Author Roberto Ruiz
According to the Twelfth Transitory of the Federation Revenue Act for Fiscal Year 2017 (“LIF”), public gasoline prices for 2017 and 2018 would be set in accordance with a flexibilization schedule or some agreements (both referred herein as “Calendar”) issued by the Regulatory Commission of Energy (“CRE”), with the opinion of the Federal Competition Economic Commission (“Cofece”).
The LIF mentions that the Calendar will be established by regions. If gasoline and diesel commercialization in a specific region is still not market-based, the maximum price will be set by the Ministry of Finance and Public Credit (“SHCP”). For the above, it would consider the price of the international fuel reference and, if applicable, differences in fuel quality, logistics costs, including transport costs between regions, distribution and selling costs in service centers, as well as the various modalities of distribution and exchange with the public, for the timely supply of gasoline and diesel.
These maximum prices will be fixed until the date indicated in the Calendar arrives. In addition, in the regions with a fixed maximum price, the asymmetric regulation for access to infrastructure should be applied, when Cofece commands so.
If non-market increases are detected in specific markets, maximum prices may be applied in regions or subregions.
Following the above, the Agreement that establishes the gasoline and diesel price flexibility schedule provided in Transitory Article Twelfth of the Federation Revenue Act for the fiscal year 2017, was published in the Official Federal Gazette (“DOF”). This agreement contains the Calendar, which was carried out after studying the characteristics of the service stations, their location and proximity between them, as well as the sources of supply, means of transport and storage for each region. The CRE considered it feasible to flexibilize prices according to the opening of Pemex Logística´s infrastructure for storage and pipeline transportation available capacity schedule.
The reason for the above was to deregulate gas and diesel prices in a gradual and organized manner, in order to ensure that the operations are carried out through actual delivery costs. The objective of this measure is to detonate the development of infrastructure and enhance better costs by the entry of new economic agents in the Mexican market, causing competence between local and foreign investors. Finally, it is pointed out that price liberalization will also apply to first-hand sales.
In areas where this could lead to monopolistic practices, CRE and Cofece will keep special vigilance.
The schedule of opening by zones would be as follows:
1.1 Baja California and Sonora March 30, 2017.
1.2 Chihuahua, Coahuila, Nuevo Leon, Tamaulipas and the municipality of Gómez Palacio in Durango June 15, 2017.
2.1 Baja California Sur, Durango and Sinaloa October 30, 2017.
2.2 Aguascalientes, Mexico City, Colima, Chiapas, Estado de México, Guanajuato, Guerrero, Hidalgo, Jalisco, Michoacán, Morelos, Nayarit, Puebla, Querétaro, San Luis Potosí, Oaxaca, Tabasco, Tlaxcala, Veracruz and Zacatecas. November 30, 2017.
2.3 Campeche, Quintana Roo and Yucatan December 30, 2017.
Based on the above, we consider that there are great possibilities for foreign investors to join in the development of energy infrastructure in Mexico, given that because of being a new market and also Pemex inefficiency, there are great possibilities of growth in the Mexican Energy Industry.
The information set forth herein was taken from LIF and from the Agreement that establishes the gasoline and diesel price flexibility schedule provided in Transitory Article Twelfth of the LIF.