Page 5 - LatAmOil Week 50 2019

LatAmOil COMMENTARY LatAmOil
 For example, the NOC has tried to launch ULSD production at its Cadereyta refinery in Nuevo Leon, but without success. Meanwhile, its other ULSD projects remain in the early stages, as Pemex has not attracted enough capital to move beyond the early stages of work.
As a result of these setbacks, CRE members voted in late 2018 to push the deadline back by six months. It never made this decision public but later granted another six-month extension.
Meanwhile, the issue has been caught up in the courts. Pemex filed suit with the intention of forcing the government to push its target dates back and is still waiting for a judge’s ruling on the case.
The postponement is a disappointment for US refiners, some of which have been eyeing the Mexican market. They had been hoping that Mexican consumers would need more LSFO, as the government worked to reduce pollution and harmonise local emissions standards with those of the US. But their hopes have been dashed, since Mexico has yet to experience major growth in demand for ULSD.
Wholesale market
The new emissions standards were not the only measures enacted by the previous administra- tion that have come up for scrutiny over the last week. CRE members said on December 18 that it had rescinded a 2018 regulation that barred Pemex from selling gasoline and diesel on the wholesale market at prices that were below cost or above market prices.
The old regulation had required the NOC to follow a set formula to determine the prices at which it would sell motor fuel to filling sta- tions. It took effect after Pena Nieto moved to open Mexico’s motor fuel market up to privately
owned and foreign suppliers.
According to the previous administration,
the measure was only supposed to remain in place until Pemex’s share of the domestic gas- oline and diesel markets dropped below 70%. Mexico has not yet met those conditions. As of September, Pemex still accounted for 87% of national gasoline sales but was providing only around 57% of diesel.
Pemex gains an edge
The new rules have raised some eyebrows among industry observers in the private and public sectors.
Alejandra Palacios, president of the Fed- eral Economic Competition Commission (COFECE), said earlier this week that the new CRE policy might give Pemex an unfair advan- tage over competitors. If there are no limits on wholesale fuel prices, she said, Mexican con- sumers will have to bear the “risks of Pemex sell- ing under cost and losing money” in the hope of gaining market share. “[For] private companies, the risk is that it will become impossible to com- pete with Pemex,” she added.
ONEXPO, a trade organisation of filing station operators, was also critical. It said in a statement that the new policy might lead to a “cascade of consequences in the market,” leav- ing Pemex with an unbeatable edge over other downstream operators.
As of press time, the NOC had not reacted publicly to CRE’s decision on wholesale prices. It is probably in favour of the shift, though, especially since it has had to close down or sell nearly 2,000 of its branded filling stations while privately owned fuel suppliers and sellers have made major inroads on the wholesale and retail market. ™
“ not appear to
be giving up on Guyana, despite recent disappointments at Orinduik
US VIRGIN ISLANDS
USVI set to reduce imports
of LSFO from Argentina next year
Tullow does
DELIVERIES of low-sulphur fuel oil (LSFO) from Argentina to the US Virgin Islands have been rising this year but are likely to go down again in 2020, according to the US Energy Infor- mation Administration (EIA).
According to EIA data, Freepoint Commodi- ties and ArcLight Capital Partners, the owners of the St. Croix refinery in USVI, imported 11,348 barrels per day (bpd) of LSFO containing no more than 0.5% sulphur in the first nine months of 2019. They did so in order to fulfil an agree- ment with the Virgin Islands Water and Power Authority (WAPA) on the supply of fuel for power generation.
Almost 40% of total LSFO imports, or 4,538 bpd, came from Argentina, EIA data showed. This represents a 36% increase on the figure
reported for the same period of last year, the agency said. (It also noted that USVI had imported LSFO from Northwest Europe, Congo and Algeria, as well as Argentina.)
The rise will not persist over the long term, it added. It explained that Freepoint and ArcLight were preparing for a partial restart of the St. Croix refinery next year, under a financing deal secured in late 2018. The plant is set to bring 200,000 bpd, or more than 57% of its 350,000 bpd design capacity, back on stream in early 2020, and some of this capacity will be used to produce LSFO for delivery to WAPA.
The St. Croix refinery, which is now part of an entity known as Limetree Bay Ventures, will also deliver LSFO to Puerto Rico Electric Power Authority (PREPA).
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