April 9, 2018 edition—First gas storage plan out; Hidalgo’s new solar project; and a quick NAFTA deal.
Last Week in a Minute or Less
Renewables & Electricity. SunPower sold a solar project to Atlas Renewable Energy; and two-thirds of the first clean energy auction projects are delayed.
Natural Gas & Liquid Fuels. The first gas storage plan is out; Avant Energy started building fuel storage in Altamira; and Salina Cruz reduced refining by half.
Oil & Gas Upstream. ENI, Pan American, and Talos Energy will start drilling next year.
Money & Power. Trump wants a quick NAFTA deal; inflation is expected to fall; and Mexico’s presidential campaign started.
Déjà vu all over again. Last week’s readers were particularly interested in Trump’s threat over tariffs if he dislikes the NAFTA deal (El Financiero – Spanish); Mexico’s storage policy (Natural Gas Intel – English); and Pemex’s losses (Mural – Spanish).
Trump wants a NAFTA deal by mid-April… The Trump administration is pressing for a preliminary NAFTA deal to be announced at a summit in Peru (English). The US government hosted the negotiators in Washington to try to reach an agreement on the remaining differences (El Financiero – Spanish).
…and Canada needs details for a quick deal. Canada’s head negotiator Freeland found progress in the negotiation (Bloomberg – English), without endorsing US negotiator Lighthizer’s idea to speed up the resolution. Freeland is ready to bargain, but noted that gaps remain.
The US accused Mexico of obstructing FDI on energy. The US Trade Representative pointed out the obstacles to foreign direct investment in the energy industry imposed by Mexico. Mexico’s hydrocarbons law restricts the ability of foreign investors to use international arbitrage (El Economista – Spanish) to resolve conflicts with the government.
Trump threatened to end NAFTA if Mexico does not stop drugs. President Donald Trump threatened to pull out of the NAFTA deal if Mexico does not stop Central American immigrants and drugs from crossing the US border (Bloomberg – English). Trump commented on the reports of Central American “caravans” (TWP – English).
What could happen to Mexico if NAFTA ends? If Trump decides to leave NAFTA, he would have to give six months’ notice to Mexico and Canada. Mexico’s exports in 2016 were worth US$401.2bn, with 73.3% directed to the US and 7% to Canada (Bloomberg – English).
The Road to Reform
The first natural gas storage plan is out at last. The National Natural Gas Control Center (Cenagas) will launch its first open season for natural gas storage this year, to reach 45bn cubic feet of capacity by 2026 (Reforma – Spanish). The tender will include only exhausted fields totaling 10bn cubic feet.
Private companies started out in the diesel and jet fuel market. In February, private companies controlled 11.9% of the diesel sales in Mexico (Reforma – Spanish). With the liberalization of the market, Aeropuertos y Servicios Auxiliares (ASA) will no longer offer jet fuel in eight airports (Reforma – Spanish).
ENI, Pan American, and Talos Energy will start drilling in 2019. ENI, Pan American, and Talos Energy will start extracting oil in 2019 in the blocks obtained in Round 1.1 and Round 1.2 (El Financiero – Spanish). With the new Pemex operations, around 50,000 barrels per day will be added to national production.
Contracts are ironclad: the CNH and the Sener. The National Hydrocarbons Commission (CNH) and the Energy Ministry said that contracts are armor-plated and will not be affected by the presidential elections (El Economista – Spanish). Andrés Manuel López Obrador declared he would review the legality of the oil contracts.
Pemex abandoned premium refining. In the last year, the state-owned company stopped refining Premium gasoline (Reforma – Spanish) in its plants. Pemex supplies imported gasoline from the US, Spain, Italy, and Qatar.
Inflation is expected to fall. Private analysts lowered the inflation forecast from 4.09% to 4.07% by the end of 2018 (El Financiero – Spanish), according to the latest Banxico survey. Analysts also reduced the forecast for GDP growth from 2.28% to 2.21%.
