MEXICO CITY – Mexico’s Energy Regulatory Commission (CRE) is considering halting the approval of all retail permits except those related to Pemex, according to leaked emails from the regulators seen by OPIS. In the emails dated April 24, CRE officials state that only retail permitsbrelated to Pemex would be granted until commissioners approve new General Administrative Directives in their next governing body session. A CRE spokesperson said the regulatory body did not recognize the documents. However, multiple sources validated the existence of the emails and internal discussions about the issue within the commission.
This internal memos follows President Andres Manuel Lopez Obrador’s vision for the energy sector, Santiago Arroyo, director of Queretaro-based consultancy URSUS Energy, told OPIS on Monday. “Both Lopez Obrador and his Energy Secretary Rocio Nahle have expressed their desire to return Pemex dominant position in the retail market,” said Arroyo, who specializes in energy law.
“These memos are a worrisome move for the market that could kill competition,” he added. According to a source close to CRE, this initiative has been handled internally by selected high-ranking officials working with CRE commissioners. “No order has been given to the different divisions inside CRE at the moment to carry these instructions,” the source said. In September, CRE Commissioner Jose Alberto Celestinos told OPIS at a forum that approving permits for retail stations tied with foreign brands could be troublesome for Pemex.
“There were too many permits requests for fuel stations… We have to be careful of not granting too many permits,” Celestino said in response to reporters inquiring about why CRE is so delayed on approving new permits for service stations. Celestinos said that granting permits for service stations tied to foreign brands could be a problem for Pemex to allocate its own product once it ramps up operations at its refineries. Shortly after, CRE said in a statement that Celestinos’ comments did not represent the commission’s official position. The emails raise concerns among market participants as before the coronavirus disease 2019 (COVID-19), sources discussed difficulty in securing CRE approval forr new retail permits. Due to the health crisis, regulatory agencies in Mexico suspended all periods to approve new permits. Before, it would take one month for CRE to approve any retail-related permits for Pemex branded stations, said Arroyo.
Meanwhile, permits related to another brand would take three months after considerable back-and-forth. “They used any excuse, even illogical ones like requesting a comma, to delay granting non-Pemex retail permits,” Arroyo said. “Now, with the COVID-19 outbreak, they could simply stop granting permits without needing excuses.” These changes would paralyze Mexico’s fuel market, Marcial Diaz, directing partner of Mexico City-based consulting firm Lexoil, told OPIS. “It is a fact that in the latest CRE meetings, commissioners approved by far more retail permits related to Pemex,” he said.
“This is fostering the feeling that in Mexico, there is unfair competition against non-Pemex brands,” he added. Arroyo said the measure violates constitutional rights introduced by the energy reform for consumers to choose their private companies from participating in the fuel sector. “This could become a dictatorial move that restricts the economic activity,” Arroyo said. “We know this is in the pipeline, and we know what is going to happen next,” he added. Daniel Salomon Sotomayor, an associate with the Mexico City-based legal firm González Calvillo S.C., told OPIS that it is unlikely CRE moves ahead with this plan.
“CRE has operated with a certain degree of independence for the last 25 years under a clear mandate to foster competition,” Salomon said. “Restricting non-Pemex permits would be against the law and could be prosecuted in courts,” he added. “We are at early stages to know if this plan would become real,” said Salomon, adding that if implemented, Mexico’s Antitrust Agency (COFECE) could take on this issue.