Mexico moves to strip fuel market permits
Mexico's government has proposed legislation that would allow the energy ministry and energy regulatory commission (CRE) to more easily strip fuel market participants of their operating permits.
The move is the latest manifestation of the government's rollback of a 2014 energy reform package that opened Mexico's long-cloistered oil industry.
The bill, presented to congress yesterday, is likely to pass because President Andrés Manuel López Obrador's Morena party holds the simple majority in the legislature required for approval.
Under the proposed legislation, an expanded group of holders of permits issued under the 2014 hydrocarbons law for fuel imports, exports, marketing, distribution, retail, transport and storage of fuels, crude and natural gas would be required to prove compliance with a minimum fuel storage policy. The existing law mandates that most participants have inventories for gasoline and diesel equivalent to five days of sales.
The government can currently sanction companies that do not comply with the storage policy but allows them to keep operating. Under this proposal, the permits would be revoked almost immediately. The proposal also expands this obligation to fuel transporters, while it currently only applies to fuel traders, importers, distributors and retailers.
The wording of the bill is ambiguous, as "all permits" could include crude and gas permits, while only gasoline, diesel and jet fuel have a stated minimum storage policy.
Because of the nature of the regulated activities, some existing permits would be unable to comply with the requirement, said Diego Campa, partner at Campa and Mendoza, a Mexico City-based law firm specialized in energy and natural resources.
As the bill is currently drafted, on the first day of the legislation's approval, the energy authorities could revoke all permits from firms that are out of compliance. Under current requirements, some companies have already been struggling to comply with the minimum storage mandate because of ambiguities in existing regulations, and the government has also delayed permits to build new storage infrastructure.
One safe harbor for companies to provide proof of its storage could be to show storage credits bought from other companies, known as tickets. The bill presented yesterday does not indicate if that would be allowed.
The bill also does not address the current exemptions of certain permit holders from the storage mandate, in light of Mexico's prohibition on retroactive application of laws.
The bill adds a new article to the hydrocarbons law (Article 59 Bis) to include, define and state the cause of a permit suspension. With this addition, the energy ministry and CRE can "suspend permits temporarily when foreseeing an imminent danger to the country's national security, energy security or the national economy."
If a permit is revoked, the bill would give state-owned oil company Pemex and utility CFE exclusive access to the associated infrastructure. If the permit of a privately owned fuel storage terminal is suspended, for example, only Pemex or CFE could use it. Authorities do have to justify the suspension for a valid cause in writing, and if the permit holder modifies the reason under which the permit was suspended, authorities must reinstate the permit.
The bill also proposes to include smuggling and illicit traffic of hydrocarbons, refined products and petrochemicals as immediate cause to revoke a permit, as well as any second offense to the hydrocarbons law.
If the controversial government-sponsored electricity bill serves as a guide, the fuel permitting bill could be swiftly passed through the congress without any major changes, with lawmakers following party lines and the president's instructions. But it could also be challenged in Mexican courts, which have stopped the electricity bill through a wave of injunctions.
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Petroecuador expects more crude with fewer wells
Petroecuador expects more crude with fewer wells
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Shale to emerge leaner from M&A boom
Shale to emerge leaner from M&A boom
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Borealis to keep pyrolysis options open
Borealis to keep pyrolysis options open
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PRSE: Brighter notes, familiar chords
PRSE: Brighter notes, familiar chords
London, 28 June (Argus) — In our editorial following last year's PRSE trade fair, we discussed short-term concerns and long-term optimism for the industry. This year's show — held last week in Amsterdam — featured some brighter notes, but conversations also struck many familiar chords of pessimism about the near term. On the plus side, last year's main reason for long-term optimism — increasingly supportive legislation in Europe — remains on track. The EU Packaging and Packaging Waste Regulations (PPWR) mandating recycled content across almost all plastic packaging by the end of the decade appear set for confirmation in the near future — welcome news for polyolefin recyclers in particular. And the PE films market appears less nervous about PPWR's strict reuse quotas for industrial packaging than it was in spring, with much optimism that future delegated acts will address industry concerns. 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And progress towards EU legislation supporting demand for recyclates outside of the packaging industry has been comparatively slow since the previous PRSE — save for a proposal from the commission to mandate 25pc recycled content in automotive plastics. Aside from concerns about sales volumes and margins, challenges with feedstock sourcing have come tgo the fore again in 2024, particularly in the flexible PE market. Flexible PE bale prices have risen through the second quarter because of reduced production of waste from commercial sites and, more recently, strong demand for exports to southeast Asia. Recyclers have struggled to pass on increases to their pellet customers, resulting in a squeeze on their margins. Since the last PRSE, the confirmation of EU waste shipment regulations (WSR), which will ban plastic waste exports to non-OECD countries from November 2026, will reassure recyclers concerned about feedstock supply. WSR might turn out to have a similar or even greater impact on the flexible PE recycling market than the more-publicised PPWR. The 27 EU countries exported 33,000 t/month of flexible PE waste to non-OECD countries — mainly in southeast Asia — in the first four months of this year, according to data from Global Trade Tracker. This is equivalent to 15-20pc of the volume of post-consumer PE film waste that is recycled in Europe, according to the latest Plastic Recyclers Europe data. Keeping this material in the European market would naturally be expected to increase feedstock availability for European recyclers. But it would be an oversimplification to say that cheaper input costs for recyclers will be the only result. European capacity will also need to adapt to accepting more export-quality bales, which are typically seen as lower-specification 98/2 or less transparent fractions. And demand for feedstock in Europe is also likely to increase, including through companies currently involved in exporting bales — many of which are already recyclers or affiliates of recyclers — that are building or expanding European recycling capacity. It was clear at the last PRSE that the myriad challenges facing the European recycling industry were not going to have evaporated by the time this year's show came around. The mood overall felt more positive than last year, but the hatches remain battened for many recyclers, with a challenging few months or even years still expected ahead. EU-27 LDPE waste exports Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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