This week’s Interview of the Week is with Jorge Lanza, CEO of CLH. Jorge explained to us CLH’s strategy for entering the Mexican market with a national company as well as the company’s extensive plans for its terminal construction.
Q: What kind of business opportunity does Mexico represent for CLH?
A: Mexico has great potential regarding fuel storage development due to the expected growth in fuel consumption and the lack of installed capacity to cover such demand. It is difficult to project how big our business in Mexico will become but considering the size and potential of the country we are sure that Mexico will gain a significant share within the CLH business. For that reason, we brought an entire team to scout business development opportunities, something that we had never done before, not even in Oman. Furthermore, if we play our game well enough, Mexico could become a springboard for CLH to enter the Latin American region.
Q: How is CLH securing its entrance into the Mexican market?
A: In 2017, we put together a team to look for the right opportunities in Mexico. Finally, we found the right partner in Hydrocarbons Storage Terminal (HST) and bought 60 percent of the company in April 2018. Through this acquisition, we will develop a new oil terminal in the Valley of Mexico. HST and its local shareholders are providing us phenomenal added value as it is an established Mexican company with people that already know the market, have direct relationship with the key market stakeholders in Mexico and local customers. CLH is working to attract anchor customers for this first storage terminal and is also providing cutting-edge efficient technologies to handle hydrocarbons that will result in lower final prices for customers.
Q: How do you expect CLH’s track record in Europe to help the company in the Mexican market?
A: CLH was born in Spain from a monopoly that started in 1927 and ended in 1992, in a similar opening scenario as in Mexico. For many years CLH experienced an increase in fuel demand amid a lack of infrastructure in the country, coupled with the competition from many international companies, just like what is happening with PEMEX. Generally speaking, we understand PEMEX’s DNA, its roots and the structural changes it is going through. That experience is a strong added-value we can offer to all our potential clients. Every new player entering Mexico is looking for a way to set a strong foothold in the country. Since we share the same culture and speak the same language, we are capable of doing business more easily with Mexican companies. We can clearly leverage our operational know-how coupled with the cultural fit to team up with local partners who have good projects in the country but need an industry expert to develop and operate them.
Q: When do you expect to start operations at the terminal to be developed together with HST?
A: This storage terminal is almost ready to start construction activities, as soon as we finish the last contracts and permits and will start operations in early 2020. While the permit granted by CRE is for storage of 875,000 barrels, the initial construction will most probably consider fewer barrels. We are looking for the right contractors to develop the project and expect them to be national. Of course, the engineering will be developed with the help of our central teams in Spain, but at the end of the day those actually building and connecting the pipelines to the storage tanks will be Mexican. Parallel to the construction, we will be looking for other opportunities to keep ourselves busy.
Q: What other business opportunities are you looking to develop in Mexico?
A: Striking the right alliances for the development of projects in the country is extremely important for us. In this sense, it is worth clarifying that the country will see an increase in oil and gas production and, because of that, we are not only looking at the creation of terminals for refined products but also for crude oil, although the need for the latter will come later as production increases. In Europe and the US, we operate jet fuel storage terminals and provide into-plane services at 35 airports, meaning that we also have a great deal of experience to bring to Mexico in this area.