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Mexico to open jet fuel market next: Flores

25 Jan 2018 22:07 GMT
Mexico to open jet fuel market next: Flores

Mexico City, 25 January (Argus) — Mexico aims to complete the liberalization of its jet fuel market this year as the last frontier in a process that saw the lifting of price controls for motor fuels and LPG in 2017, Mexico's undersecretary of energy Aldo Flores said today.

"By the end of 2017, all of the fuel markets had been liberalized, expect for jet fuel," Flores said at an event to mark the opening of Argus' new office in Mexico City. "The idea is to open it this year."

The jet fuel opening will require changes in storage and transportation infrastructure, just as it has for other fuels, he said.

"All of the infrastructure belongs to [government airport service agency] ASA so we have to see how those storage tanks can be shared," he said.

Flores said that the process could involve a type of open season, although the details have yet to be finalized.

Mexico will introduce changes gradually, Flores said, as it has for other fuel markets as part of its energy reform intended to dismantle the decades-long institutional monopoly of state-run Pemex.

"Opening markets gradually allows us to learn and better see areas of opportunity," he said.

Some 54 companies besides Pemex now hold permits from energy regulator (CRE) to store and sell jet fuel in Mexico, although independent commercialization has not started. State-owned Aeropuertos y Servicios Auxiliares (ASA) has been the only company allowed to sell, distribute and store the product.

He said the opening will be a transparent process similar to that of other fuels.

Before the energy reform "many of the market structures implied self-regulation on the part of Pemex, self-regulation by the authorities, so we had a legal framework which had not fully developed," Flores said. "It required creating protocols and incentives to develop the market."

Mexico's jet fuel demand averages 81,350 b/d in the first 11 months of 2017, worth Ps34.9bn ($1.8bn). The value has risen by more than a third from Ps25.5bn in the same period of last year, representing 75,600 b/d.

CRE president Guillermo Garcia Alcocer has previously said that the jet fuel market presents some different dynamics compared with gasoline and diesel, such as how airlines might purchase fuel for a year at a time.

It is also less of a target for fuel thieves, which has been a massive problem in gasoline and diesel markets as thieves can tap pipelines and sell fuel directly to consumers.

Mexico's demand for jet fuel has moved up along with air traffic. Mexico City's airport alone handled 44.7mn passengers in 2017, up 7.2pc from 41.7mn passengers in the previous year. But Pemex's jet fuel output has decreased, along with that of other fuel products — output fell by almost a third between November 2012 and November 2017 to 37,780 b/d.