News

April 20, 2017

Mexico's Volaris: Weaker Peso, Higher Fuel Costs Dampened Q1 Results

Volaris, the self-described "ultra-low-cost" airline serving Mexico, the United States and Central America, on Thursday reported its first-quarter results.

Total operating revenues in Mexican pesos reached Ps.5,656 million in the first quarter, representing a year-on-year increase of 9.1%.

Total operating revenues per available seat mile (TRASM) were down by 6.6% year on year to Ps.124.4 cents. "This is partially explained by a seasonality effect from the shift of Holy and Easter weeks this year, taking place entirely in April," Volaris said.

Adjusted EBITDAR (earnings before interest, taxes, depreciation, amortization and rent/restructuring costs) came to Ps.1,055 million in the first quarter, representing a year-on-year decrease of 51.5%.

"During the first quarter, we faced a challenging market and geopolitical environment, with a tough seasonality comparison versus the previous year," Volaris CEO Enrique Beltranena said. "However, Volaris responded by managing capacity and executing its ULCC model to continue stimulating market demand and adapt rapidly to these conditions. We remain cautiously optimistic of demand and thus we will continue prudently managing capacity based on market demand. Going forward, we believe that the Company's fundamentals remain strong and our solid financial position will enable us to execute our long-term growth plans."

Macroeconomic Factors and Other Volaris Metrics

Mexico's General Directorate of Civil Aeronautics (DGAC) reported overall passenger volume growth for Mexican carriers of 15% year on year in January and February. Domestic overall passenger volume increased by 14% while international overall passenger volume increased by 19%.

The Mexican peso depreciated 13.2% year on year against the U.S. dollar, going from an average exchange rate of Ps.18.0/USD in first quarter 2016 to Ps.20.4/USD during first quarter 2017.

The average economic fuel cost per gallon increased by 67.8% year on year to Ps.37.1/gal (US$2.0/gal) in first quarter 2017.

In Q1 2017, Volaris continued to experience pressure in USD-denominated costs, such as aircraft and engine rent expenses, international airport costs, and maintenance expenses due to the year-on-year 13.2% depreciation of the Mexican peso. Cost per available seat mile (CASM) for Q1 2017 was Ps.141.4 cents, a 26.6% increase compared to Q1 2016, mainly driven by higher fuel prices and foreign exchange rate pressures.

Volaris remains active in its fuel risk management program. Volaris utilized call options to hedge 52% of its Q1 2017 fuel consumption, at an average strike price of US$1.64/gal, which combined with the 48% unhedged consumption resulted in a blended average economic fuel cost of US$2.0/gal.

Volaris booked 4.0 million passengers in Q1 2017, up 15.6% versus Q1 2016. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased by 14.4% between the two periods. System load factor during Q1 2017 decreased by 1.8 percentage points year on year to 83.2%.

Non-ticket revenues and non-ticket revenues per passenger increased by 27.8% and 10.6%, respectively, versus Q1 2016. Non-ticket revenue generation continues to grow with new products such as new combos offering "more flexibility", "more baggage" and "more speed" appealing to customers' particular needs. Effective March 1, the company began charging for the first checked bag in new bookings for flights to and from the U.S. and Puerto Rico.

During Q1 2017, Volaris did not incorporate any additional aircraft, and one aircraft was redelivered in March. As of March 31, Volaris' fleet comprised 68 aircraft (14 A319s, 44 A320s and 10 A321s) with an average age of 4.4 years. At the end of Q1 2017, Volaris' fleet had an average of 179 seats, 62% of which were in sharklet-equipped aircraft.


April 5, 2017

Oiltanking Targets Oil Products, Petchem, NGL for Texas City Expansion

Oiltanking North America LLC said on Wednesday that it has acquired 89 hectares (220 acres) of waterfront and industrial land in Texas City for oil storage capacity and marine dock expansion.

This transaction will provide the necessary area to develop Oiltanking's Texas Independent Deepwater Expansion (TIDE) terminal.

This expansion project will allow Oiltanking to offer crude oil storage in the U.S. for the first time since selling two terminals in Houston and Beaumont to Enterprise at the end of 2014, Jerry Hardman, director, Business Development & Commercial at Oiltanking North America, told OPIS on Wednesday.

Besides crude, Oiltanking also is expected to focus on natural gas liquids, petrochemical, gasoline and distillates for its expanded capacity. Its current capacity at Texas City is catered to petrochemicals, renewables and gasoline components, he said. Gasoline components make up about a third of the existing storage capacity at Texas City.

