Mexico’s Energy Policies Force Companies to Realign with Pemex
By KELIN DILLON
As Mexican President Andrés Manuel López Obrador’s (AMLO) intention to reform Mexico’s energy sector to favor state-owned oil company Petróleos Mexicanos (Pemex) has resulted in the reduction of fuel import permits and the cancellation of storage operations, private and foreign companies alike have been forced to reignite a working relationship with Pemex in order to obtain sufficient energy to carry out operations, with little outside alternative to the choice besides closing down business.
“What the Secretariat of Energy (Sener) is doing with the current import permits is waiting for them to expire so as not to hold a referendum, and there are several permits that expire this month,” said EServices Director Alicia Zazueta. “What this implies is a lack of outside investment because foreign companies are very disappointed in Mexico’s energy policies, and, obviously, the growth strategy that was in place is no longer viewed as on its previous trajectory. The market is really closing completely to Pemex and the Federal Electricity Commission (CFE).”
Back in 2018, just months after López Obrador took office, Sener had granted thousands of energy-related permits; in stark contrast, only 88 Sener-granted permits are in place as of Feb. 2022. Another 14 permits are expected to expire this year, including for Total Mexico, IEnova and Toyota Motors. Similarly, some major foreign energy companies like BP and Vitol have already had their foreign import permits suspended, which is anticipated to cause shortages in some parts of the country.
In the same vein, controversy has arisen surrounding the Sener’s shutdown of Monterra Energy’s fuel storage terminal Veracruz, which the company has claimed was an illegal and arbitrary decision. Monterra also said that the Mexican Energy Regulatory Commission (CRE) ignored its submitted documentation to proceed with operations, and is now claiming damages of $667 million against Mexico and seeking a collaborative resolution to the process.