Pemex EXCLUSIVE business arm bans new business with Trafigura -sources

MEXICO CITY / LONDON, July 15 (Reuters) – The trading arm of Mexican state oil company Petroleos Mexicanos (Pemex) has temporarily banned new business with Trafigura AG, according to a document and a source, in connection with investigations on the conduct of the energy trader in several countries deepen.

The world’s largest independent commodities traders are coming under global scrutiny for alleged corruption after years of investigating bribes by officials in several Latin American countries.

Pemex (PEMX.UL) and other state oil companies have become reluctant to do business with merchants, including Trafigura (TRAFGF.UL) and rival Vitol (VITOLV.UL).

Earlier this month, PMI Comercio International suspended new agreements with Trafigura and its subsidiaries until further notice, according to a company communication seen by Reuters. The document did not state the reason for the ban.

Mexico is the world’s fourth largest importer of refined petroleum products and a major buyer of natural gas and liquefied natural gas (LNG). Many foreign trading houses and oil companies buy Mexican crude from Pemex and also supply refined products or LNG to Mexican state-owned companies.

Employees at PMI, which is in charge of Pemex’s fuel imports, were urged to honor existing deals with Trafigura but not to enter into new deals in early July, a source familiar with the operations said.

Mexico’s long-standing business relationship with Trafigura and other energy traders has become increasingly difficult to maintain due to additional levels of compliance being gradually imposed by the company and its units, multiple sources said.

The main reason for the heightened surveillance is that Pemex and its subsidiaries fear exposure to companies being investigated for corruption elsewhere, two of the sources said.

All sources spoke on condition of anonymity due to the sensitivity of the matter.

Other Pemex units continue to trade with the Geneva-based trader, another source said. Reuters was unable to determine the frequency and size of trading relationships, but the Americas accounted for 31% of Trafigura’s oil revenues in 2020.

“We see no reason to suspend further business with Trafigura and we look forward to clarifying the situation with PMI as soon as possible,” said a spokeswoman for Trafigura, adding that its compliance standards had been reviewed by a independent external advisor.

Pemex did not immediately respond to a request for comment.

At least two shipments of gasoline and naphtha supplied by Trafigura were due to arrive in Mexican ports this month, according to two sources with knowledge of the supply, confirming that shipments purchased before the suspension decision had not been canceled.

In addition, a contract between Trafigura and the Mexican electricity company Comision Federal de Electricidad to supply LNG to the country remains in place, according to two separate sources.

Trafigura’s two largest business divisions are petroleum and metals. The company traded around 6.4 million barrels per day of crude and refined products in the first half of this year, making it the largest oil trader after Vitol.

Brazilian prosecutors in 2018 announced an investigation into allegations of corruption involving traders Trafigura, Vitol and Glencore (GLEN.L) and officials of state-owned company Petrobras (PETR4.SA).

Vitol, the world’s largest commodities trader, agreed last year to pay US and Brazilian authorities $ 164 million after admitting to bribing officials in Mexico, Brazil and Ecuador to get and keep business with state oil companies there.

Ecuadorian state-owned company Petroecuador has since 2020 removed Vitol and Gunvor (GGL.UL) from its list of suppliers amid investigations.

President Andres Manuel Lopez Obrador reiterated in June that Mexico wants Vitol to make public the name of the head of the state oil company that accepted bribes from Vitol.

PMI temporarily banned trading with Vitol in December. Mexico is trying to renegotiate some of its contracts with Vitol after the trader admitted paying bribes to win business. The ban remains in place, the source said. Read more

Reporting by Stefanie Eschenbacher in Mexico City and Julia Payne in London Additional reporting by Marianna Parraga and Ana Isabel Martinez in Mexico City and Alexandra Valencia in Quito Editing by David Gaffen and Marguerita Choy

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