Mexican seizure of Air Liquide hydrogen facility raises concern

A Mexican government decree ordering the temporary occupation of French firm Air Liquide’s hydrogen production plant at the Tula refinery has set off alarm bells.

“How this has been approached is highly questionable, essentially because of how it affects confidence in our country in terms of legal certainty because the serious, formal arguments that underpin this decision are not known,” Rosanety Barrios, an analyst and former regulator at energy ministry Sener, told BNamericas.

Barrios is currently advising opposition presidential hopeful Xochitl Gálvez on her energy transition proposals. 

Published on December 29, the declaration that the plant in Hidalgo state is of public utility was interpreted by experts and media outlets as an expropriation. Barrios said that although the move cannot yet be considered an expropriation, a “declaration of public utility is a prior step.”

“We don't know if this decision, this first act of public utility, will lead to an expropriation or whether it is simply a form of pressure on the part of the government to force or create conditions that invite the counterpart to accept an early termination of the contract. I believe that an action like this could be avoided. Some ways are much more in line with the law,” she said, suggesting that it would be better to renegotiate the contract. 

“From day 1, when this administration took office, the [former] energy minister, Rocío Nahle, expressed her total opposition to this operation …. I'm very struck by the fact that in five years they were unable to reach an agreement,” Barrios added.

The Air Liquide facilities started operations in 2011, according to the company's website. However, former president Enrique Peña Nieto's administration (2012-18) signed a 20-year supply deal with Air Liquide in 2017 and it has been providing hydrogen to the refinery since then.

In a similar situation in May 2023, President Andrés Manuel López Obrador ordered navy ministry Semar to take over three rail stretches of operator Ferrosur's concession in the Tehuantepec isthmus region in Oaxaca and Veracruz states.

THE DECREE

According to the decree, state-owned oil and gas company Pemex will immediately and temporarily take over the 6,452m2 area that hosts four air separation units, while the Pemex Transformación Industrial unit must pay Air Liquide compensation.

However, Pemex is in dire financial straits. The 2024 federal budget includes a 145bn-peso (US$8.5bn) cash injection to help address the company’s US$110bn debt.

Details of how much the government will pay are not known yet.