Guillermo García
President Commissioner
View from the Top

Putting the Power into the Hands of the Customer

Wed, 01/18/2017 - 13:59

Q: What have been the highlights of CRE’s activities during 2017?

A: A key achievement has been the gas price liberalization. The original plan was to implement the change in 2018 but the executive branch decided to accelerate the process and move it up to 2017. This decision proved to be positive because the market cannot be opened if prices remain fixed.

Although there were some problems, the Open Season has been another highlight. The process took into account best practices and market conditions but the complexity of the system posed an issue. We decided that it was best to temporarily halt the process to implement a simpler system proposed by PEMEX. It was relaunched in the middle of April. Future Open Seasons will be more complex but we will use what we learned from this first Open Season. Companies have also been positive in their feedback.

Q: Which of CRE’s current projects will have the most influence on Mexico?

A: Storage capacity here is scarce. This is a big issue for a sector that has to work with strategic reserves of 10 to 15 days. More storage infrastructure must be built. CFE is working to switch from oil to natural gas as a prime fuel for its plants. We are working toward a way to use its fuel oil facilities. By doing so, PEMEX could double its storage capacity to six days from three in the coming years.

Private companies are also asking for permits to create privately owned storage facilities and we have awarded some such permits on a first-come first-served basis, mainly in the central region of the country but also in states such as Nuevo Leon, Chiapas and Yucatan. PEMEX will have to compete against and learn from other storage providers to become competitive. It will have to offer attractive prices and good operating conditions. For now, the most reasonable step would be for PEMEX to work in joint ventures.

Q: How will storage facilities be interconnected with gas station owners?

A: The US is a liquid market in terms of oil products. There, the owners of gas stations are different from those who own the storage facilities, a situation dictated mainly by market conditions and not by regulations. In Mexico, the law stipulates the separation of these activities according to regulations from both CRE and COFECE. There can be some integration in terms of companies bringing and storing their final products via a certain system provider but we expect that in the majority of cases storage will be allocated to multiple users. Those two models are possible in Mexico.

Q: How do you expect the branding phenomenon to develop in Mexico?

A: Branding is an interesting phenomenon in Mexico. BP has opened a service station that is the first of its kind in the country. Consumers are interested in buying new products and services and gas stations are adequate places to include convenience stores, dry cleaners or even banks, from which companies can receive bigger revenues. It will be interesting to see how companies follow BP’s lead to create a different product as well as offering extra services at gas stations. The gasoline business has small margins and companies must adapt to increase profits.

Gas stations will not be selling only one brand. They will offer a broader range of products and we believe PEMEX has an opportunity to compete against other brands. Most probably PEMEX will become a white flag product provider for gas stations by selling the two types of gasolines we are accustomed to, without additives, in a more economic market. To allow for fair market competition, CRE has launched the Gasoapp, a smartphone application that allows customers to identify nearby gas stations together with the price of gas at that location. The app also allows users to report problems such as price discrepancies and lack of fuel at a station.