Downstream Companies Strike Back Against Regulators

Companies in Mexico’s downstream and midstream sectors took drastic measures this week in response to what they consider an overreach from regulators. These measures could establish a more comparative precedent for other players in the industry. 

The first response came from the fuel retail sector when five service stations in the states of Guanajuato, Coahuila, Puebla and the State of Mexico refused to be verified by Profeco. The director of Profeco, Ricardo Sheffield Padilla, announced that this verification was part of Profeco’s “Litro por Litro” program, which attempts to monitor pricing policies and fraud at service stations through an app that allows users to submit anonymous complaints. Profeco announced that as many as 209 complaints had been submitted through the app during one week in February, according to a report from Oil & Gas Magazine. This information becomes part of Profeco’s weekly briefing at the president’s daily morning press conferences, which track gasoline prices by brand and state. 

These five service stations do not appear to be owned by the same company, and are externally represented by different brands, so the theory that these refusals were in any way coordinated could not be proved by Profeco. Sheffield Padilla made it clear that, if these service stations persist in their refusal to be verified by Profeco’s regulations, they will receive a visit from representatives from CRE, ASEA and the National Guard.

The second of these responses came from the storage and distribution sector, in which KKR subsidiary Monterra Energy announced its plans to sue the Mexican federal government after CRE regulators and National Guard soldiers closed down its fuel storage terminal in the port of Tuxpan in September 2021. At the time, Monterra Energy issued a public statement making clear that there was no legal reason for this shut down, since the terminal had been completely compliant with all standing SENER regulations. Now, KKR has decided to take the next legal step, demanding that the Mexican state pay back a total of US$667 million in damages and all legal fees incurred in the process, according to another report from Oil & Gas Magazine. No representative from the Mexican government has issued any statement in response to this development, although the suit is yet to be formally filed in court, leaving the door open to a negotiation process pending a settlement offer, if appropriate.