Mexico to ban gasoline oxygenated with ethanol in three urban centers

Mexico will ban the sale of gasoline oxygenated with ethanol beginning in late October in three major urban centers as part of a push to combat the worst pollution in over a decade due to high concentrations of ozone in the atmosphere, government officials say.

While Mexico opened to the door to such imports in April, such a blend of ethanol and gasoline is not yet present in the Mexican market. State oil company Pemex says it neither produces nor imports gasoline oxygenated with ethanol.

However, the new rule anticipates any such imports in future as Mexico opens up its long-shuttered energy sector. In May, the government said that air quality levels in Mexico City and its surrounding areas were the worst in 14 years.

A ban in key metropolitan areas could hinder the development of the potential market, which would concern U.S. traders. 

Mexico's energy regulator CRE expects a new norm on oil quality standards, NOM-016-CRE-2016, to be published next week in the official gazette. It will come into effect in late October, and is a periodic review replacing previous norms.

There were no immediate details on any other fuel norm changes in the pipeline.

The new standard establishes quality parameters for gasoline, liquid gas, diesel and jet fuel, for a period of up to five years.

The ban on the sale of gasoline oxygenated with ethanol covers Mexico City and a host of surrounding municipalities in the State of Mexico, as well as Guadalajara, the capital of Jalisco state and Monterrey, the capital of Nuevo Leon.

"Due to altitude and heavy traffic, it was decided that the most appropriate measure at this time was to prohibit the sale and marketing of gasoline oxygenated with ethanol because it is a precursor of ozone and we have a contamination problem," a CRE official said, asking not to be named in line with policy.

Mexico City and surrounding areas this year have suffered high levels of pollution and ozone, which prompted authorities to slap additional limits on the number of vehicles on the road and some restrictions for industry.

Pemex imports around 50 percent of Mexico's gasoline needs, of which the vast majority comes from the United States. Much of that is ultra-low sulfur gasoline.

Overall, Mexico consumes around 860,000 barrels of gasoline per day.

The CRE clarified that the rule states that in the rest of the country, gasoline mixed with ethanol can be sold but with a ceiling of 5.8 percent of oxygenated content.

A sweeping energy sector reform the government is implementing is unraveling the decades-long monopoly Pemex enjoyed, including allowing private companies to import gasoline and compete with Pemex, which has 11,000 gas stations.