"We also possess the capability to store ULSD and currently working to send the first rail cars for diesel delivery to Mexico next month," Hardman said.

During the initial phase of development, construction of a deep-water dock will begin with up to 14 meters draft (45 feet). The new terminal has ample ready- to-build land available to construct over 1.6 million cubic meters (10 million bbl) of storage, pipeline interconnectivity and additional jetties as needed for crude oil, petroleum and gas products in the Houston market.

"Upon completion of the initial development phase, the terminal will form a viable export/import/blending hub alternative in the Houston market by creating a premier logistics platform with significant flexibility and optionality," the company said.

The TIDE terminal is in close proximity to Oiltanking's existing Texas City terminal, which offers sophisticated infrastructure with approximately 550,000 cbm (3.5 million bbl) of liquid petroleum products, renewables, chemicals and gas storage capacity.

The Texas City terminal has rail and truck capability and routinely handles unit trains. In addition, Oiltanking's Texas City terminal has a very efficient marine configuration including two vessel docks with up to 12 meters (40 feet) draft and eight barge docks.

The development of the TIDE terminal fits perfectly with the Oiltanking strategy to offer excellent terminal services in key petroleum and chemical markets in North America. The port of Texas City is home to a vast refinery market and several chemical companies. It's short sailing time to open water and uncongested marine traffic position makes the port a highly valuable player in the Houston market.

Oiltanking North America LLC, a fully-owned subsidiary of Oiltanking GmbH, is headquartered in Houston, Texas, and through its subsidiaries offers diverse facilities for the storage and distribution of chemicals, biofuels and petroleum products.

Oiltanking GmbH is a subsidiary of Marquard & Bahls, a Hamburg-based, family- owned company that operates in the fields of energy supply, trading and logistics. Oiltanking is the second largest independent tank storage provider for petroleum products, chemicals and gases worldwide. The company owns and operates 81 terminals in 23 countries within Europe, North and South America, Middle East, Africa, India as well as in Asia. Oiltanking has an overall storage capacity of 21 million cbm.


April 4, 2017

NW Mexico Retail Fuel Prices, Now Free, Are Steady; Pemex Is Sole Supplier

Mexico has moved quietly into the latest phase of its fuel market liberalization program, a far cry from the uproar over gasoline prices that began the year.

Last Thursday saw free-floating prices for gasoline and diesel go "live" in northwest Mexico -- Baja California and Sonora, or Region 1 -- and so far it appears that most retailers have kept prices at the pump unchanged, according to industry sources.

With only a few exceptions, retail fuel prices are holding at the maximum government-set ceiling prices effective through March 29, consultant Mario Guido told OPIS on Monday. His informal survey of Tijuana, Mexicali and Hermosillo turned up one retailer who had raised prices to maintain his 6.5% margin, while a major retailer in the two-state area continued with a discount of one-fifth of a peso which had been in place for some time already.

After only four days, it was too soon to determine whether the Tijuana retailer's increase had made any impact on his sales volume, said Guido, a partner at Strategic Business Development.

Meanwhile, the end of March has come and gone and Mexico's Energy Regulatory Commission (CRE) has yet to award the portion of Pemex's oil product pipeline and storage capacity made available in the Region 1 open season.

The agency is waiting for Pemex's new methodology for weighting variables contained in the proposals submitted by private third parties, CRE President Guillermo Garcia Alcocer told the El Economista newspaper.

Among the 22 prequalified companies were Shell, Chevron, Trafigura, Tesoro Mexico Supply & Marketing and Grupo Comercial de Mexico. Press accounts have put the number of final-stage applicants at eight to 10.

Open season for Pemex Logistica pipelines and terminals elsewhere in Mexico is scheduled for the remainder of the northern region (April-May), followed by the rest of the country in three tranches (June-July, September-October and November).

As a result of the ongoing open season, Pemex remains the only supplier in the freely pricing zone. While no difficulties have arisen for Pemex in supplying service stations, according to news accounts, service station owners are urging CRE to accelerate logistics allocations.

Under a single supplier, they say, the only competitive "lever" is reduction of companies' profit margins rather than their ability to get better price conditions.

"Until there is a different supplier than Pemex, everybody will hold steady," Guido commented.


March 29, 2017

Florida Technology Firm to Build Power Plants in S. Mexico

Another U.S. company is entering the liberalized Mexican energy market amid cautious optimism on rising opportunities to invest and secure profitable returns.

