Trafigura Reduces Operations in Mexico

Trafigura Group, one of the world's largest oil traders, is reducing its positions in Mexico due to the government's energy policy, which has been impacting the company's profit margins. According to undisclosed sources, five commercial-trading jobs have been eliminated this month, including the position of director in Mexico held by Katia Eschenbach.

The decision to downsize operations in Mexico comes as a result of the country's energy policy, which has prompted Trafigura to reevaluate its presence in the country, reports Bloomberg. Trafigura's commercial oil and gas team in Mexico is left with only three individuals dedicated to international trading.

The squeeze on Trafigura's margins in Mexico can be attributed to policies announced by the government last year to tackle inflation. These policies have created challenges for the company, which previously faced setbacks when its fuel-import license was canceled and it was banned from doing business with PEMEX's PMI oil-trading unit amid allegations of corruption and involvement in the contraband of supplies. Although the permits were reinstated, Trafigura's operations have been limited due to the impact of fuel subsidies.

Mexico-s governmental administration has focused on strengthening state-owned companies, particularly PEMEX and CFE. These policies have strained relationships with key trading partners such as the US and Canada, leading to an ongoing energy dispute.

While Trafigura's metal and minerals trading operations remain unaffected, potential threats loom. Changes in the mining law pose risks to the company's future operations. The proposed reform to the mining law reduces mining concessions from 50 to 15 years. Furthermore, recent law reforms grant the Mexican Geological Service a monopoly over mining exploration activities. Mining companies are currently seeking legal protection against these measures as they await the outcome of pending changes.

Trafigura is also grappling with construction delays and cost overruns in the construction of a condensate splitter within PEMEX’s gas-processing facility in Burgos, Spain. Initially projected for completion in 2017, the construction of the splitter has experienced setbacks. The company has invested about US$150 million in this project, as reported in Trafigura's annual reports.