Mexico’s presidential campaign is on the go. Mexico’s presidential campaign started with the front-runner, Andrés Manuel López Obrador, launching his campaign near the US border (Reuters – English). Mexicans suffered the worst murder toll on record last year (Reuters – English).
AMLO’s NAFTA negotiator agrees with Mexico’s team. Jesús Seade Kuri, chosen by the presidential candidate to lead the NAFTA negotiations, agrees with the current Mexican negotiating team on rules of origin and conflict resolution (El Financiero – Spanish). The former IMF member expects the team won’t feel pressured to finish negotiations soon.
Private companies will pay more for power in the north. CFE’s power tariffs for the industrial sector in the North Gulf region, including Nuevo León, Coahuila, and Tamaulipas, increased by 12% in March compared to February (El Norte – Spanish).
Elections and NAFTA negotiations scared share sales in Mexico. The uncertainty surrounding the NAFTA renegotiation, the presidential elections, and high interest rates caused the biggest drought in private capital in the last two years. The US$297m raised by Promecap represents a 67% decrease (El Financiero – Spanish) compared to the resources in the same period the previous year.
Mexicans pay more for gasoline than their neighbors. Mexico offers more expensive gasoline due to higher taxes than in Central American countries, despite its proximity to the US (El Financiero – Spanish). The Central American market has matured after 30 years of a free market.
Mexico is financially shielded. Mexico has a financial shield of US$264.1bn, US$173.2bn from international reserves and US$90.9bn from an IMF credit, the highest level since August 2016 (El Financiero – Spanish). The shield could allow the country to handle economic turmoil in the context of local and international uncertainty.
Strategy & Operations
Salina Cruz cut refining by half. The Ing. Antonio Dovalí Jaime refinery, located in Salina Cruz, reduced hydrocarbons transformation processing by 45% and 52% in January and February 2018 (El Universal – Spanish), compared to the same period in 2017. Salina Cruz refined 164,531 and 118,208 barrels per day in January and February, respectively.
SunPower sold a solar project to Atlas Renewable Energy. SunPower Corp. sold the solar project Guajiro, in Hidalgo, to Atlas Renewable Energy (El Financiero – Spanish) (RenewablesNow – English). SunPower was awarded the project in Mexico’s first power auction held by the National Center of Energy Control (CENACE).
Two-thirds of the first power auction projects are delayed. Two years after the first long-term auction, four projects are on schedule and two will be completed before the deadline, but 12 are delayed (El Financiero – Spanish). The Energy Ministry expects six wind and solar projects to start in 2018.
Avant Energy started building a fuel storage facility in Altamira. Avant Energy started the construction and operation of a storage terminal that will create more than 2,000 jobs in Tamaulipas (El Economista – Spanish). The Suministro de Petrolíferos Altamira-Bajío system broadened investment in the Altamira and Queretaro terminals to US$260m (El Economista – Spanish) (Mexico Now – English).
Old School Social
Events in the world beyond your screen—go see and be seen!
The 33rd Annual Global Power Markets Conference is scheduled for April 9-11 at The Wynn Las Vegas in Las Vegas.
The 2018 Mexican Energy Forum will be held on April 17-19 at W Hotel Mexico City, Mexico.
The 2018 Columbia Global Energy Summit is scheduled for April 19 at the Center on Global Energy Policy in New York.
The 2018 SEPA Utility Conference will be held on April 23-25 in Rancho Mirage, California.
The AltFuels Mexico 2018 is scheduled for April 23-26 at the WTC in Mexico City.
Mexico and the US studied a shared corner of the desert. A binational project is registering more than 90 archeological sites of different periods in the Valle de Altar (El Universal – Spanish), in the desert shared by Sonora and Arizona. The project will study three sites in the valley.
Quote of the Week
“El arte en general, y naturalmente también la arquitectura, es un reflejo del estado espiritual del hombre en su tiempo.”
“Art in general, and naturally also architecture, is a reflection of the spiritual state of man in his time.”
– Mathias Goeritz (1915-1990), Mexican poet, sculptor, and architect.
We hope you have a productive week. Please send any news, comments, or binational archeological projects to MexicoWeekly@energynarrative.com.
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