New Steps toward Opening the Fuels Market, by José María Lujambio

April 18, 2016
New Steps toward Opening the Fuels Market, by José María Lujambio

On February 23, 2016, the Department of Energy (“SENER”) published in the Official Journal of the Federation (“DOF”) a notice informing that, as of April 1, 2016, it will be able to grant permits for the importation of gasoline and diesel to any interested party who fulfills the applicable legal requirements. Therefore, parties will not have to wait until January 1, 2017, which was the date originally set forth for such purposes in the fourteenth transitory article of Mexico’s Hydrocarbons Law.

This policy measure is justified by the SENER considering that it will promote free competition by eliminating restrictions on the current supply model; it will offer consumers access to prices below the maximums, particularly along the border; and it will also incentivize investment in transportation and storage infrastructure, which will result in greater energy security and promote better conditions for the full opening of these fuels market in 2018.

Until now, the State productive enterprise Petróleos Mexicanos, (“Pemex”) had been the only party authorized to import these refined products, as part of a framework of controlled prices. Due to growing domestic needs and insufficient refining capacity in Mexico, the country already imports half of its total demand of gasoline and 40% of its total demand of diesel.

The scheme of the special tax on production and services applicable to these products has already been amended by the Federal Congress, in transition toward the liberalization of prices expected for 2018. Beginning 2016, the Mexican Energy Regulatory Commission (“CRE”) is authorized to grant the first permits for service stations with brands other than Pemex, after having granted during 2015 the permits for an overwhelming majority of the more than 11,000 operating stations. Additionally, as of the date of this note, the CRE has already granted 10 permits for the commercialization of at least one of these fuels. And recently, on March 3rd, it approved the provisional rates for the refined products’ storage terminals currently owned by Pemex Logistica; this after having published, on January 12th, the regulations for open access to said service and to pipeline transportation, which will also be amended to facilitate the market opening.

The implementation of the energy reform on midstream and downstream activities is moving forward and is accelerating, which creates important business opportunities that will hopefully soon yield economic benefits to Mexican consumers.

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