Karla Omaña / Reform Agency
Monday, January 25, 2021 | 6:00
Mexico City- The new agreement by the Department of Energy (Sener) to limit imports of hydrocarbons, including LPG, could hit the final price of this fuel due to Pemex’s lack of competition and price control.
Sener recently included both propane and butane in the list of products requiring a license from the agency responsible for Rocío Nahle.
Unlike the oil market, the development of this sector in Mexico has accelerated and private companies have acquired more participation compared to Pemex.
According to information from IHS Markit, 823 thousand tons were imported into the country last October, 390 thousand of which were imported by private companies.
“As imports are limited, the price goes up as Pemex production becomes much more important. When this is limited, Pemex’s absolute power to set market prices pays off,” said Adrián Calcáneo, Latin America leader at IHS Markit.
One of the earlier attempts to limit private imports has been to change the quality of fuel.
Last year, Pemex tried to change the quality rules of LP gas, increase the amount of butane in the mix and thus be able to place its product. This is because most of the product imported by IP is mainly propane, which comes directly from US refineries.
Calcáneo warned that this change would increase the final price by up to 40 percent because of the additional logistics costs such a change would entail.
“Pemex is the only one to produce and sell butane in the country, private companies buy the cheapest propane. As the private companies start to gain market, Pemex is losing, and it was left with a lot of butane that it could not bring to market ”.
“If you force the mix to have a minimum of butane, let the marketers either buy it from Pemex, or import the butane, which has to be stored separately, all those extra logistics costs are simply passed on to the end consumer.” , said.
As part of the implementation of the energy reform, the LPG industry underwent significant changes in 2016 and 2017, such as the opening of imports, the liberalization of final consumer prices and changes to the formula of first-hand sales prices (VPM). Susana Cazorla, former head of LP Gas at CRE and an expert on regulatory issues, explained that while the final price of LP gas is largely determined by the international price, the cost of imports, transportation and logistics also has an impact to have.