 tank cars that can be used for products service. Gordon noted that older DOT-111 cars are also suitable for shipments under regulations in the FAST Act transportation bill passed a year ago. There is a rail transloading facility on the Union Pacific line adjacent to the Tyler refinery where the company hopes to ramp up to unit train loading over time.

"We are going to scale up to 5,000 b/d within a month, and then the unit train component would take about a year to 15 months," Gordon said.

Delek also wants to convert its idle 32-car crude unloading terminal at its 73,000 b/d refinery in El Dorado, Arkansas, to products loading service. And it sees Alon USA's 73,000 b/d refinery at Big Spring, Texas, railing the short distance to Mexico once the two companies complete their pending combination.

Meanwhile, US and Mexican rail operator Kansas City Southern (KCS) laid out an aggressive vision for its participation, particularly in the industrial belt between pipeline-served Monterrey in the north and the densely populated capital Mexico City in the middle.

"Our rail network will bridge that gap between Monterrey and San Luis Potosi" in north-central Mexico, said Jennifer Fussell, KCS' assistant vice-president of sales in its chemical and petroleum business.

KCS has been moving products unit trains for about two years between state-owned Pemex's 320,000 b/d Tula refinery near Mexico City and the Pacific coast port city Lazaro Cardenas. It has also shuttled products from Brownsville, Texas, to Monterrey for nine years, all with no incidents, Fussell said. KCS could move marine shipments into Mexican ports to inland areas by rail.

In addition to refined products unit train terminal projects slated for Salinas Victoria in the north, San Luis Potosi and the Mexico City area, Fussell said it is not clear what the eventual rail participation might be among Pemex's existing network of 77 terminals known as TARs.

"Will these TARs be used, sold, invested in to facilitate transloading?" she asked. "I do not think anyone has that answer today, although there is some infrastructure there, and some have that [rail] functionality."

Likewise, Gordon said matching loading capabilities will need to be built or modified in the US to meet potential demand in Mexico.

"Only so many companies are set up to ship diesel and gasoline by rail," he said, noting gasoline is more challenging because of the evaporation controls needed. "It is not what refineries are historically set up to do."

Fussell added that in addition to new projects that have been announced, KCS is seeing other repurposing of crude terminals "as well as simple retooling of smaller terminals – it is very encouraging."