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Greasing the wheels for competition

Article - July 18, 2013
While the oil the industry in Mexico has been closed to private companies since 1938, there have been some steps taken to improve competition in the oil lubricant market, a sign that things are changing in Mexico's oil industry.
Pemex has had a monopoly in Mexico’s oil on for seven decades, but that could all change with the reforms that President Enrique Peña Nieto is trying to push through parliament which would allow private companies to form joint ventures with Pemex for deepwater explorations (see article above).
 
It is a contentious issue, but there has been less contention surrounding the liberation of the downstream sector in Mexico, such as opening up oil refining to private firms. Since 2008, private investment has been permitted in midstream and downstream oil activities. The midstream and downstream gas market has been liberalised for decades and it looks like the oil sector will be soon to follow.
 
One small victory for proponents of a free oil market came in November 2012 with the announcement that Pemex would cease the rights of Mexicana de Lubricantes (Mexlub) – a joint venture between Pemex Refineries and private firm Impulsora Jalisciense – to be the exclusive supplier of lubricants to the chain of 10,000 Pemex-owned petrol stations throughout Mexico. This ends Mexlub’s 20-year monopoly at the Pemex pumps, with other local and multinational lubricant manufacturers now allowed to sell their products at Pemex stations (prior to this, the only place Mexicans could find other lubricant brands was repair garages or independent sales outlets).
 
So how is Mexlub coping with this newly arrived competition? Its General Manager José Luis Sandoval Reynoso says that its diversity and quality set it apart from its rivals: “We compete with giant multinational companies which also have had much more time on the market. After reviewing our situation, we decided to make our medium-term mission to be the most versatile on the market. This means that we will market ourselves in all segments. That will give us authenticity and we will differ from other companies.
 
“For example, we are considered a company dedicated to the manufacture of automotive lubricants. This is true, but we also manufacture different products that are not only focused on the automotive engines.
 
“We are the leading supplier to the Electricity Federal Commission of oil cooler for transformers, but we also supply products to different sectors, a wide variety of items not restricted to motor engines. To sum up, what distinguishes us from other companies is the versatility and quality of all our products.”
 
Another positive for Mexlub is the fact that is a 100 per cent Mexican-owned company, which means Mexicans may continue to favour it over foreign rivals at the Pemex pumps. Evidence of this is the fact that despite the stiff competition from established multinationals, Mexlub remains the number two brand in the market. In a year and a half, it plans to double production and export to 20 countries, up from the current 12. And the possibility of forming alliances with distributors in the UK is something that interests Mr Reynoso. 
 
“Joint ventures or putting a plant in the UK, these are interesting opportunities,” he says. 

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