Page 5 - LatAmOil Week 13 2021

LatAmOil COMMENTARY LatAmOil

However, Lopez Obrador has been working drop “by double digits,” Bloomberg remarked
to blunt the impact of the changes, which he last week. And in June 2020, it saw the total vol-
views as a source of corruption and economic ume of diesel imported by private companies
instability. drop below its own import totals for the first
For example, he has postponed or suspended time ever.
auctions of new upstream oil and gas assets. This development does not line up with the
He has also stated explicitly that he believes policy preferences of the Mexican president,
the public sector should take a leading role in who made it clear on March 29 that he believed
all aspects of the fuel and energy business, and opening the downstream fuel sector up to com-
he has instructed his administration to take as petition had spurred corruption. During a daily
much action as possible under Mexican law, press briefing, he said: “Over 1,000 permits
short of amending the constitution, to promote were granted in Mexico during the [previous]
the interests of Pemex and its state-run cohorts. neo-liberal administrations to import gasoline
Additionally, he has shrugged off complaints and diesel, many of which were never used, but The Mexican
that Mexican regulators are slow-walking for- were kept for speculation purposes, even avoid-
eign and privately owned companies’ requests ing payments of royalties for years.” president has
for permission to import petroleum products He went on to say that his government would made clear
for domestic consumption. be taking a closer look at all private companies
According to Alejandro Schtulmann, the seeking to import petroleum products. From that he believes
head of the Mexico City-based risk consultancy now on, he said, import permits will only go to
Empra, the president’s actions on this front are firms that can prove that they own or lease stor- opening up the
quite deliberate. The current administration is age facilities that hold five days’ worth of fuel.
trying to send a message that “the Mexican gov- The practical effect of this measure will be downstream
ernment doesn’t want you here,” he said, accord- a reduction in the number of new petroleum fuel sector to
ing to a report from Bloomberg. product import contracts, Lopez Obrador said.
Schtulmann indicated that he expected “We will honour contracts, but we will not grant competition
the president to continue throwing up legal any more permits. We need to protect Pemex to
obstacles to companies that might compete ensure supply,” he declared. has spurred
with Pemex, even if outside actors such as the The president acknowledged that Mexico
US government sought to interfere in order to was still reliant on fuel imports and attrib- corruption
protect US companies’ interests. “If they made uted this dependence to under-investment in
investments, they are going to try to operate, Pemex’s refining assets. He described the situ-
but it will all come down to a legal battle,” he ation as unacceptable, saying: “We cannot con-
remarked. “There could be strong retaliation tinue depending on imported fuel.”
from [Washington] toward this, and also from
private parties.” Election implications
It is too early to say how the new bill might affect
Market share Mexico’s oil and gas industry.
He also stressed that Lopez Obrador was deter- On the one hand, it has yet to pass through
mined to protect Pemex’s control over the the legislature, so its provisions have not taken
downstream sector, particularly with respect to effect. On the other hand, even if it does become
petroleum product imports, distribution and law, it may draw a challenge from Mexico’s
sales. The president’s “main motivation” for roll- Supreme Court, which has sought to block some
ing out the new legislation, he said, is to prevent of the president’s other attempts to support pub-
the NOC from losing any more market share. lic-sector energy companies.
This makes sense, given that the previous Nevertheless, it does indicate that Lopez
administration’s reforms have had a significant Obrador is not taking a different approach to
impact on Pemex’s downstream business. True, energy policy in the run-up to Mexico’s mid-
the NOC has lost its monopoly on upstream term elections in June of this year. As such, his
development projects, and it has seen a few new administration may very well float more pro-
fields auctioned off to IOCs and privately owned posals designed to benefit Pemex and other
firms since 2013-2014. But it has also seen its state-controlled energy companies over the next
share of the domestic diesel and gasoline market two months. ™

Week 13 01•April•2021 www. NEWSBASE .com P5