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| A propane tank may not be far off. |
In Mexico, two significant changes are coming for LPG: the liberation of import restrictions in 2016 and the elimination of price controls the year after.
The first will see private companies being allowed to import gas themselves, rather than go through Pemex, the state oil company. At present, a firm such as Grupo Tomza, one of the larger transportation and distribution firms, buys its gas in the U.S. and transports it to Mexico, where it is purchased by Pemex, the only company allowed to import the product.
The first will see private companies being allowed to import gas themselves, rather than go through Pemex, the state oil company. At present, a firm such as Grupo Tomza, one of the larger transportation and distribution firms, buys its gas in the U.S. and transports it to Mexico, where it is purchased by Pemex, the only company allowed to import the product.
Tomza then buys it back from Pemex and sells to consumers. As of January, Tomza will be able to bypass Pemex, but gas prices will still be subject to regulation by authorities.
Then in 2017, supply and demand will dictate pricing.
Landeros said this week that although the international price for LPG was 4 pesos per kilo, Pemex was selling it to distributors for 9.2 pesos.
By the time it gets to the consumer, a 20-kilogram tank costs 280 pesos. However, Landeros predicts that price will drop to 200 pesos, a significant change in a country whose propane gas consumption for domestic use is said to be the highest in the world, used by 80% of the population.
Annual sales are worth an estimated US $8.5 billion.
Gas distributors expect consumption to rise further following the decline in price, perhaps reversing an upward trend in the use of wood and charcoal, which has risen in rural areas from 36 to 39%, said Landeros, with negative implications for health and the environment.
Although new pipelines are delivering natural gas to more of the country, there isn’t enough infrastructure in place for its household distribution in large urban areas, so propane enjoys widespread use. Residential customers represent 60% of consumption, followed by commercial consumers at 14%, automotive fuel at 10% and industrial at 9%.
The new import and pricing regime, a product of energy reforms, is not only expected to bring price reductions but it’s already changing the face of the highly fragmented gas distribution business.
The big players — four companies control about 40% of the market — are buying up the smaller ones, of which there are some 500. Money is also being invested in ships and private terminal facilities to bring more LPG into Mexico.
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