A Florida technology company, EAWC Technologies, said on Wednesday that it has signed a revised agreement with Mexican company Tecnologias Verdes SA de CV to build its innovative waste-to-energy (WtE) plants in Mexico. 

The revised agreement, originally signed in March 2015, extends and expands its plans to construct a WtE power plant in Chiapas, Mexico -- the first of five planned for this area of the country. Each plant is expected to deliver 50-125 Mw/hour with all five scheduled to be online no later than 2020.

Chiapas is located in Southern Mexico.

EAWC said that Mexico's energy sector had been under strict governmental management since 1938. This changed in 2013 and 2014 when Mexico amended its constitution and passed enabling legislation overhauling its energy sector to allow private and foreign investment. 

EAWC plans to finance construction of its WtE projects through the placement of bonds secured by energy contracts. 

Orders for the five WtE plants are expected to provide over $300 million in equipment sales alone, and related royalties for use of EAWC licensed technology would provide about $90 million in fees annually beginning in 2019 for the next 15 years. EAWC is also expected to generate revenue from the supply of gas to the power plans.

OPIS notes that the opening of Mexican energy market is attracting potential investors interested in delivering oil products and natural gas liquids to Mexico as well as invest in energy infrastructure, but the ground rules in competing in the Mexican markets remain unclear as PEMEX's shadow in the domestic market continues to loom large.


March 15, 2017

Glencore Strikes Fuel Supply Deal with Large Mexico Retailer Group: Source

The pace of foreign participation in Mexico's liberalizing fuel market is beginning to pick up.

Global trading company Glencore Plc and Mexico's largest gasoline-station group - G500 - have a deal wherein Glencore will supply gasoline and diesel to G500- affiliated fuel stations, cross-border business consultant Mario Guido told OPIS.

On Friday, BP officially launched its first retail fuel station in Mexico City, eyeing the opening of 200 stations in 2017 and some 1,500 over five years.

Glencore has already invested in the deal by putting up some capital for the purchase of the G500 headquarters building in Mexico City, said Guido, a partner in Strategic Business Development.

A spokesperson for Glencore declined to comment.

In addition, the trading company has put capital into the creation of a franchise model which will unify the G500 members through the use of a single image and standard for operations and procedures, Guido said.

A report on the deal by Bloomberg put the term of the supply agreement at 15 years and the quantity at 180,000 b/d for 1,400 stations.

According to Guido, Glencore will supply fuel to the geographically dispersed G500 stations through product swaps with Pemex. The swap deal is believed to be the first of its kind for Pemex and international trading companies.

In the three years since Mexico passed energy reform into law, industry sources in the country have noted to OPIS close ties between Glencore and the federal government, with representatives of the trading firm said to have acted in an advisory capacity regarding the implementation of some changes.

There are some 1,800 stations in the G500 group.

Glencore is among the 22 companies who were prequalified to participate in the initial open season for pipeline and storage capacity held by Pemex Logistica.

Capacity reservation allocations for Region 1 -- Baja California and Sonora, including the ports of Guaymas and Rosarita -- were due out today but have been postponed, Guido told OPIS.

Due to a mix-up in tariffs wherein the initial tariff to be charged by Pemex Logistica was some 10 times below the actual cost of storage and transportation, the capacity allocation announcement was called off, he said. As of presstime, it was uncertain whether the bid process would have to be redone.


March 10, 2017

BP Opens First Fuel Station in Mexico; 200 Branded Sites Seen for 2017

BP Plc has officially launched its first retail fuel station in Mexico and plans to open around 200 sites this year, the company said Friday.

While the arrival of various global oil company brands has been touted in Mexico since the country approved the deregulation of the fuel market in late 2013, BP's new site in the Satelite area of Mexico City is the first to begin operations.

The 200 BP sites to launch this year are to include both dealer and company owned-and-operated sites, according to BP, and to feature retail stores and full-service refueling islands. The fuel offered will have BP's proprietary engine-protecting ACTIVE technology.

Over the next five years, BP aims to open around 1,500 retail sites in Mexico, as part of its retail strategy to deliver "a strong, differentiated offer built around top-quality fuels, lubricants and convenience for consumers in growing markets worldwide," BP Downstream CEO Tufan Erginbilgic said in a statement.

Having marketed and distributed Castrol lubricants in Mexico since the 1960s, BP's activities in the country also include trading in natural gas, LNG, NGLs, crude oil and refined products. Introducing Mexican consumers to the BP-branded fuel and convenience offer via station openings throughout the country will also create "thousands of new retail jobs in the process," said Alvaro Granada, general manager of BP's retail business in Mexico.

