Photo; GSC Tanks

By THE PULSE NEWS MEXICO STAFF

The leftist government of Mexican President Andrés Manuel López Obrador (AMLO) announced this week that it will now restrict fuel imports to state-run agencies, thus dealing yet another blow to private-sector energy companies.

On June 11, the Mexico’s Tax Administration Service (SAT) published a change to its foreign trade rules forbidding private parties from obtaining or renewing permits to import fuels from places other than those authorized by the government.

This new ruling will affect investments of up to $4.64 billion in authorized storage projects, in addition to leading to higher costs for consumers.

Current permits, which were renewed every three years, allowed private-sector companies to import fuels to storage terminals.

Currently, the private sector imports 35 percent of all gasoline, 48 percent of all diesel and 98 percent of all LP gas consumed in Mexico, but the new ruling eliminates these private-company imports.

The change does not apply to the state-run oil venture Petróleos Mexicanos (Pemex) or the also-state-owned Federal Electricity Commission (CFE), which will be allowed to continue importing and exporting fuel as usual.

“The most serious part of this ruling is that it essentially nullifies  investments already made (in storage) by private companies. The rule is practically an expropriation because it leaves those storage terminals without viability,” said energy specialist Rosanety Barrios, who, as the former head of Mexico’s Energy Secretariat’s (Sener) Industrial Transformation Unit at the Ministry of Energy, played an instrumental role in the nation’s 2014 Energy Reform Bill, which AMLO has vowed to reverse.

Of the investments in energy previously approved by Sener for 70 storage projects worth $4.6 billion, about $1.5 billion have already been executed, according to the global business advisor firm FTI Consulting.

Barrios explained that the companies that built storage plants have contracts with other private-sector firms that had been given permission to import and store fuel in various ports across Mexico.

Among the private storage projects currently operating in Mexico are: the Mexican-owned IEnova in Veracruz, the Anglo-Swiss Glencore in Dos Bocas, and Houston-based Monterra Energy in Tuxpan.

Other private business models include importation from refineries in the United States by train to terminals located in the Bajío, as in the case of Exxon Mobil.

But the authorization to operate these terminals will now no longer be renewable. which means private companies can no longer import fuels, leaving Pemex and the CFE with yet another monopoly in Mexico’s energy sector.

FTI Consulting director Pablo Zárate said that “this measure clearly violates the spirit of the United States-Mexico-Canada Agreement (USMCA) to protect investments. and creates an artificial barrier to trade.”

“It is a discriminatory measure with direct impacts on investment,” he said.

Gabriel Ruiz, partner at the Thompson & Knight international law firm, added that the measure “limits the rights of individuals and modifies project costs, which will trigger an increase in transportation costs.”

On Monday, July 5, the American Chamber of Commerce in Mexico (AmCham) said that the new ruling will have a significant impact on the prices of fuels, as well as on other products such as food and medicine, which will negatively impact consumers.

 

 

 

 

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