Pemex lobbying against tariff cut proposal
Mexico's state oil Petroleos Mexicanos has begun a lobbying campaign targeting the government's proposal to accelerate the phase-out of customs duties on crude oil, natural gas, and petroleum products.
The Mexican Secretariat of Commerce and Industrial Development's (Secofi) last month called for public comment on the proposed acceleration of lifting its customs duties on crude oil, natural gas, and petroleum products (OGJ, Nov. 17, 1997, Newsletter). That comment period ends Dec. 19.
Pemex is lobbying hard against the the proposal for good reason, says George Baker, a Houston consultant specializing in the Latin American petroleum industry.
The Nafta agreed-upon tariff started at 10% and was intended to fall 1%/year. The tariff is now 6%-still high enough to discourage alternative natural gas or crude oil imports, Baker contends. Secofi seeks comment on whether to accelerate the reduction.
"Pemex is understandably reluctant to have alternative supplies of natural gas imported into Mexico, given the serious environmental and commercial problems it faces with its high-sulfur (4%) fuel oil produced at its mostly landlocked refineries. Current production is 400,000 b/d. Pemex needs Mexican industry as an outlet for its fuel oil, which, otherwise, has little or no commercial value in world markets," said Baker, publisher of Mexican Energy Intelligence.
Adrián Lajous, managing director of Pemex, claims that displacements of Mexican gas caused by imports could shut in Pemex oil production, which will have a significant effect on Mexican tax revenue.
Critics argue Pemex is stalling until its Burgos basin dry gas development program (OGJ, Nov. 10, 1997, p. 89) increases output enough to displace potential U.S. or Canadian gas supplies to Mexican end-users.
Monterrey benefits
Baker says Monterrey is the Mexican gas market that could most benefit from competition; Pemex is currently the only supplier.Monterrey-area gas demand is about 400 MMcfd, a level that is expected to double in the next 10 years as the steel, glass, chemicals, breweries, and tile industries there increase demand for electric power-presumably fueled by natural gas out of concern for worsening air quality in the region.
"Several new power generation stations are being proposed for the Monterrey region," said Baker. Monterrey would benefit both economically and environmentally from other sources of natural gas, he noted.
"Absent alternative gas supplies," said Baker, "Monterrey industry foregoes the economic benefits from competition in gas sourcing."
"Pemex is understandably reluctant to have alternative supplies of natural gas imported into Mexico, given the serious environmental and commercial problems it faces with its high-sulfur (4%) fuel oil. Pemex needs Mexican industry as an outlet for its fuel oil, which, otherwise, has little or no commercial value in world markets."
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