Page 5 - LatAmOil Week 28 2021

LatAmOil COMMENTARY LatAmOil

This view has led the president to reduce the Platts noted. It also pointed out that US-based
NOC’s exposure to competition from privately Kansas City Southern was the only rail operator
owned firms in various ways. involved in liquid fuel shipments to the Mexican
One of its methods has involved conducting market.
inspections as a pretext for ordering foreign and Additionally, it hinted that the inspection
private investors to suspend their operations, campaign might lead to legal action. Industry
S&P Global Platts noted last week. It quoted players may seek to challenge the Mexican gov-
industry experts and participants in a recent ernment’s findings, they said, without saying
virtual seminar, along with multiple unnamed whether any specific firms were contemplating
sources, as saying that the pace of these inspec- such a move.
tions has picked up in recent weeks.
According to Carlos Vallejo, a partner at the No easy market solutions
Mexican energy consultancy Lexoil who spoke It’s not clear whether such challenges might suc-
at the virtual seminar, the Environment, Safety ceed, especially since Mexico City has justified
and Energy Agency (ASEA) and the Energy the additional inspections by citing the need to
Regulatory Commission (CRE) began stepping combat corruption and ensure compliance with Mexico City
up joint efforts to carry out random verification the relevant fiscal regulations.
visits to fuel transloading terminals in late June. If they do succeed, it may not make much has justified
As a result of these inspections, several terminals difference in the end. Instead, it may lead Lopez
have had to suspend operations, he said. Obrador to try using other administrative meth- the additional
“Authorities are looking for any excuse to ods to force the terminals to suspend operations.
close down storage facilities operated by private But if they don’t succeed, Mexican fuel inspections
companies,” he told Platts outside the frame- markets are likely to feel the strain. Pemex’s by citing the
work of the seminar. “The aim is to make a coun- six refineries are operating at less than 50% of
ter-reform to minimise competition to Pemex.” their total design capacity of 1.5mn barrels per need to combat
day (bpd), and they are not capable of turning
Terminals under pressure out enough fuel to satisfy domestic demand. As corruption
Vallejo did not name any of the affected facilities, such, the country depends on petroleum prod-
but three sources with knowledge of the matter uct imports, and it will run short if it disrupts
said that ASEA and CRE inspectors had forced too many of the shipments that pass through
a truck-loading terminal in Puebla State owned facilities such as the IEnova terminal in Puebla.
by IEnova, the Mexican subsidiary of US-based The prospect of shortages may not be that
Sempra Energy, to shut down. much of a concern for Lopez Obrador in the
Two of these sources noted that three more long term. The president has said he would
fuel terminals had been idled in Nuevo Leon and prefer to see Pemex regain its position as the
Queretaro states, while the third reported that country’s monopoly supplier of fuel, and he
joint inspection teams were visiting the border has committed to investing in domestic refin-
control and customs stations that handled rail ing projects such as the building of the mas-
shipments into Mexico. sive Dos Bocas oil-processing plant in Tabasco
These suspensions are affecting multiple State. In the short term, though, with Dos Bocas
privately owned companies – not just IEn- still under construction and existing refineries
ova and the owners of the other terminals, but operating below capacity, Pemex may struggle
also the entities that rely on these facilities. For to secure enough fuel to cover demand.
example, the US-based refiner Valero uses the And if it does, officials in Mexico City might
Sempra subsidiary’s Puebla terminal to transfer just respond by looking for new administrative
fuel delivered from another terminal in Vera- measures that would force importers to cut deals
cruz to trucks that can bring it to local buyers, with Pemex. ™

(Photo: Honiron Manufacturing)

Week 28 15•July•2021 www. NEWSBASE .com P5