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Mexican energy sector lukewarm in
virus response

Mexico's energy sector slows as virus response begins

By Sergio Meana / Platts

Petroleumworld 03 26 2020

Some Mexican energy regulatory agencies are suspending select operations while demand for gasoline, diesel and jet fuel is expected to fall as the country's coronavirus cases climb.

The country is transitioning to a second phase of prevention measures focused primarily on delaying transmission within the country government officials said today. The country had 316 confirmed cases as of 4pm ET today, according to the Mexican government and the Johns Hopkins coronavirus resource center.

Still the federal government has not been specific about what measures it will take and has insisted that key projects, such as building the 340,000 b/d Dos Bocas refinery, will continue, but with precautions.

City governments, including Mexico City, have closed attractions such as museums and have at least some employees working from home.

Phase 2 should begin when a country has more than 100 confirmed cases, according to the World Health Organization (WHO). Mexican officials have said that so far infections have not been transmitted within the country.

Over the weekend President Andres Manuel Lopez Obrador said that the government lowered gasoline prices to strengthen the economy. But the government has not directly controlled fuel prices since 2017. It does control a weekly variable tax deduction and state-owned Pemex still supplies about 85pc of the country's about 12,500 retail stations.

"Despite the drop in crude price, that of course affects us all, we took the decision to reduce the price of gasoline because now it is costing us less to import it," Lopez Obrador said in a video posted from a retail fuel station in the state of Oaxaca.

Pemex's wholesale regular gasoline rack prices decreased to Ps13.10/l ($1.97/USG) today from Ps14.90/l on 17 March. Premium gasoline was at Ps13.85/l and diesel at Ps16.33/l.

Although the government has no formal enforcement power, Mexico's consumer watchdog (Profeco) head Ricardo Sheffield said today that the government would like to see regular retail gasoline prices near Ps17/l ($3.31/USG), premium gasoline prices at Ps17.50/l and diesel at Ps18/l.

From 12-18 March regular gasoline prices averaged Ps18.38/l, premium gasoline prices averaged Ps19.51/l and diesel Ps20.15/l, according to Profeco.

Fuel demand is expected to stay 20pc lower because of coronavirus mitigation efforts, according to Mexico's national retail fuel organization (Onexpo).

Jet fuel demand is also expected to decline as Mexican airlines start to cut back operations. Low-cost airline Interjet has suspended its international routes from Mexico, mostly to the US. AeroMexico, Mexico's biggest airline, will ground 40 planes.

Government energy regulatory entities have also started to take measures.

Mexico's oil regulator CNH partially suspended activities between 23 March and 19 April as part of government-wide measures to slow the spread of coronavirus. Time limits on all formal procedures will be suspended and the commission will not meet during the period. As a result, no new production or exploration plans or drilling permits will be approved for a month and all plans and permits already filed will not be reviewed until 30 April.

Mexico's energy regulatory commission (CRE), which supervises downstream and power activities, has not announced any special measures.

CRE did not immediately respond to a request for comment on the status of permits for retail fuel stations it approves.

Story by Sergio Meana from Platts S&PGlobal
03 23 2020



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