Is Pemex’s Monopoly Really Over?
November 2, 2017
The NOC (National Oil Company) announced that it is preparing a renewal of its retail business model, with the launch of new franchises and contracts to face the newly liberalized market.
According to Pemex Transformación Industrial (PTI), Pemex will launch its new franchise model next month as part of a plan to renew its gas station business.
PTI’s director, Carlos Murrieta Cummings, said that the company will develop other types of contracts to offer a more profitable profit margin, for which they are creating a new franchise and new contracts with a different brand positioning for the franchisee.
Murrieta revealed that Pemex will not go to market with this model until its management reaches new commercial agreements with industry entrepreneurs, and that it is working to improve legal operations regarding fuel, mainly to deal with fuel theft and system failures.
This is the first step Pemex will take to confront the competition represented by new brands of gas stations such as BP (LON: BP), Gulf, Shell (LON: RDSB) and Oxxo, among others.
Over the next five years BP, Shell and G500 will open about 3,126 gas stations, while Gulf announced that it plans to convert 2,000 Pemex gas stations to its own brand.
Chevron (NYSE:CVX)signed an agreement with Redco to open 200 to 250 gas stations in the states of Sonora, Sinaloa, Baja California and Baja California Sur between 2017 and 2021.
Murrieta added that at the end of the day, the important thing is that the consumer has alternatives to choose from different gas stations, leveraging Energy Reform.
Roberto Díaz de León, president of the National Organization of Gas Station Associations (Onexpo) said that the opening of more gas station would allow more energy to be offered, instead of just traditional fuel.
Bottom-line: Pemex’s management had two options: they could either wait and watch foreign firms fill in its spot in the downstream market, play dirty by sabotaging other companies’ entrance to the Mexican market, or it could step it up and renew its franchises to offer a better service, fix its fuel theft issues and improve its retail prices.
The second option is much wiser than the first, although it may be more complicated for the NOC to execute. Once a monopolist, always a monopolist at heart.