The country’s ministries of economy and energy filed the proposal with government agency Conamer to change the regulation governing the import and export of hydrocarbons and nuclear materials as well as petroliferous and petrochemical products. The government wants to shorten the duration of import permits to five years from 20, a move that will stifle competition, help state-owned Pemex, and ultimately put investments in energy at risk, said two energy consultants. Apart from the shorter terms, the new rules impose stricter requirements for obtaining import permits.
An applicant will have to show authorities that it already has a contract with the supplier of the imported product, another contract with the counterparty selling the product in Mexico, and a contract to store the product. 1. Investments in LNG export and fuel-storage terminals would get hit 2. Proposal is already in public consultation 3. New rules affect permits to import ethyl alcohol as well The Mexican government has launched a proposal to cut the duration of permits to import fuel, oil, and gas, an effort to stifle competition and help state-owned Pemex that will put investments in energy at risk, according to two energy consultants.
The country’s ministries of economy and energy filed the proposal with government agency Conamer to change the regulation governing the import and export off hydrocarbons and nuclear materials as well as petroliferous and petrochemical products. By reducing the term of permits to five years from 20, the proposal will make trade in these products safer for national security, reduce tax evasion in these imports, and allow for more competition, the ministries said in their proposal. Conamer is in charge of studying the potential impact of regulatory changes.
The agency has posted the proposed changes on its website and interested players can file their opinions about the new rules before the agency grants its approval. Only after Conamer gives the OK can the Economy Ministry put the regulations into effect by publishing them. Cutting the duration of permits is the most harmful change in the ministry’s proposal since it will deter players from developing infrastructure projects that can’t operate with such short-term permits, said Susana Cazorla, founder partner at consultancy SICEnergy.
“There are energy projects like a fuel-storage terminal that need 10-to-15 years to make their investment return.” The modified rules will also undermine new LNG export projects that are less profitable with five-year permits, added the consultant. After a drawn-out negotiation with the current administration, IEnova secured a 20-year permit to use an LNG terminal in Mexico’s Northeast to export natural gas that the company will import from the US, as reported.
Apart from the shorter terms, the new rules impose stricter requirements for obtaining import permits, said Marcial Diaz, partner at consultancy Lexoil. An applicant will have to show authorities that it already has a contract with the supplier of the imported product, another contract with the counterparty selling the product in Mexico, and a contract to store the product, said Diaz. Companies usually ask for permits to import more products than the ones they already have committed to purchase so they can sell a portion into the domestic market, he added.