Introduction

On December 18 2015 the Energy Regulatory Commission (CRE) requested the Federal Economic Competition Commission's (FECC) opinion on Pemex Transformación Industrial's first-hand contracts for the supply and franchise of gasoline and diesel.

The contracts were drafted following a CRE resolution which imposed the following rules:

  • From January 1 2016, Pemex's first-hand contracts must not be conditioned on each other;
  • The duration of Pemex's first-hand contracts must not exceed December 31 2016;(1)
  • Supply contracts entered into with Pemex must not be conditioned on franchise contracts; and
  • Pemex's first-hand contracts must have no nationality requirements or exclusionary clauses.

Recommendations

On January 25 2016 the FECC issued its opinion and a number of recommendations regarding Pemex's contracts. The opinion highlights the intention of the CRE's resolution, which is to enable service station owners to choose whether to remain in a legal relationship with Pemex as of 2016 or whether to opt for an independent commercialisation model and turn to alternative supply sources from 2017 onwards.(2)

The FECC made the following recommendations:

  • Pemex should clarify and segregate the different services it provides to customers, including the individual prices thereof, allowing customers to choose which services to acquire.
  • The acquisition or supply of gasoline and diesel should not be tied to any other additional product or service, such as transport or storage services, or to a condition that the acquirer sell additional or different products.
  • Pemex should not impose mandatory delivery arrangements as a condition of the supply of gasoline and diesel. Delivery arrangements should be freely chosen by acquirers.
  • Contracts should include a clause that allows both parties to request unilateral early termination of the contract.
  • Franchise contracts should be short term.(3)
  • Pemex should permit buyers to enter into contracts with other suppliers.
  • Contracts should not include a profit margin that is linked to the category of service station, conferring exclusive advantages on Pemex franchisees that are unavailable for independent service stations.
  • Pemex franchisees should be allowed to determine the consumer prices of gasoline and diesel, based on fixed parameters. Prices should not be determined by Pemex.

Comment

These recommendations are intended to incentivise competition in the gasoline and diesel supply, sale and delivery markets. In particular, they should result in better conditions for customers and pave the way for the permanent liberalisation of the markets on January 1 2018. However, the FECC's recommendations are non-binding.

For further information on this topic please contact Lucia Ojeda Cardenas or Mariana Carrión Valencia at SAI Consultores SC by telephone (+52 55 59 85 6618) or email (loc@sai.com.mx or mcv@sai.com.mx). The SAI Consultores website can be accessed at www.sai.com.mx.

Endnotes

(1) From January 1 2017, Pemex will be able to enter into supply contracts under new competitive market conditions provided for by the Hydrocarbons Law.

(2) Pemex is currently the only legal supplier of gasoline and diesel in Mexico and has first-hand contracts with over 11,000 service stations.

(3) The contracts have a 15-year term, which may be extended for additional five-year terms. The FECC does not specify an appropriate duration.

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