Steven Otillar Quoted in Downstream Today on Mexico’s Liberalized Oil and Gas Market

Akin Gump oil and gas partner Steven Otillar spoke with Downstream Today regarding Mexico’s decision to allow private companies to import petrol and diesel beginning earlier this month.  That’s nine months earlier than originally planned.

“I believe the acceleration of the reforms for competition in the retail fuel space is very important as an outward symbol of the implementation of the reforms overall,” Otillar said. “For the Mexican people, they will not likely see Talos or ENI rigs offshore, but they will take note when they see their first gas station that is not the traditional green, white and red of Pemex.” He added, “From a practical standpoint, price controls will remain in place until January of 2018, and imports will take some time, so that most retail suppliers will still initially be purchasing fuel from Pemex affiliates.”

Otillar talked about the risks and rewards that Gulf Oil International faces as it lines up franchisees to run existing retail locations currently operating under the state-owned Pemex brand. He said, “I believe they have the risk appetite to enter into the market, and the ability to move quickly. Early entrants tend to have a higher risk appetite and can consolidate market position as a first mover if successful.”

Other areas Otillar discussed with Downstream Today included:

  • Gulf’s key challenges: “Apart from customer preference, I think the greatest challenges will be in logistics. Moving products within the country will be extremely complex and require substantial investment and planning on the part of Gulf.”
  • Whether other outside retailers can enter the Mexican fuel retail market: “Efficient companies that can find economies of scale and minimize costs should be very successful.”
  • The impact on Pemex’s fuel outlets: “Pemex will have to at least provide the basics – cheap fuel, retail conveniences and available fuel inventory at its locations. … historical transgressions such as faulty fuel meters, attendants accused of improperly charging and overcharging, and even the inability to use credit cards for purchases, will not be tolerated by customers that now will have a choice of where to buy their fuel.”