Mexico issues new terms for wholesale fuel sales

OREANDA-NEWS. October 24, 2016. Mexico's Energy Regulatory Commission (CRE) last night approved two new contract models for the sale of oil products in the domestic market.

The two contracts replace Pemex's current unique supply contract, in which the state-run company had provided all services, from production, or import, to delivery.

The first type of contract for first-hand fuel sale (VPM) guarantees the acquisition of fuel in a Pemex refinery or ports of entry to companies that already have separate logistics contracts.

The second, called a commercialization contract, will include additional services such as storage and distribution.

The new contract models aim to encourage private-sector initiative in Mexico's newly competitive retail fuel market, which was opened up under a comprehensive energy reform that revoked Pemex's monopoly.

The firm's downstream unit, Pemex TRI, will have to offer the new contracts to all future clients and gradually replace current ones, CRE said.

The contracts can be terminated without penalty with a 30-day notice.

There was no immediate reaction from new fuel suppliers contacted by Argus.

As a result of the energy reform, companies were allowed to open non-Pemex branded fuel stations in January 2016, while fuel imports were liberated in April.

A few companies such as Mexico's Hidrosina and LaGas have opened non-Pemex branded stations and others have made similar announcements, such as Gulf Mexico, the Mexican affiliate of Indian conglomerate the Hinduja Group, BP and OXXO Gas, a division of local beverage retailer Femsa.

But fuel imports have yet to materialize as permit holders say Mexico's fuel tax is too high to make it viable.

Fuel prices are currently calculated using a formula partially tied to international prices but capped at 3pc above or below monthly average Mexican prices from 2015.

The government suggested prices could be liberalized as soon as January 2017, a year earlier than planned, but a draft budget proposal submitted in September by Mexico's finance ministry indicates that prices could be still partially controlled by the finance secretary until the end of 2018.

Separately, CRE is working on terms for third-party access to products pipelines. The terms should be issued by the end of 2016.