Pemex looks to capture remote retail fuel market

OREANDA-NEWS. October 03, 2016. Mexico's state-run Pemex inaugurated a rural fuel distribution campaign in the Mexican state of San Luis Potosi, part of a pilot program aimed at addressing fuel shortages in remote areas of the country.

"With this new franchise model, we will supply a market of nearly 1,000 rural populations that are currently neglected," said Pemex, which launched the project in association with Combured, one of Mexico's associations of fuel distributors.

This first low-demand retail fuel station, a prefabricated unit that takes two weeks to assemble, was inaugurated in the small town of Cerro de San Pedro.

The program coincides with the opening of Mexico's fuel market under a ground-breaking 2014 energy reform revoked Pemex's long-held monopoly over the oil sector.

Mexico's 12,000-strong service station network, mostly independently owned Pemex franchises, is now competing against new brands such as Hidrosina and LaGas, two firms that opened Mexico's first non-Pemex service stations this year.

Gulf Mexico, the Mexican affiliate of Indian conglomerate Hinduja, says it hopes to account for about a quarter of the country's retail sites, and in July, BP confirmed it was analyzing investment opportunities in Mexico's retail market.

Oxxo Gas, a division of local beverage retailer Femsa, plans to transfer its 330 Pemex-branded retail sites to the Oxxo Gas brand, abandoning the Pemex franchise model.

Mexico allowed companies other than Pemex to import fuel in April 2016, nine months ahead of schedule, but new permit holders say a fuel tax, known as IEPS, currently undermines the economics of gasoline and diesel imports.

Mexico remains a net importer of gasoline. Pemex produced 299,300 b/d in August, or 2.8pc less than in July and 23pc less than a year ago. Imports were down 7.7pc compared to July but up 21pc compared to a year earlier.