February 21, 2022 [Argus] – Monterra Energy has called on Mexico to negotiate a reopening of its 2.2mn bl fuel storage terminal near Tuxpan, Veracruz, that regulators abruptly shuttered in September or it will request international arbitration.
“We have gone above and beyond to resolve the issue cooperatively so we can continue to support Mexico’s energy security and economy, while also providing well-paying jobs,” Monterra chief executive Arturo Vivar said. “We simply ask that Mexico uphold the rule of law and its treaty commitments.”
The company would prefer an amicable resolution, but Vivar said the Mexican government’s actions so far have left it with no choice.
The Houston, Texas-based Monterra has filed a formal notice of intent with Mexico’s economy ministry, kicking off a 90-day negotiation phase allowed for under international treaties to first try to avoid arbitration proceedings. The ministry has not responded to a request for comment.
The terminal closure has caused economic damages of $667mn, Monterra said.
The terminal was part of a wave of regulatory inspections in September that led to 23 full temporary closures and 17 partial temporary closures of both terminals and retail fuel sites around the country. The government has more recently reinstated laws that make importing harder for non-state companies, and has cancelled permits needed to import fuels, as it drives to boost state-owned Pemex.
The energy regulatory commission (CRE) granted Monterra a 30-year permit for its Servitux terminal on 4 May 2018. CRE inspected the terminal prior to it starting, and Monterra notified the commission in July 2021 that it had begun storage operations.
But late on 13 September, the CRE held a surprise inspection along with armed members of the national guard and officials from the national industrial and environmental safety agency (ASEA).
The inspection led to a temporary closure with no legal justification, Monterra said. The terminal has been shuttered since.
“The closure order is arbitrary, illegal, and fully inconsistent with the previous extensive exchange of correspondence,” the company said. “The company submitted all required documents and evidence over the past two years. Servitux has filed additional submissions since the closure took place, to which the CRE simply has not responded.”
Prior to the terminal’s closure, all product imported and unloaded originated from the US. Spain’s Repsol, which has about 225 branded retail stations in Mexico, was to have storage rights there of 450,000 bl, developers said when announcing the project.
The Mexican government’s actions, taken through the CRE, ASEA and the energy ministry (Sener), among others, are in breach of several US-Mexico-Canada free trade agreement (USMCA) provisions, international law, and Mexican law, Monterra said. Annex 14-C in the USMCA outlines the arbitration process that may apply to legacy investments such as that of Monterra.
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