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Interview: Mexico's new open model endangers small liquid petroleum gas distributors

Xinhua, June 9, 2016 Adjust font size:

Small and medium liquid petroleum gas (LPG) distributors in Mexico faces the risk of being forced out of business due to their inability to compete with large companies under a new model that allows open imports of LPG, said a leading expert in an interview with Xinhua.

President of the LPG Distributors' Association (Adigas) Victor Figueroa said that SMEs in the sector are at a disadvantage in terms of the infrastructure that big companies have to transport and stock LPG imports from the U.S. and Canada.

After bringing the LPG into Mexico by rail, the commodity is then transferred onto railway tankers at train stations to be directly distributed to the cities that need them.

However, the new open market model has left the SMEs out, Figueroa said.

"If we cannot access this imported gas, we are dead commercially, we will not be able to compete," said the president of Adigas, an association which represents 73 SMEs in the sector, which distribute 70,000 tons of LPG a month.

This year, Mexico opened up the importation of LPG to the private sector as part of its unfolding energy peform. Prior to this, Pemex enjoyed a monopoly to purchase, produce, distribute and commercialize fuel for almost 80 years.

About 80 percent of Mexicans use LPG to heat their homes and cook, using around 280,000 barrels a day. Since May, as part of a pivot back to its core oil extraction business and to streamline its activities, Pemex has moved from importing LPG. The company used to import about 105,000 barrels a day, or over 35 percent of the total demand, until 2015.

This makes this sector highly lucrative but Figueroa said big companies will easily dominate, given their access to existing infrastructure or having the budget to build more.

Certain SMEs have managed to import the fuel from Texas or California, meeting the cargoes at border cities at the U.S. border, transferring it onto Mexican vehicles and then distributing it.

However, Figueroa points out that this only benefits smaller LPG distributors located along the border and who do not have to face extra costs of transporting it to the center and south of Mexico.

"Currently, SMEs do not have the capacity to rent terminals, maintain infrastructure or sign the contracts with U.S. companies to buy the fuel," the executive said.

Therefore, faced with a lack of their own pipelines and storage facilities, some smaller companies have for the moment resorted to sharing the cost, by buying LPG, transporting and stocking it jointly. Endit