Mexican fuel retailers grow despite policy shift

Mexican government policies aimed at returning retail fuel market share to state-owned Pemex has slowed but not stopped some private-sector retailers from expanding to tap what is still seen as a growth market.

Delays in permitting at the energy regulatory commission (CRE) for new stations coupled with stricter inspections at existing stations by the consumer protection agency (Profeco) and other policy changes meant to boost state-owned firms have led to complaints from retailers.

Yet US-based wholesale firm Costco just opened its 12th retail fuel station in Ensenada, Baja California, after a Ps100mn ($5mn) investment. And Mexico's largest private-sector fuel retailer Oxxo plans to continue to add to its 563 stations in states where it has existing operations, it said this week, although it did not give a specific target. It opened five stations in the past year.

"We were very affected by the pandemic, but rose to the challenge," Oxxo said. "This country, Mexico, still brings opportunities."

In May, ExxonMobil opened its 500th retail fuel station, the brand of independent US refinery Valero opened its 80th, and Paris-based TotalEnergies started operations at its first Total-branded retail fuel station in the import center of Tamaulipas as part of its 230-store chain.

The openings come despite the fact that the CRE issued 79 permits for new retail stations through July of this year, behind 175 in all of 2020, and down sharply from 407 in 2019, 416 in 2018, 351 in 2017 and the record 679 in 2016.

President Andres Manuel Lopez Obrador has tried to reverse the previous administration's drive to open the market to more competition. The rate of opening has slowed after the number of private-sector retail stations jumped to about 1,300 in 2018 in the year after the energy reform and to about 2,500 in 2019. Since then it has since grown to only about 3,000, according to data from Pemex and retail fuel association Onexpo.

And the rules of operating under the government's new policy direction are less clear, market participants have told Argus. While some retailers previously would showcase bringing in all of their supply independent of state-owned Pemex, continuing to buy at least some product from Pemex is now essential to stay in good graces with the government, retailers have said.

Yet Mexico still offers opportunities, retailers have said, as the country only has one station for about every 300,000 citizens. Out of the more than 2,500 municipalities in which the country is divided, only 56pc of those have even one fuel station, and 34pc of those have either three or fewer stations, according to data from Mexico's energy regulatory commission (CRE).

And the number of Pemex-branded retail fuel stations continues to declien, falling by 10pc at the end of the second quarter from a year earlier to 7,136 stations out of the roughly 12,500 in the country.

Fuel demand in Mexico is expected to grow close to 2pc in 2021 from the pre-pandemic level of 2019, despite the political and economic hurdles, according to Onexpo.

By Sergio Meana