New Brands, New Stations

Mexico currently has about 11,400 retail gasoline stations, some 30% of which have convenience stores. The stations with stores are dominated by the OXXO and 7-Eleven brands.

As part of the ongoing energy reform and market deregulation, a number of Pemex stations have been rebranded in 2016 -- to OXXO Gas (by c-store giant FEMSA), Hidrosina, and La Gas, among others. Gasoline station owners association Amegas plans to introduce its Innova Petromex brand in 2017.

The introduction of fuel brands from outside of Mexico has moved slowly owing to uncertainty about access and additions to fuel supply infrastructure, free market pricing and other aspects of energy reform.

Spring 2016 saw London-based Gulf Oil International cut a licensing deal with IF Vertical 2. Also known as Gulf Mexico, the Gulf licensee had permits to import fuel but chose in September to put its franchising offer on hold until 2017.

Royal Dutch Shell has reportedly also been looking at offering its franchise in Mexico, along with Chevron and Exxon Mobil.

More recently, Pemex Director Jose Antonio Gonzalez Anaya has said publicly that Walmart was planning to open some 200 fuel stations in Mexico. A spokesman for Walmart's Latin American operations declined to comment on the report.

Challenges for the construction of new fuel stations include a long approval process, according to cross-border business development consultant Mario Guido.

Applications involve environmental and social impact studies, and distance regulations (from both local and state authorities) can impede a new station from opening too close to existing stations.

"This means that if the city is not quickly expanding, potential station investors may find that there is no possible area to place a new station ... or that the only possible locations are non-suitable sites," Guido said.

State distance regulations -- under pressure from the federal government and a Supreme Court ruling -- may disappear but when is anyone's guess, he added.

With a suitable location in hand, approval from energy regulator CRE takes three to six months, Guido explained. Then comes the choice of brand. Whether an operator opts for Pemex or a different brand, because Pemex is currently supplying everybody operators have to register with the state-owned company which can take at least a month.

Once station construction is close to being finished, federal, state and local inspections are made for compliance.

"Without taking into consideration the buildout itself, new-station owners are looking at a 4-8 month permitting and compliance period," Guido said.


March 7, 2017

Interview: Bulkmatic de Mexico Expands Fuel Handling Capacity at Terminals

Propelled by growing demand for rail transportation of fuel imports into Mexico, freight transloading company Bulkmatic de Mexico is looking at a multiphase expansion of that part of its business.

With the construction of fuel storage at two of its key terminal locations along the Kansas City Southern Mexico (KCSM) railroad, the company expects to triple its fuel-by-rail handling capacity by the second quarter of 2018, General Manager Alejandro Doria told OPIS in an interview.

Founded in 1996, Bulkmatic was built around transloading polyethylene pellets from hopper cars into trucks or customers' manufacturing facilities and most of its terminals are "manifest train ready" for fuel. Its footprint in Mexico cuts a swath from Nuevo Leon in the Northeast, south to Mexico City, with western locations also, in Guadalajara, Hermosillo and Mexicali.

As with many infrastructure projects proposed during Mexico's deregulation of the fuel market, commitments by customers have been hard to come by, Doria said, especially while the government continues to exert control over retail fuel prices. However, when customers ask if Bulkmatic could handle their business when the operating environment for suppliers and marketers becomes clearer, "we evaluate and take the risk," he added.

Bulkmatic has 14 existing terminals, five more are under construction, and locations for new terminals are under consideration.

Currently, gasoline, diesel and LPG can be transloaded rail to truck or truck to rail at Salinas Victoria, Tula and Hermosillo. By May, a third, newly constructed terminal at San Luis Potosi will be ready for rail to truck fuel transfers.

Total combined fuel transfer capacity (including the use of four portable transloader skids) stands at 20,000 b/d, or the equivalent of 28 rail cars per day or 200 rail cars per week, according to Doria.

In an effort to offer most of Bulkmatic's terminals for fuel transfer, the facilities in Mexico City, Toluca and Guadalajara are targeted to be in compliance with fuel safety and environmental regulations by the fourth quarter of this year.

Meanwhile, Bulkmatic is holding open season for storage at its Tula and Salinas Victoria terminals ahead of construction expected to begin in July. Ten tanks holding 600,000 bbl are planned for Tula and 12 tanks holding 720,000 bbl are planned for Salinas Victoria, with completion seen by Q2 2018. The terminals, served by the KCSM railroad, will be able to receive unit trains of 90 rail cars, and could also be connected to existing and future pipelines.

