In June 2017, Mexico’s Energy Regulatory Commission (CRE) announced the elimination of the maximum price of natural gas, known as the first-hand price, or the VPM. Instead of using this price cap formula, the state-owned oil and natural gas company, Petroleos Mexicanos (Pemex), alongside independent market participants, would determine prices based on market conditions. More than a year later, how does the Mexican market look from a pricing perspective? In place of the VPM, CRE took steps towards engineering pricing transparency in the gas market through the publication of the National Reference Index of Wholesale Natural Gas Prices (IPGN), starting in July 2017, making price reporting mandatory for the first time in the Mexican market. Moving to a more granular level, in February, CRE broadened its pricing coverage to six different regional indexes, which represent a volume-weighted average price of all trades reported by marketers during the prior month with respect to volume, average price billed and service costs. However, regional pricing formation has not occurred solely from a federal standpoint. Pemex prices are now no longer based on just two markets, Reynosa in the North and Ciudad Pemex in the South, but are determined by market activity in nine… continue reading
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Source: CTRM Center