Mexico restricts fuel imports of private firms

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Mexico issued during the weekend new rules that would limit fuel imports of private firms in a controversial move seen as boosting the dominant position of state oil firm Pemex.

Mexico’s leftist populist President Andrés Manuel López Obrador came to power with the promise to increase state support for Pemex and make the state-run major the pillar of a turnaround for the country’s declining oil production. López Obrador is also trying to make Mexico ‘energy independent’, and the latest legislation to restrict private companies’ ability to import refined oil products is seen as a move in that direction.

Despite mounting debts and declining crude production, Pemex is focused on a US$8-billion refinery, Dos Bocas, planned for López Obrador’s home state of Tabasco. The planned refinery was a key campaign pledge of the president to reduce Mexico’s reliance on fuel and refined product imports, most of which come from the United States.

According to the latest regulation issued by Mexico’s Energy Ministry and in force from December 28, the ministry will no longer issue 20-year permits to private companies to import fuels. Instead, it will replace those 20-year permits with shorter ones of just five years.

A week before the new rules entered into force, the antitrust regulator of Mexico, COFECE, criticized the plan to restrict permits for imports and exports of oil and refined products, recommending that the government do not follow through with its intention.

The project would severely hamper competition on the retail fuel market and limit consumer choices to access more options and get the best possible prices, COFECE said on December 21.

The new regulations would also limit incentives for private companies to invest in infrastructure to transport and store fuels, and reaffirm Pemex’s dominant market position in fuel sales in the medium term, the antitrust regulator said.

Since taking office, the López Obrador administration has undermined foreign investment in Mexico’s energy industry, which had just been opened to private participation by the previous administration.