User Rating: 5 / 5
The decoupling of Mexican from international oil prices is set to continue into 2021, according to fuel sector experts.
The unprecedented nature of the COVID-19 pandemic has made fuel prices difficult to predict as they are now more dependent on demand rather than oil prices, according to a webinar hosted by fuel sales trade group Onexpo.
“[The price slump] has to do with refining capacity and the effects of the pandemic, and it is unclear whether the sector will recover as expected in 2021,” said energy consultant Paul Alejandro Sánchez Campos.
According to him, US refining capacity had never decreased below 80% throughout the last 40 years, despite changing price and production scenarios. Only the pandemic forced capacity below that mark, and the system has still not recovered to pre-pandemic levels.
In particular, consumption of gasoline, kerosene and jet fuel in Mexico also remains below pre-pandemic levels, while natural gas and derived products have stayed relatively flat. Meanwhile, heavy oils like fuel oil have performed better than expected during the emergency, Sánchez Campos said.
While Mexico’s gasoline demand normally straddles around 800,000b/d, it fell to around400,000b/d when the pandemic peaked in April. And the industry could not recover past 700,000b/d despite economic activity being allowed to resume.
The price decoupling has highlighted the fact NOC Pemex could profit from importing an increasing amount of fuel products instead of producing them at its refineries due to the lower price, the consultant added. However, public policy is prioritizing boosting Pemex’s refining capacity to promote energy self-sufficiency, as BNamericas reported previously.
Regulation
According to consultant Maury Zapata, the government is likely to simplify a formula to determine the level of national contribution to the sale of a fuel product next year.
Even though Mexico no longer demands sold fuel products to comply with a percentage of national contribution (origins of the hydrocarbon, refining location, transport, storage, or sale), the government still requires companies to keep track of the information and can fine those that do not keep records.
Zapata also said, given a series of policies outlined in energy ministry Sener’spolicy agreement published earlier this year, the government was likely to change distributed generation regulation next year that could hurt fuel stations looking to self-supply electric power through solar panels.
Permitting
All panelists agreed that the permitting drought at energy regulator CRE, which was severe last year but became much worse during the pandemic, is part of a complicated public policy agenda. The situation has led to a backlog of over 200 fuel sale permit requests at the regulator.
“There seems to be a filter,” said Sánchez Campos. “When [critical] reports have been published, such as the one by [competition watchdog] Cofece, CRE hurries, they raise their hands to approve 80 or 90 permits. There are taboo issues, particularly when Pemex loses market share or when there are franchise changes to a brand different from Pemex.”
He said the issue, stemming from pressures from the government to favor Pemex over its competitors, was compounded by the pandemic and staff shortages at CRE. He said companies should make sure their applications comply with every requirement to avoid further delays in the permitting process.
Electric charging stations and hydrogen
Regarding the future of transport, Sánchez Campos said he does not think existing fuel stations are well prepared to become charging stations for electric vehicles.
A better fit for the modernization of fuel stations and for Mexico would be hydrogen production, since a lot of the existing infrastructure could be easily adapted. Additionally, the gas transport infrastructure could be used to transport hydrogen as well.