New brands in the gasoline market. New brands in the gasoline market.

Reforms have opened 1,700 gas stations

Private stations now represent 22% of the total

Mexico’s gasoline market is diversifying rapidly with new gas stations opening on a daily basis, according to the federal energy secretary.

The increased competition — in a market until recently monopolized by state oil company Pemex — was enabled by legislation stemming from the controversial energy reform.

After opening the market up to private national and international companies, the next step was to allow the importation of gasoline from abroad, instead of forcing both retail gas stations and other companies to rely on Pemex supplies.

Consequently, the Energy Secretariat (Sener) has now issued petroleum import licenses to 196 companies and 20 of them have already begun bringing fuel in for their own use.

Beyond the automotive sector, railway and mining companies as well as paper mills have taken advantage of the relaxed regulations.

Energy Secretary Pedro Joaquín Coldwell recognized in a recent address to lawmakers that the market would take time to mature but said benefits to consumers are already evident.

“The consumer is starting to have the power to choose because every day new service stations are opening. There are 30 new brands and 1,700 [new] gas stations,” he said.

Petroleum market specialist Rodrigo Favela explained that the energy reform allows private companies to participate at every stage of the supply chain including the refining, transportation, importation and sale of fuel.

He noted that in the northern border region, where tankers can enter easily from the United States, greater competition will likely translate into lower prices sooner than in other parts of the country.

The entry of new players into the market including BP, Costco and Gulf as well as Mexican companies OXXO Gas and Hidrosina, are indicative of the market’s potential, he said.

According to the Energy Regulatory Commission (CRE), the number of private gas stations in Mexico has risen to 2,578, representing 22% of the 11,700 stations operating across the country.

“There are 26 brands including Pemex that are competing in the market for consumer’s preference,” the CRE indicated.

Favela, who is also an organizing partner for next year’s Energy Mexico Expo and Congress, said that this month Pemex will announce a new franchising model aimed at making it more competitive with new new brands that are entering the market.

One advantage the state-owned company has, he said, is that it will take time for private companies to develop the infrastructure they need to import petroleum, such as pipelines and storage facilities.

However, once they have a foothold in a constantly growing market, the potential for profits is significant. Sener predicts 40% growth in demand in the 15 years from 2015 to 2030.

Pemex sales exceeded 450 billion (US $23.65) billion pesos in 2016. It remains to be seen what effect increased competition will have on its bottom line for 2017.

The Mexican CEO of French company Total, which recently announced an alliance with Gasored to open 250 stations in the Mexico City metropolitan area and neighboring states, believes that the longer-term effects of the energy reform will begin to be seen in the coming years.

“I understand that people think that not much has happened with the new brands,” Alexandre Duret-Proux said.

“. . . but the reality is that it’s only just starting . . . the time to measure the significance and speed of the development . . . will be in two to three years.”

Former president Lázaro Cárdenas nationalized Mexico’s petroleum industry in 1938 and it remained closed to foreign countries and private companies for almost 80 years until President Enrique Peña Nieto’s energy reform began to gradually deregulate the sector.

Source: Milenio (sp)

Reader forum

The forum is available to logged-in subscribers only.