Private sector loses ground in Mexican LPG market

Falling imports were offset by Pemex's increased domestic output, with Mexico's nationalist policies continuing to favour the company, writes Antonio Gozain

Private-sector operators lost ground to state-owned oil firm Pemex in Mexico's LPG market last year as a result of higher domestic output from Pemex, falling rates of theft and energy policies favouring the company.

Pemex's share of domestic LPG sales grew to 62.1pc last year — including wholesale distribution to retailers — up from 61.2pc in 2022 and 49.7pc in 2020, which was the lowest in its history. The company had a monopoly on the market before Mexico's 2014 energy reforms. Pemex sold 166,400 b/d (5.24mn t/yr) of LPG in 2023, up by 4pc from 159,400 b/d in 2022, according to the company. This increase was also supported by firm demand for LPG in Mexico. No data on consumption are available, but Mexico's total LPG imports plus domestic output stood at 292,400 b/d last year, 4pc higher than in 2022.

Pemex's LPG imports fell by 1pc to 76,100 b/d in 2023, while private-sector companies' imports also fell by 1pc to 114,000 b/d, according to the energy ministry Sener. But these declines were more than absorbed by Pemex because it hiked domestic production. The company's LPG output increased by 11pc to 102,300 b/d in 2023, partly as a result of increased investment in its refining capacity since 2019, although about 84pc of this was from gas processing.

President Andres Manuel Lopez Obrador's administration has pursued a nationalistic policy to support Pemex through restrictive regulations. Although the 2014 energy reform remains in force by law, in practice Sener and autonomous energy regulator CRE have aligned with Lopez Obrador, cancelling or not granting permits for private-sector firms at all levels of the fuel value chain. Still, private-sector firms have over 4,700 permits for LPG distribution in the country, according to CRE.

Another challenge for private-sector companies and Pemex has been LPG theft, which is predominantly done by tapping the state-owned company's pipelines. The problem has escalated as criminal gangs have shifted from gasoline and diesel to LPG owing to a government crackdown on targeting pipelines of the former two products. Yet Pemex reported it lost 179,000t of LPG to theft in 2023, down by 8pc from 194,500t in 2022, following a transparency request for data from Argus. Illegal taps on its LPG pipelines fell by 2pc to 2,470, the data show.

But this would seemingly contradict previous Pemex data that showed the company had lost 175,000t in January-August 2023 alone, unless theft had stopped in the final quarter, as well as data from LPG distributors' association Amexgas, which suggested illegal taps were on course to rise by 54pc to over 3,800 in 2023.Pemex did not respond to an Argus request for comment on the data.

Mexico's LPG retail prices have increased this year on rising US propane, althoughthe government continues to shield customers through price controls. The average capped price across 2,490 cities was 10.57 pesos/litre ($1.99/l) over 10-16 March, above the 2023 average of Ps9.66/l. This follows US propane price rises at the turn of the year, although they have fallen since. US Gulf coast propane prices delivered to Mexico fell by 4pc on the week to 88.01¢/USG ($459.50/t) on 8 March.

Control enthusiasts

Mexico introduced LPG price controls in 2021. A court ruled in August 2023 that the price caps are constitutional for truck deliveries to residential consumers but not sales from other retail sites. Around 60pc of Mexico's LPG demand of more than 9mn t/yr comes from the residential sector, Argus data show.

Mexico's presidential election in June could be an opening for a return to liberalisation. Ruling party Morena's candidate Claudia Sheinbaum — ahead by double digits in recent polls — is expected to continue with Lopez Obrador's nationalistic approach, but opposition candidate Xochitl Galvez has expressed her intention to open the sector to more private-sector investment.

Mexico LPG imports

Pemex LPG production