Karla Omaña / Reform Agency
Monday, January 25, 2021 | 06:00
Mexico City- The new agreement of the Ministry of Energy (Sener) on the restriction of imports of hydrocarbons, including LP gas, could lead to a blow to the final price of this fuel, due to the lack of competition and price control by Pemex.
Recently, Sener included both propane and butane in the list of products that will require authorization from the agency responsible for Rocío Nahle.
Unlike the oil market, the development of this sector in Mexico has been faster, and private companies have gained more participation compared to Pemex.
According to information from IHS Markit, in October last year, 823 thousand tons were imported into the country, of which 390 thousand were imported by private companies.
“Because imports are limited, the price increases because Pemex’s production becomes much more important, if it is limited, Pemex’s absolute power to set market prices returns,” said Adrián Calcáneo, Latin America leader at IHS Markit.
One of the previous attempts to limit private imports was to change the quality of the fuel.
Last year, Pemex tried to change the quality rules of LP gas, to increase the amount of butane in the mixture and thus to be able to place its product. This is due to the fact that most of the imported IP product is mainly propane, which comes directly from US refineries.
Calcáneo warned that this change would lead to an increase of up to 40% in the final price, due to the additional logistical costs that such a change would entail.
“Pemex is the only one that produces and sells butane in the country, private companies buy the cheapest propane. As private companies start to win the market, Pemex loses and is left with a lot of butane that it could not put on the market.
“If you force the mixture to have a minimum butane content, have marketers buy from Pemex or import the butane, which must be stored separately, all additional logistics costs will simply be passed on to the final consumer,” he said.
As part of the implementation of the energy reform, between 2016 and 2017, the LPG industry underwent significant changes, such as the opening of imports, the release of prices to the final consumer and changes in the formula for first-hand sales prices (VPM). Susana Cazorla, former head of LP Gas at CRE and an expert on regulatory issues, explained that although the final price of LP gas is largely determined by the international price, the cost of imports, transport and logistics also has an impact.