Latest Regulator Raids Impact Bulkmatic, Valero Mexico Terminals
11.29.2021 - NEWS

November 29, 2021 [bnamericas] – Mexican energy sector regulator CRE has implemented a sweep of inspections in the retail fuel sales market, leading to new actions against Valero and Bulkmatic de México.

 

US officials have complained about inspections that have involved the national guard.

Private firms have been subject to inspections for months, aimed at squeezing them out of the local fuel sales market and quashing the rollout of private gasoline stations that began with the implementation of the 2013-2014 energy reforms.

Former CRE commissioner Montserrat Ramiro told BNamericas CRE’s strategy “is negative for the development of the country” and “bad news” for consumers.

“Not only is it placing an excessive burden on the Mexican state and public finances, it’s hanging up a sign to show the world just how unwelcome private investment is in Mexico,” she added.

According to daily Reforma, CRE seized 480,000b, or 73.6Ml, of fuel planned to be sold at ExxonMobil and Marathon service stations. The fuel was stored at a hydrocarbons facility owned by logistics firm Bulkmatic.

If the fuel is not released, some Exxon and Marathon stations would run dry during the week, Bulkmatic México president Alejandro Doria said in a statement.

Ramiro said the restricted supply will lead to rising prices. “The role of the regulator is to protect consumers and citizens and that is not happening now.”

CRE inspected various private fuel import terminals Friday and Saturday, also closing Valero’s rail terminal and storage facility in Nuevo León state, according to local outlet Oil & Gas Magazine.

The site is a key distribution center for fuel arriving to the Monterrey area and critical for Valero’s US$1bn plan to boost its fuel distribution and sales network.

These two incidents follow similar ones in August and September with CRE shutting down privately owned hydrocarbons storage terminals in Tuxpan, Veracruz, in Puebla state, and in Hermosillo, Sonora state.

Investments in those storage terminals are estimated at US$1.5bn, as reported by energy news outlet Energía a Debate.

CRACKDOWN RATIONALE

Government officials have framed the crackdown as part of efforts to halt the illegal fuel market trade.

However, it comes after 18 months of slowed permitting for sales, transportation, distribution, and storage fuel retailers. Also, legislation, albeit mostly challenged in the courts, is looming that would make it more difficult to compete with national oil company Pemex and its stations.

Consultancy eServices estimated that 1,000 such permits remain pending CRE approval, of which 50% correspond to gas stations, adding that the lack of permitting has cost the industry roughly US$100mn.

Critics are already framing the latest moves as a broad effort to use the regulators, who arrived at sites backed by national guard troops, to generally undermine private sector participation, given President Andrés Manuel López Obrador’s (AMLO) statist vision.

CONSEQUENCES

In response to the closure of the Bulkmatic terminal in Salinas Victoria, Doria told Reforma that litigation is underway. “Right now, while the search is in progress, nothing is moving, because it is exhaustive, they’re checking under the rug.”

Bulkmatic’s Salina Victoria 2, also located in Nuevo León state, typically stores 87 and 92 octane gasoline and diesels.

Reforma quoted IHS data service OPIS as reporting that the CRE audits are coming just as Mexico is implementing actions to reduce illegal fuel imports and Pemex is losing market share.

Even the US market is concerned because the crackdown could imply the suspension of operations at US refineries, whose products are sold in key markets such as Monterrey. “Big companies like Exxon and Valero are not going to import fuel illegally or off-spec,” OPIS cited one fuel broker as saying.

US ANGER

On November 17, Louisiana senator John Neely Kennedy sent a letter to US energy secretary Jennifer Granholm, pressing for action to halt threats to US energy firms’ operations in northern Mexico.

Kennedy, a ranking member of the US senate appropriations energy and water subcommittee, urged her to address the shutdown of US fuel storage facilities in Mexico.

“Recent reports indicate that AMLO is using a militarized police force to prevent the operation of US businesses … AMLO’s strategy includes undermining other privately-owned, American renewable energy facilities,” the letter said.

“It is obvious what is going on here – AMLO’s shutting down all foreign competition for his state-owned company, Pemex, and so far he’s getting zero resistance from US officials in the Biden Administration,” Kennedy wrote.

Texas governor Greg Abbott sent a letter to President Joe Biden the same day, saying Mexico’s actions to curtail competition for Pemex have steadily escalated, He cited recent reports that Mexico was using national guard troops to shut down fuel storage assets owned by Texas-based Monterra Energy.

“Other American companies face similar operational threats,” wrote Abbott. “Despite these companies’ continued efforts to work with Mexican regulators, multiple facilities remain closed and under the supervision of the militarized police force, leaving Texas companies and their employees in an untenable situation.”

Abbott urged Biden to “immediately engage” with Mexico and facilitate the “immediate withdrawal of the Mexican military from US-owned business interests and convey that no further actions to undermine energy development, production, or transmission activities will continue.”

AMLO met Biden and Canada’s Prime Minister Justin Trudeau in Washington DC for a USMCA summit on November 18, but it is not known if the matter was discussed.

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