Draft Bill Makes Downstream Competition Weaker, Warns COFECE

The Federal Commission of Economic Competition (COFECE) yesterday issued a warning against a Ministry of Energy and Ministry of Economy draft bill that would change regulations on the import and export of fuels and reduce free competition between PEMEX and private operators.

In a press statement, the commission, which oversees free market access and competition in the country, explained that unlike PEMEX, private companies need to import fuel. Restricting access to import permits, which is effectively what the bill seeks, would thereby impede companies’ abilities to trade.

“PEMEX is the only company that produces petroleum products in the national territory, so in the market of commercialization of gasoline it only faces competition through imports made by other companies (marketers). Therefore, in order for there to be competition in this market, it is indispensable that the associated regulation does not obstruct or make it unjustifiably difficult to obtain, use and renew the necessary permits for the importation of these products and that SENER guarantees their expeditious and non-discriminatory granting,” read the statement.

COFECE published five issues with the draft bill. The first issue was that the bill reduces import permits from 20 to five years, “reducing the incentives to invest in transportation and storage infrastructure, and reaffirming, in the medium term, the dominant position of Pemex in marketing.”

The second issue was that under the new bill SENER would have the right to adjust the import and export amounts on a permit, while the third point was that it “establishes the fictitious refusal for the processing of the permits” without SENER having to explain any refusal.

The fourth and fifth problems put forward by COFECE were that the bill “establishes unclear and burdensome requirements for the application of permits” and distorts the administrative figure of the permit, since it turns it into a public policy instrument to control the energy balance.”

This is not the first time that accusations of competition rigging have been thrown against the government in the last two years. Earlier this year, the American Petroleum Institute (API) complained to the Federal Consumer Protection Agency (PROFECO) that CRE had shown “discrimination” in granting gas station permits to US companies. API Director Michael J. Sommers noted “difficulties obtaining permits for a variety of activities, including new or renamed stations, third-party storage facilities, imported fuels, liquid terminals and liquefied natural gas terminals.” The accusations were dismissed by PROFECO.

Likewise, the removal of PEMEX’s asymmetric gas regulation also gave the industry reason to be concerned, with marketers and retailers losing ground on their access to fuels. Alejandra León, Director of Latin America Upstream at IHS Markit, told MBN that “transparency is more difficult to come by following the government’s removal of the PEMEX asymmetric gas regulation.”