With refining assets within proximity of the U.S.-Mexico border, San Antonio-based Andeavor is eyeing Mexico to expand its marketing efforts.

CEO Greg Goff discussed expansion plans following Tesoro Corp.’s rebranding as Andeavor during a recent conference call. He also discussed how the acquisition of El Paso, TX-based Western Refining Inc. fits into the company’s plans.

Andeavor last month signed a terminaling agreement with Mexico’s state-owned Petroleos Mexicanos (Pemex) that would allow the company to supply 30,000-40,000 b/d of transportation fuels to the Mexican states of Sonora and Baja California.

In addition, Andeavor plans in the next two months to open its first retail marketing stores south of the border under the Arco brand.

“We believe these agreements support the company’s integrated value chain by extending our marketing presence into the growing market in Mexico, and the company intends to grow its marketing presence across the entire span of northern Mexico over the next few years,” Goff said.

Other operators also are expanding their refining businesses in Mexico, including ExxonMobil Corp., which last month said it plans to enter the fuels market in 2017 with Mobil-branded stations and a line of advanced Synergy gasoline and diesel fuels.

Moving into Mexico as a “natural progression” for refining operations in Southern California and West Texas. Mexico is “a natural extension of our value chain,” with northwestern Mexico’s overall future demand estimated at 160,000 b/d, two-thirds gasoline, one-third diesel “and growing,” Goff said.

“When you look at supplying that market, it is kind of a natural to come from our refining area in the Los Angeles area, so it is important for us to be able to take those volumes to the street and through a distribution system that we have comfortable, reliable supply through there,” he said.

“I think over the next five years we have the potential to pretty significantly grow our marketing presence, and as we get more into it, create an organization that will be partially based in Mexico, but it will take us three to five years to get to the point we want to get to.”

Potential challenges in Mexico and questions about Pemex’s role were also discussed. Goff acknowledged that a lot of attention to detail in the first few years would be essential. He acknowledged that for Mexico the opening up the energy markets is a “tremendous change,” requiring close coordination with Pemex.

“The biggest challenge is working through all the little details such as the trucking for getting the product to the stations and getting efficient supply into the market because at the end of the day we need to cost-effectively supply the people in Mexico.”

Andeavor reported second quarter earnings of $40 million (31 cents/share), compared with $418 million ($3.47) for the same period last year. This year’s results were negatively impacted by lower commodity prices and pre-tax acquisition/integration costs related to acquiring Western Refining.