The president has committed to continuing her predecessor's statist energy policies, adding to legislative uncertainty in the country, writes Antonio Gozain
Mexico's LPG market finds itself in a holding pattern, with little change in retail pricing or policy signals from new president Claudia Sheinbaum, despite energy and judicial reforms that have stirred the country's political and investment climate.
Sheinbaum has not specifically addressed the LPG market beyond promising stable retail prices since being sworn into office in October following her victory in elections in June. But she has committed to continuing former president Andres Manuel Lopez Obrador's energy policies, which included increasing the domestic LPG market share of state-owned oil company Pemex to about 65pc this year from 50pc in 2020. Private-sector companies have long handled LPG retail distribution in Mexico, but they started importing LPG after the 2014 energy reform.
Pemex sold 157,000 b/d (406,000t) of LPG in September, down by 1.5pc from a year earlier, the latest data from the company show. The firm imported 83,000 b/d and produced 96,800 b/d of LPG in the same month, while private-sector companies imported 106,500 b/d, according to the energy ministry.
The government's commitment to state energy control is underscored by the recent passage of constitutional reforms aimed at removing Pemex and state-owned utility CFE's definition as "productive state companies", freeing them from the obligation of seeking profit. The energy reform, already approved by congress, could allow the government to provide more direct support to Pemex or guarantee larger debts, of which Pemex currently holds around $95.5bn. The continuation of Lopez Obrador's statist policies, intended to make Mexico self-sufficient in terms of gasoline and diesel production, is expected to harm market competition.
Adding to the uncertainty for the LPG sector, legislators are likely to approve a bill to dissolve Mexico's independent regulators, including the competition watchdog Cofece and energy regulator the CRE, which oversees fuel and LPG market permits. This would centralise regulatory authority under the energy ministry.
The CRE has been in charge of LPG retail price controls since their reintroduction in 2021 to protect residential consumers from price spikes. It is unclear if the energy ministry will set price caps if the CRE is dissolved, given concerns that it could weaken Mexico's standing in the 2026 review of the US-Mexico-Canada Agreement, as the US and Canada may see it as a threat to their interests.
Another reform that has impacted Mexico's investment climate during Sheinbaum's first month is the judicial bill. Mexico will now elect more than 1,600 judges, magistrates and supreme court justices between 2025 and 2027, a process critics claim would favour candidates aligned with the executive and congress.
Meanwhile, the market's long-standing issue with theft has sharply declined. Illegal taps on Pemex's LPG pipelines fell by 67pc to 698 over January-August from 2,102 a year earlier, according to a Pemex transparency response to an Argus request. The volumes of stolen LPG were not disclosed. The fall in illegal tapping was mainly driven by the government's push to secure Pemex's 1,600km Cactus-Guadalajara LPG pipeline, market participants say.
Gas Welfare state
The suspension of operations at state-owned LPG retailer Gas Bienestar — which translates to Gas Welfare — in November 2022 reflects some of the challenges for the government in expanding LPG access through state-run schemes. Touted as a solution to provide LPG to low-income households, sales did not expand as anticipated and the firm was "paused" until resuming operations last year. The company refused to disclose its financial statements in July following a transparency request but confirmed it operates in nine of Mexico City's 16 municipalities. This has not stopped government support, as Pemex received 300mn pesos ($15mn) for Gas Bienestar's LPG distribution units in the third quarter, according to company data.
