Mexico Lawmakers Remove Curbs to Pemex in New Fuel Market Bill

Mexico’s lower house of congress on Wednesday approved a reform to the country’s hydrocarbon law that removes one of the linchpins to promote private competition against state-run oil company Petroleos Mexicanos.

The lower house voted 301 in favor, 147 against and two abstentions to approve the proposal, which eliminates a transitory provision to stimulate competition introduced in 2014 when the market was opened to private companies. The bill will now go to the senate, where a much wider proposal to increase government controls over Mexico’s fuel market is also being discussed.

The legislation is the latest effort to strengthen Pemex, as Mexico’s national oil company is known, a long-sought goal of President Andres Manuel Lopez Obrador. His administration is pushing to unwind a reform by his predecessor that opened up the energy sector to private participation and ended the state’s monopoly in oil production and refining.

Mexico Lawmakers Remove Curbs to Pemex in New Fuel Market Bill

The new bill, which was just introduced this week by a ruling party lawmaker, removes an article from the nation’s oil law that compels regulator CRE to issue so-called asymmetric regulations to privilege private companies in sales of fuels from Pemex refineries. The rule initially sought to limit Pemex’s market power but lawmakers now argue that private companies had already increased their share and such limitation was no longer needed.

Jonathan Terluk, an analyst at political risk firm Empra in Mexico City, said the latest bill was another measure aimed at squeezing out the competition against Pemex.

“Conditions for private sector operators could become much more complicated, and Pemex could perhaps undercut the competition,” he said.

Lopez Obrador’s Morena party, which controls congress together with allies, is pressing to pass nationalist legislation before key midterm elections in early June. The senate is expected to vote as early as Thursday on a much wider bill to increase government controls over the fuel market after its approval by the lower house last week.

Pemex supplied 83% of wholesale gasoline market in 2020 and 73% of the diesel market, the head of Mexico’s antitrust watchdog Cofece said in a tweet. Revoking asymmetric regulations that were aimed at lifting private players to at least 30% of the market would be premature, she said.

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