Mexico bans Vitol, Trafigura from further oil trade over corruption allegations


Through Max de Haldevang and Amy Stillman to 08/22/2021

MEXICO CITY (Bloomberg) – Vitol Group and Trafigura Group – both barred from any new petroleum trading activity with the Mexican state producer for alleged bribery – will be subject to the ban until at least the end of 2024 during for the government to review the conduct of other commodity traders, Energy Minister Rocio Nahle said.

Pemex will not give Vitol and Trafigura, two of the world’s largest commodity trading houses, new jobs for at least the remainder of Andres Manuel Lopez Obrador’s six-year tenure, Nahle told Bloomberg News at ‘an interview. The Mexican government is reviewing the conduct of other oil trading companies and will suspend work with any company found guilty of wrongdoing, she said.

In recent years, the world’s most powerful commodities traders have come under investigation for bribery and corruption as part of a global crackdown that has spanned jurisdictions ranging from U.S. United and from Switzerland to Brazil and Mexico. Lopez Obrador seized power by pledging to restore the Mexican state-owned oil giant to its former glory and reduce the influence of private energy operators he often referred to as corrupt.

“Those who engage in corruption should not be in Mexico,” Nahle, 57, a longtime ally of Lopez Obrador, who also chairs Pemex’s board of directors, said Thursday in his Villahermosa office in the state of Tabasco, in southeastern Mexico. “We are working to leave a country with good practices.”

Trafigura sees no reason to suspend further activities, and its compliance policies and procedures have been fully reviewed and found by an independent external lawyer to meet the highest standards required by law in all jurisdictions in which Trafigura operates, has said a cabinet spokesperson. . Trafigura strongly refutes any allegation or suggestion of corruption, the spokesperson said.

Representatives for Vitol did not immediately respond to requests for comment. In the past, Vitol has said it is committed to upholding the law and has anti-corruption policies, procedures and controls in all of its business operations.

In December, Pemex’s business arm, PMI, suspended further business with Vitol after the company agreed to a $ 160 million settlement over charges it had plotted to pay bribes in Brazil, in Mexico and Ecuador. The allegations included bribes paid to Pemex officials as late as last year, and the Mexican government and producer have launched their own investigation into Vitol.

In July, PMI temporarily banned new work with Trafigura, although existing agreements are being honored, according to people familiar with the situation.

Oil cover

Nahle also said that Mexico was in the process of covering oil export prices, but declined to give details or say if the country had started buying options in the market.

“The finance ministry is on it,” she said. Just like they do “every year they watch the way”.

Covering the country to protect against price fluctuations in the international market is the biggest annual oil deal on Wall Street, and typically sparks huge interest from bankers, traders and commodity watchers. Arturo Herrera, who recently stepped down as finance minister, said in February that Mexico was adopting a new approach to the hedging program, aimed at spreading its purchases over time and possibly purchasing insurance within the same year. for which protection is provided.

Back Bocas

Nahle headed Mexico’s refinery projects before becoming Minister of Energy and Lopez Obrador president. In 2017, the then-MP visited the world’s largest refining complex in India, considering the giant Jamnagar plant of Reliance Industries Ltd.

Dos Bocas is on track to begin running startup tests in July and open a few months later in 2022, Nahle said. The cost of the project remains at $ 8.9 billion, plus or minus 10%, she said.

Along with running the project, Nahle reduced Mexico’s dependence on imported fuel by increasing production at the country’s six existing refineries. They processed an average of 706,000 barrels of oil per day in the first six months of the year, up 22% from the same period two years ago.

However, Nahle’s success in refining came at a cost to the environment. Pemex produces more fuel oil – a highly polluting refined product that has been banned for use by international ships – because refineries lack the technology to extract cleaner fuels from the sludge left after converting crude into gasoline. .

“Of course we are increasing fuel oil because refineries are getting more shipments” of oil, she said. But the government intends to “phase out” fuel oil production with the reconfiguration of several of its refineries in central Mexico by 2023, and Dos Bocas will not produce fuel oil. “It doesn’t worry me.”

She also said the state-owned CFE utility “burns very little fuel oil,” buying around 45,000 barrels a day from Pemex. According to BloombergNEF calculations, switching from a gas-fired power station to fuel oil generates 16% more carbon dioxide.

Nahle said Pemex is installing separation batteries in its land exploration fields such as Quesqui and Ixachi so that it can process more natural gas instead of flaring it. Pemex reported a double-digit increase in pollutants in the second quarter of the year compared to a year ago, which it said was largely due to corrective maintenance at the refinery and the evacuation of the natural gas.

Oil price

Nahle has also represented the government at key OPEC + meetings, sometimes not hesitating to disband with the world’s most powerful energy players.

She said oil prices “could come down a bit” as major producers such as Saudi Arabia, the United Arab Emirates and Russia gradually ramp up production after drastic cuts last year to stem an unrelenting crash. market precedent caused by a pandemic.

“Countries that cut off their oil flows are restoring their production, but they are doing it little by little, in a responsible way,” she said.

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