Following the conclusion of a years long process to liberalize the domestic fuel market, gasoline and diesel prices are no longer subject to government control anywhere in Mexico. As of November 30, the Finance Secretariat (SCHP) announced that fuel prices were fully deregulated, effective immediately, and that it would cease publishing daily maximums. Financial analyst Pablo Soria de Lachica discusses several new investment opportunities that are arising as large oil companies and other players welcome the news of eased government control.
Soria de Lachica explains that the liberalization process began in 2013, when Mexico’s government launched a sweeping overhaul of the country’s energy sector that opened the oil, gas and electricity industries to foreign direct investment. Consequently, energy companies and those in related industries, both Mexican and international, recognized sizable opportunities in a rapidly evolving environment — both in the provision of infrastructure and the wholesale of fuel and supplies. Nearly half of the country’s pipelines are saturated, with particularly critical situations in the central and central-west regions. In the wake of reform, commitments to build four pipelines in the central, central-west and northeast regions, representing more than 2 billion USD in investment, have been announced. Fuel storage capacity is also inadequate to meet Mexico’s needs, significantly limiting its ability to hold inventory — the country typically holds six to eight days worth of inventory versus an average of 25 days for OECD (Organization for Economic Cooperation and Development) countries. As a result, roughly 250 million USD has been earmarked by companies to expand capacity over six sites throughout Mexico, the largest being Orizaba Energia’s $115 million initiative to build 2.7 million barrels of storage in Tuxpan. Pablo Soria de Lachica sees myriad opportunities for investors in both the shortage of pipeline infrastructure and carrying capacity, which, despite the commitments already made, stand to be exacerbated by Mexico’s projected strong growth in fuel demand.
Since foreign companies became allowed to transport fuel into the country in April of last year, new retail gas stations have proliferated in a market that was previously only open to state-oil company Premex. “BP, Shell, Chevron, Exxon and Gulf have already begun taking advantage of the relaxed regulations,” states Soria de Lachica. Now that fuel prices will be further exposed to market forces, he expects these companies to ramp up supply. Trucks and trains are already transporting fuel at frequent intervals from Texas refineries to the United States-Mexico border and onward to distribution terminals throughout the country.
Pablo Soria de Lachica is an internationally acclaimed broker and foreign exchange expert. A graduate of the Universidad Tecnologico de Mexico, where he received a Masters of Business Administration, Soria de Lachica now advises investors and companies around the world. Presently he collaborates with Kartoshka, a global leader at the forefront of the latest sales, telemarketing and customer support technologies.
Pablo soria – Professional Profile – LinkedIn: https://mx.linkedin.com/in/pablosoriadelachica
