VH Global Energy Infrastructure has issued a statement on the impact of tariffs on its Brownsville fuel terminals in Texas. The Brownsville plant imports oil slurry from Mexico and refines that into a useful product. If it has to pay an extra 25% tariff on the slurry that it imports, that would have a significant impact on the plant’s profitability. That might mean that the trust’s fuel terminals would lie unused (although customer contracts have been designed to manage downside risk and include minimum volume commitments regardless of throughput through the terminals) or perhaps worse, that its major customer would run into financial difficulties.

The problem for the company is the unpredictability of the US regime and confusion surrounding what the tariffs, if implemented, would cover. VH Global Energy Infrastructure says “There is the awareness that the current administration has deep and extensive connections with the energy industry in the U.S., the constituents of which are awaiting more positive outcomes for refinery businesses they hold in the U.S., which would otherwise be negatively affected by the tariff. From the information available today, it is considered that the potential negative financial impact of the tariff on the customer revenues and business of the company’s terminal assets is low.”

The mooted tariff on Mexican imports was 25% and was the subject of an executive order issued on 1 February 2025, to take effect on 4 February 2025. Then, yesterday, the imposition of the tariffs on Mexico was delayed by a month.

Initial analysis by the manager and the operating partner, Motus Energy, concluded that the imposition of the tariff would not have an impact on the northbound flow of residual slurry from Mexico into the company’s fuels terminals in the Port of Brownsville Foreign Trade Zone in Texas, US.

Slurry is shipped from the terminals into refinery coking facilities in Texas and Louisiana at a significant discount to crude pricing, and therefore the imposition of tariffs on a commodity with such low value could have little effect on the flow, as long as there is impetus for the Mexican refineries to ship the product across the border to Brownsville – a strategic hub for cross-border product movements. The statement notes that the nearest Mexican refinery to the assets, the Cadereyta refinery in Mexico, continues to produce and supply refined products into Mexico at pace, and as a result of the process, produces a significant overhang of residual fuel slurry which needs transporting to the US, along the only geographically viable route, which involves transiting the fuels in the terminals in Brownsville.

The company also thinks that should the Mexican national energy company PEMEX, via its trading arm PMI, choose an alternative end coking facility outside of the US for its slurry, it would still utilise the terminal assets prior to shipping the product overseas from the Port of Brownsville.

[I flagged this as a risk in an article for Citywire published on 2 December. It may be that Trump feels he has already got what he wanted by way of concessions from Mexico,  but trying to predict what he might do is futile. These assets have often been a source of confusion/consternation for potential investors in VH Global Energy Infrastructure, and I think it is a significant factor behind the trust’s 54% discount, but it is hard to see how the terminals would fetch a decent price in this environment. Investors in the trust must hope for the best.]

ENRG : VH Global Energy Infrastructure monitoring impact of tariffs on Mexico