New Terminals, New Locations

Bulkmatic looks to complete a second terminal in Hermosillo by Q4 of this year, according to Doria. Located in the northwest state of Sonora and served by the Ferromex railroad, the facility will have a railyard that can accommodate 150 rail cars.

Initially, Hermosillo will do only rail-to-truck transfer of diesel, gasoline and LPG. Storage capacity of at least 200,000 bbl is probably warranted for the site, but any addition will ultimately depend on market demand, he said.

Bulkmatic's Guadalajara terminal, also served by Ferromex, is another location where storage could be added. Locations being considered for the construction of new Bulkmatic terminals include Chihuahua and Tijuana.

OPIS notes that Francisco Sota, general director of Bulkmatic de Mexico, is scheduled to participate in a panel discussion about infrastructure at the OPIS Mexico-U.S. Petroleum Summit in Houston on April 25.


February 28, 2017

Mexico Needs to Address Energy Security amid Ongoing Reform: IEA

A new report from the International Energy Agency (IEA) identifies Mexico's energy security as one of the key issues that needs be addressed amid the country's ongoing energy reform.

As new market entrants and regulators play an increasing role, a revised division of responsibilities between the government and industry players needs to be defined, IEA said. New regulations are currently being prepared to meet this challenge.

Also, in view of Mexico's climate concerns as well as the forecast growth of the Mexican economy and population in coming decades, the IEA report encourages the government to incorporate energy and climate considerations into long-term urban development and transport plans.

IEA works to ensure reliable, affordable and clean energy for its 29 member countries and beyond, according to the agency. Its mission is guided by four main areas of focus: energy security, economic development, environmental awareness and engagement worldwide.

In the IEA report "Energy Policies beyond IEA Countries: Mexico 2017," the agency documents the "steady and impressive pace" at which energy reforms have been implemented by the Mexican government. IEA said that it welcomes these efforts and applauds the government of Mexico for the progress made to date.

"In terms of scope, depth and pace of implementation, Mexico's energy reform ranks as the most ambitious energy system transformation worldwide in a long time," said Paul Simons, IEA's deputy executive director.

"Turning around a market based on monopoly structures into a competitive one requires constant attention by government and regulatory agencies to prevent incumbents from using their market power to increase their own profit, thereby reducing the efficiency of the new system," he said.

In the oil and gas upstream sector, this reform is being implemented with asymmetric regulation (third party access) along with a gas release program modeled on sector reforms in other markets, IEA said.

The attractiveness of the new framework has been validated by the interest shown by international investors in the first oil and gas bid round, as well as a successful first farm-out agreement by Pemex, the former oil and gas monopoly, it said.

In the power sector, IEA commends the government for its careful approach to reform, which successfully incorporates lessons and best practices from around the world. The remaining challenges now lie in the decisiveness of reform implementation, including the effective unbundling of Comision Federal de Electricidad, the former power monopoly, IEA said.

Meanwhile, Mexico embarked on "an ambitious and comprehensive energy sector reform in recent years to harness market forces and attract new investments, moving away from its monopoly-driven system, and leading to increasing market transparency, improved energy security and strengthened environmental sustainability," IEA said.

The energy reform process initiated in 2013 ended the country's decades-long monopolies in the oil and power sectors and attracted new actors to the country's energy sector.

Active competition policy remains the crucial ingredient to ensure that the country will reap the long-term benefits of the reform, according to the country's first in-depth energy policy review by the IEA.

In a separate scenario analysis to 2040 published last year (Mexico Energy Outlook), IEA concluded that Mexico's energy reform would boost oil production, increase the share of renewable energy sources in the power sector, increase energy efficiency and slow the growth in carbon dioxide emissions.

In the absence of these energy reforms, oil production would fall further, electricity costs would be higher and household spending would be hit, IEA said.

"Indeed, failure to reform would reduce Mexico's gross domestic product by 4% in 2040, resulting in a cumulative loss of one trillion U.S. dollars in total economic output," it added.



February 28, 2017

Pemex: Alliance with Air Liquide a Key Step in Improving Refining Ops

Pemex's recently announced alliance with France's Air Liquide for the supply of hydrogen will boost the Mexican oil company's refining capacity by 10% to 15%, Pemex CEO Jose Antonio Gonzalez Anaya said in an interview last week.

The agreement with the Mexican subsidiary of Air Liquide will initially involve the supply of hydrogen to the Tula refinery in the central-eastern state of Hidalgo.

