Mexico’s Pemex, Vitol reach graft settlement worth more than $30 million – documents, sources

MEXICO CITY, Oct 2 (Reuters) – Mexican state energy company Pemex has received a settlement worth more than $30 million from Vitol, including a $23 million cash payment, over a graft scandal that halted deals with the Swiss-based trader, documents showed and sources with knowledge of the matter confirmed to Reuters.

In return, Pemex has lifted its three-year ban on business with the world’s largest independent commodities trader, according to the settlement, the terms of which have not previously been reported.

The two Pemex documents are also not public.

The ban followed Vitol’s public acknowledgement in December 2020, in a deal with the U.S. Department of Justice, that it had paid kickbacks to win business with Pemex as well as state companies in Brazil and Ecuador.

Last week, Reuters revealed Pemex had resumed trade with Vitol, buying gasoline and additives cargoes.

The settlement was signed in April, but it still took several more weeks for all entities of the state company to complete due diligence processes, one source familiar with the negotiations said.

Since settling, that source said Pemex has bought at least eight cargoes from Vitol, making it once again one of the most important trading partners for both regular and premium gasoline imports.

Mexican President Andres Manuel Lopez Obrador had said Pemex would only resume dealing with Vitol if adequate compensation was paid and the company handed over the names of those involved in the graft scandal. Pemex later disclosed the names of two former officials.

The Mexican government and Pemex did not respond to requests for comment. Vitol declined to comment.

Two sources familiar with the matter confirmed the terms to Reuters, speaking on the condition of anonymity because the information is both commercially and politically sensitive.

In the U.S. settlement in December 2020, which is entirely separate, Vitol agreed to pay almost $164 million as part of a deferred prosecution agreement.

In this settlement, the documents showed Pemex received the $23 million cash payment in compensation for “inconveniences,” while Vitol also agreed to drop a claim for the return of a $9.25 million guarantee and a lawsuit from nearly a decade ago for $1.2 million.

The guarantee had already been collected by Pemex Transformacion Industrial, which is responsible for processing petroleum products and petrochemicals, after terminating a contract for ethane in late 2020 on grounds of corruption.

As part of the settlement, Vitol also dropped a lawsuit against PMI Comercio Internacional, Pemex’s international trading arm, for $1.21 million for alleged damages to a refinery in Cressier, Switzerland.

The documents also showed that Vitol had alleged in a separate out-of-court case that the refinery suffered damages from organic chlorides found in crude oil Vitol had purchased from Pemex’s trading arm in 2014. No further details were disclosed.

In addition, Vitol agreed to carry out works at the Pajaritos complex in Veracruz state free of charge and transfer ownership of assets to Pemex; the works at the ethane plant included the installation of vaporizers and pipelines.

The documents do not detail the commercial value of the asset transfer nor the additional works carried out by Vitol. Reuters was unable to find other records pertaining to those values. The documents also do not contain an admission of guilt.

Mexico is an attractive market for commodity traders: its ailing refineries struggle to process the heavy crude oil Pemex pumps. Despite being a crude oil producer, Mexico relies on gasoline and diesel imports.

Pemex data released last week showed gasoline and diesel imports rose by 17% each in August, to more than 407,00 barrels per day (bpd) and nearly 175,000 bpd, respectively.

Meanwhile, legal proceedings tied to the graft scandal continue in Mexico but also the U.S., where a former employee is on trial, and Ecuador.

In mid-December 2020, Pemex presented its own case for possible corruption to the Mexican Attorney General. The graft scandal Vitol acknowledged dates back to Lopez Obrador’s predecessors.

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