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February 5, 2020

Volume 3 Issue 8

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Base Oils Burgeoning in Brownsville

Brownsville, TEXAS – They stood near their rigs, road weary from 12-plus hours of windshield time, but still laughing while telling tales in rapid Spanish. Dressed in t-shirts and boots, they waited for their hauls – 11,000 gallons of base oil each, bound from this border city to lubricant blending plants in Mexico.

Deliveries of this sort have risen in number over the past few years, partly due to political and economic instability in Mexico. Brownsville is one of the main conduits for an increasing flow of bases oils from the U.S. to Mexico. The Port of Brownsville has several terminals with base oil operations, but Interlube – a joint venture between Shell Lubricants and Comercial Importadora – is the only one that deals exclusively with base oil, said Roger Gonzalez, the director. Other terminal operators supplying base oils include Bluewing Midstream, the Maverick Terminal unit of Howard Energy Partners and Golden Eagle Chemicals.

Interlube provided numbers showing how its business has grown in recent years: 13,244 trucks loaded from storage tanks in 2019, up from 6,747 in 2016; 550 rail cars transloaded to its storage tanks last year, compared to 372 in 2016; 600 rail cars delivering directly to trucks in 2019, versus just 140 in 2016. Last year, Interlube supplied 2.59 million barrels of base oil, up from 1.27 million barrels in 2016.

The growth of Interlube’s business reflects an increase in base oil trade passing through Brownsville, one of the main conduits for U.S. base oil exports to Mexico, which likewise have been rapidly expanding. According to the U.S. Energy Information Administration, the nation exported 4.1 million barrels of base oil to its southern neighbor in 2015. By 2018 that number had skyrocketed to 10.2 million.

Gonzalez attributes the hefty increase to the under-developed state of Mexico’s base oil supply base. Based on its size of its lubricant market, he said, the country could use five base oil plants. In fact it has one – at Petroleos Mexicanos’ refinery in Salamanca. That plant has capacity to make 6,000 barrels per day of API Group I oils but frequently operates at far lower rates. Additionally, the country lacks a reliable supply of chemical additives used to make lubes.

Another reason for the soaring level of base oils traveling by truck out of Brownsville is the comparative quickness of that delivery mode. Rail might seem quicker than the roadways, Gonzalez explained, but Mexico’s railway system is too inadequate. Infrastructure is part of the problem, as there are only two rail lines from the U.S. to central Mexico – crossing at Laredo and Eagle Pass, Texas.

Second, it takes three to four weeks to go by rail from Brownsville to Mexico City, whereas a truck delivery takes only a couple days. “The rail terminals are filled with fuel,” Gonzalez said, but because of a lack of tankers and government corruption it can take weeks to unload the fuel.

It’s nearly impossible for an most suppliers to transport base oils competitively via rail. In addition to a shortage of rail tankers, the Mexican government subsidizes Pemex’s freight rate to where the government-controlled oil company only pays one peso per rail car, whereas the price for other companies undergoes significant swings, he said.

This leaves tractor-trailer traffic as the sole economically feasible option. “It’s cheaper by truck than by rail car, even with gas, wear and tear, road toll and pay to the drivers,” Gonzalez said, explaining that in September 2019, the average cost of a round trip was 58,565 pesos, or about U.S. $3,133.

Tankers can haul upwards of 15,000 gallons of liquid. However, Interlube must follow both U.S. and Mexican department of transportation regulations. The U.S. limits hauls to 11,000 gallons per tanker, while Mexico started limiting weight on trucks only recently.

Sitting on five acres just a stone’s throw from the channel, Interlube’s office building is a hub of energy. A small office staff answers phone calls from customers and files a mountain of paperwork, while outside trucks wait to be filled and head out. The business typically operates between 9 a.m. and 8 p.m. and will fill upwards of 125 trucks during that time. Recently it extended hours to 10 or 11 p.m.

“It’s growth has been amazing,” said de la Pena, who has worked at the terminal for more than two decades. “We started out with 20 or 25 trucks on a busy day, now we get a 100 to 125 on a normal day. It’s quiet a jump.”

Trucks begin arriving early, coming from as far as Mexico City, some 1,200 kilometers or 750 miles away, traveling hours before arriving in the border town of Matamoros, Mexico, where trailers are separated before cross into Brownsville. The U.S. doesn’t allow tandem trailers to cross the border from Mexico.

When the trucks arrive at the Port of Brownsville, they head to a staging area about two miles from the terminal. A runner goes back and forth between the terminal and the staging area informing the drivers when it is his turn to fill up. Once their tank is full, the trucker is given the proper paperwork allowing the cargo to enter Mexico legally.

De la Pena said turnaround can take anywhere between 30 minutes to six hours. “We try to get the trucks in and out within an hour,” she said. On a recent January morning, a dozen trucks, bearing both U.S. and Mexican DOT regulation numbers, were waiting for open bays, either from multi-story tanks or rail tankers.

Less than 100 yards away, Interlube employees were unloading a barge loaded with 42,000 barrels of base oil, a job that can take from eight to 10 hours. A rainbow of colored pipes transferred the liquid from the barge to tanks. De la Pena said Interlube is the only terminal in the Port of Brownsville that has color coded pipes, which allows customers to know which ones carry their oils. “This is to avoid contamination; its part of our quality control that we stress,” she said. “We’re the only group that does this. Customer service is key to our success, we strive to keep our customers happy.”

Behind a chain linked fence, only Interlube employees are allowed to unload the barges, mainly for safety reasons, explained Adalberto Fernandez, the facility's engineer, adding safety is always a concern. “After 911 everything changed,” he said. Employees must wear TWIC (Transportation Workers Identification Card) badges issued by the Department of Homeland Security. To obtain TWIC clearance, workers must pass safety training and a background check. The terminal is also located in a free trade zone, which requires additional security, he explained.

Walking back to the office from the barge, de la Pena said the company is experiencing some growing pains. The company now has two dozen employees, but is trying to increase that number to add more shifts, especially in its accounting, traffic and operations departments. “We continue to grow,” she said, with a slight smile.

Photo: Daniel Tyson/Lube Report staff

Interlube's terminal in Brownsville, Texas. The company has hauled more base oil by tractor trailer's into Mexico since political and economic instability hit the country.