In its Business Plan 2017-2021, Pemex highlights the role of such alliances and partnerships in putting the company's finances in the black by 2025, with such partnerships projected to have a positive impact on cash flow to the tune of
41.9 billion pesos (US$2.1 billion). The business plan specifically calls for partnerships in the areas of refinery auxiliary activities (hydrogen, water) and the reconfiguration and operation of refineries.

"The supply of hydrogen, vapor and electricity are critical aspects for operation reliability in refineries," the Business Plan states.

The Business Plan specifically mentions entering into service contracts (investment, operation and maintenance) for hydrogen supply to refineries starting in 2017.

The Business Plan further notes that, when looking at Pemex's Industrial Transformation segment (which includes petroleum refining), hydrogen supply issues were responsible for 63% of unplanned shutdowns from January to August 2016. Nine gas processing centers are also part of the Industrial Transformation segment.

In a telephone interview with the Imagen media group, Gonzalez Anaya said the decision to partner with Air Liquide was the result of a meticulous selection process.

"There are four companies in the world that specialize in the supply of hydrogen. We selected the one that resulted in the lowest cost. We will cut costs by 30% and will boost reliability, so that we don't have as many unit stoppages and produce more gasoline," Gonzalez Anaya said.

He added that while each of Pemex's six refineries in Mexico has a hydrogen plant, alliances such as the one with Air Liquide will boost the reliability of Pemex's hydrogen supply.



February 13, 2017

Pemex Logistica Open Season for N. Mexico Seen Extended: Consultant

Open season for the use of state-owned oil logistics assets in northern Mexico is seen taking longer than originally envisioned, cross-border business consultant Mario Guido told OPIS on Monday.

The most recent date for pre-qualified independent gasoline and diesel marketers to submit proposals for Pemex's pipelines and terminals that they want to book was Feb. 17, but Mexico's Comision Reguladora de Energia (CRE) has decided that more time is needed, according to Guido, partner at Strategic Business Development. No new dates for bid and assignment have been offered, he said.

The move likely means that companies won't receive allocated capacities until sometime in March. The delay in assignments may spur some of the first companies to obtain 12-month import permits in April 2016 to reapply or to seek extensions.

Fuel distributors and retailers who have been considering the terms offered by Pemex Logistica for use of its transportation also got some clarity regarding loss of product in Pemex pipelines. Company Director Roberto Revilla Ostos stated recently that the company will not cover any loss of product put into its transportation system which does not arrive at its destination. The company will be liable only for the fee applied to transport the missing product, he said.

As reported by OPIS in January, in the first phase of the open seasons Pemex will make available about 267,000 b/d of pipeline capacity and around 959,000 bbl in storage capacity in northern Mexico. In accordance with the schedule of gasoline and diesel price flexibility to be established by CRE, the open seasons will be carried out by region.

The first phase will be in the northern zone of the country, and will include storage terminals and pipeline systems in the border states of Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon and Tamaulipas.

Meanwhile, Mexico's liberalization of gasoline and diesel prices continues.

The government opted not to follow a Jan. 1 increase of 14% to 20% in retail prices with further upward adjustments for the first and second weeks of February, in response to intense public and political condemnation and partly thanks to the lower cost of imported supply (due to weaker U.S. prices and strength in the peso).

However, another small price rise is possible beginning Feb. 18. At that time, the government can adjust ceiling prices daily in line with international market prices for phased-in deregulation.

Movement in the fiscal stimulus offered to fuel marketers by the federal government has allowed it to keep retail prices unchanged from January. And should international pricing and exchange rates work to raise Mexico's cost of supply, the country's finance ministry (SHCP) has indicated its willingness to postpone spending on large projects -- such as a highway planned for Queretaro -- so that the funds go toward the fiscal stimulus to limit retail fuel increases.

That fiscal stimulus -- the refundable difference between what marketers spend for Pemex supply and the lowest allowable retail price at which they can sell -- remains a contentious issue for retailers because claiming it carries with it the onus of financing the refund for some 45 days.

According to Guido, for a station that typically sells 11 million liters in a month, that financing can run at upwards of US$1.5 million.

Marketers have to wait for the end of the calendar month to apply for the refund and meet criteria such as volumetric system data showing that all the fuel purchased was sold to customers and attestation by legal representatives of that data. They have been promised a 13-day turnaround of those applications.

For marketers along the northern border, Feb. 14 will be the first test of the government's guarantee to refund their financial outlay of the 3.27 pesos/liter stimulus in play during January.