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Mexico Opens to New Suppliers; Pemex Takes a Step Back

Mexican energy regulatory authorities have launched the program for state oil company Petroleos Mexicanos (Pemex) to surrender natural gas supply contracts amounting to 70% of its total sales volume. The program, begun late last week, will help private-sector companies gain market share and begin competing with Pemex.

The action is aimed at expanding supply to meet demand growth, which Mexico’s Energy Secretariat expects to rise from 7.5 Bcfd to 9 Bcfd, a 20.3% increase, over the course of the next 15 years.

Over the next three years, Mexico’s Comision Reguladora de Energia (CRE) will oversee the release of blocks of contracts in three phases; the first worth 20%, the second also worth 20% and the third worth 30%. Any remaining share not successfully placed will likely be offered in 2020. The first phase will launch on Wednesday (Feb. 1).

During each phase, CRE will randomly select large contracts and sets of small contracts to fill the volume quota to be released. Large contracts represent customers with consumption equal to or greater than 40,000 gigajoules/d (GJ/d). Meney De la Peza, head of CRE’s regulation unit, said all contracts have the same probability of being selected.

“The smaller contracts will be grouped geographically to make them more attractive to bidders and will be at least the size of the average of the large ones,” she said. “Any contract holder may decide to leave, but the program helps suppliers gain visibility of the market.”

The selected contract holders will be offered the possibility of switching to a private supplier, without having to pay a penalty to Pemex’s Industrial Transformation subsidiary, in charge of its mid- and downstream businesses.

Once contracts are selected, Pemex will be allowed to make a binding offer for each one, after which CRE will publish information on the contracts, including size, location and creditworthiness, among other things, on its website. Private-sector suppliers will then be allowed to make counteroffers.

Contract holders will then decide whether to accept a third party’s bid and sign a new contract, to remain with Pemex, or to reserve capacity in the Integrated National Pipeline System’s ongoing open season and temporarily cede it to any marketer that can service its needs.

New private suppliers will also be allowed to reserve capacity in the open season and offer it to customers later on.

New contracts will have a one-year duration, after which customers will be free to consider new options. “The reason for this is to make these contracts coincide with those for the open season,” De la Peza said.

Guillermo García Alcocer, head of CRE’s executive board, considers this process to be critical to kick start competitive market operations. “Pemex had requested the authority to continue to make counteroffers for each contract,” he said, “but, naturally, we could not agree to this.”

“I suspect many customers are not satisfied with Pemex’s services,” he concluded.

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