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Bill to end limits on Pemex market power advances

  • Market: Oil products
  • 21/04/21

Mexico's lower house energy commission has passed a bill that would fully end limits on Pemex's market dominance, the third fast-tracked energy proposal since early March aimed at boosting state-owned energy companies.

The bill, now headed to the full house for debate, would remove from the country's hydrocarbons law requirements put on Pemex to create space for private-sector competitionin the wake of the country's 2014 energy reform. Pemex has been required to offer fair and transparent discounts to its gasoline, diesel, jet fuel and LPG buyers — as well as for some petrochemicals. It has also been required to make public some of its pricing formulas and details such as transportation fees, information that private-sector companies do not typically have to reveal.

The provisions were meant to be temporary, until competitors gained sufficient market share, a test that has been met, the Morena party of President Andres Manuel Lopez Obrador that proposed the bill argued.

But Pemex's monolithic power is far from over, opposition lawmakers said.

"Pemex had 86pc of the gasoline market and 72pc of the diesel market in 2020," PRI lawmaker and former head of state utility CFE Enrique Ochoa Reza said. "These changes will increase costs for all Mexicans."

Mexico's competition watchdog Cofece concluded that Pemex still controls similar amounts of the markets.

The energy regulatory commission (CRE) had already ruled that Pemex no longer had to follow certain wholesale pricing rules for gasoline since December 2019. Yet Pemex continues to publish its discounts and prices and follows pricing guidelines from the CRE, as the restrictions are still referenced in Mexico's hydrocarbons law.

This bill follows on the heels of another proposal to make fuel market operating permits more difficult to obtain and easier to strip away, which is set for a vote in the full senate tomorrow. The senate energy commission passed the bill 9-6 yesterday after the lower house approved it earlier this week.

In early March, congress passed a reform to the country's electricity law that sought to mostly prioritize state-owned generation. It has been suspended following a series of court decisions against it.

The legislative period ends on 30 April and resumes on 1 September, after mid-term elections on 6 June in which Morena aims to gain a two-thirds majority that would ease passage of constitutional reforms.


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