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US lawmakers accuse Mexico of slowing US energy investments to benefit Pemex

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US lawmakers accuse Mexico of slowing US energy investments to benefit Pemex

Highlights

Oil state senators say actions violate spirit of USMCA

Pompeo said State was in 'constant' talks with Mexico

Mexico is top destination, by far, for US refined oil products

Washington — A group of US lawmakers from energy-producing states is urging the White House to call out Mexico for violating the spirit of the recent North American trade deal by making it harder for US energy companies to invest and gain market access south of the border.

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In an Oct. 22 letter to President Donald Trump, the group — led by the US Senate delegations of Texas, Louisiana, and Oklahoma — accuses the Mexican government of "providing preferential regulatory treatment" for Pemex and "delaying, or canceling outright, permits for US energy companies."

They said the actions undermine the spirit of the US-Mexico-Canada Agreement, which took effect in July.

"An integrated North American energy market benefits US fuel manufacturers, workers, and, ultimately, Mexican consumers," the US lawmakers said.

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Chet Thompson, president of refiner trade group American Fuel and Petrochemical Manufacturers, said US companies have invested billions of dollars in midstream and retail infrastructure in Mexico to benefit both countries.

"However, this good progress is now in jeopardy based on the Mexican government's preferential treatment of Pemex and their actions to delay or even cancel permits for US energy companies," Thompson said Oct. 23.

Pemex, state utility CFE and Mexico's energy ministry did not immediately respond to requests for comment.

Mexico is the largest export market for US refined oil products by far, with shipments averaging 1.6 million b/d last year. US exports sank to 536,000 b/d in May in response to plunging demand from coronavirus restrictions but have recovered to 975,000 b/d as of July, according to the most recent US Energy Information Administration data.

API raised issue in June

Mexican President Andres Manuel Lopez Obrador took office in 2018 with a campaign promise to strengthen former monopolies Pemex and CFE, and ultimately gain sovereignty and independence in fuel and electricity generation.

Lopez Obrador this week reiterated his intention to make amendments to the constitution to undo parts of a 2013 reform that opened the energy sector to private investment, if his administration is unable to reach its goals of strengthening the former monopolies in oil, gas and electricity under the current legal framework.

The American Petroleum Institute raised the complaint of US energy companies in June, urging Mexico to uphold its commitments to the USMCA and to stop discriminating against US companies in Mexico's fuel market. API said US companies were facing new regulatory actions that undermined the soon-to-be-implemented trade deal, including permitting difficulties, arbitrary shutdowns, new storage requirements, and delayed or rejected imports.

In September, US Secretary of State Mike Pompeo said his diplomats were "in constant conversation with the Mexican government" about the issue.

"We want American companies to have the opportunity to invest down in Mexico," he said at a Sept. 2 briefing at the State Department. "It's what the USMCA was designed to achieve. We think there's been real progress there.

"But make no mistake, we've been clear, this isn't about what we'll do to defend America's interests. It's in Mexico's best interest to have American investment, the technology that is brought to develop Mexican energy resources to benefit the people of Mexico."

US investments represented 36% of Mexico's $32.9 billion in foreign direct investment last year. The share has shrunk from roughly 39% in 2018, 47% in 2017 and around 70% before 2015, as the US reduced its interest in Mexico while other countries like Spain increased their participation.