April 12, 2020 edition—Dos Bocas delay; Pemex’s production; and CFE’s future tenders.
Last Week in a Minute or Less
Electric Power & Renewables. Experts hope CFE’s tenders will launch soon; CFE’s use of dirty plants skyrocketed; and Mexico City and CFE will update the subway.
Natural Gas Mid-Downstream & LNG. Mexico should work on its fiscal framework for natural gas storage; and Sempra offered KKR a slice of Costa Azul.
Liquid Fuels Mid-Downstream. If the budget comes through, Dos Bocas will be running by 2023; the Sener accused gas stations of cashing in on subsidies; and illegal taps multiplied in 2021.
Oil & Gas Upstream. Pemex’s production went up in February; and Pemex will need US$2.1bn by 2026 for its exploration and extraction contracts.
Government & NGO. The USTR found eight barriers to invest in Mexico; IIF and Citibanamex expect 4.6% growth; and the IMF may help Mexico out.
Déjà vu all over again. Last week’s readers were particularly interested in AMLO’s opinion on the energy reform (El Financiero – Spanish); NFE’s LNG supply (Natural Gas Intel – English); and AMLO’s fuel import rules (Platts – English).
Geopolitics & Trade
Business leaders push for a North American partnership to speed recovery. Business leaders in the three countries urged the governments to enhance the coordinated North American pandemic response to ensure the full implementation of the USMCA and to advance competitiveness (Fortune – English).
New England and Canada discussed USMCA. The New England-Canada Business Council and Vermont and Canada’s stakeholders virtually discussed the impact of the USMCA trade agreement on cross-border trade, the pandemic, and renewable energy (WAMC – English). The goal is to fight climate change while continuing regional business cooperation.
The USTR found eight barriers to invest in Mexico. The US Trade Representative published the report, “Foreign Trade Barriers 2021,” which discusses the limitations faced by the US to invest in Mexico, including Mexico’s import policies (El Financiero – Spanish). The report mentions the hydrocarbons law restrictions on using international commercial arbitration (USTR – English).
Mexico became the US’ first trade partner again. Mexico reached US$96.9bn in exports and imports with the US during the first two months of 2021 (El Financiero – Spanish). Mexico represented 14.9% of the US’ international trade, followed by China with 14.7%.
IIF and Citibanamex expect 4.6% growth… The Institute of International Finances (IIF) expects Mexico’s GDP to reach 4.6% this year (El Economista – Spanish). According to Citibanamex’s survey, Mexico’s GDP will increase by 4.6% this year after the 8.5% fall in 2020 (El Financiero – Spanish).
…and the Finance Ministry has even higher expectations. The Finance Ministry improved its growth forecast from 4.6% to 5.3% for 2021 (Proceso – Spanish). Experts believed the forecast to be optimistic considering the vaccination plan and the propagation of new COVID-19 strains (El Financiero – Spanish).
Remittances skyrocketed in 2021. According to Mexico’s central bank, Mexico’s remittances during the first two months reached US$6.7bn, a 20.9% increase (El Economista – Spanish). The 7.3% devaluation of the Mexican peso against the US dollar strengthened the peso performance by 25.3%.
The IMEF is cautious about Mexico’s recovery. The Mexican Institute of Finance Executives (IMEF) said Mexico’s economy shows reactivation signals in the manufacturing and non-manufacturing sector (El Financiero – Spanish). The IMEF warned that the good news should be taken with caution.
Pemex will need US$2.1bn by 2026. According to its 2021-2025 Business Plan, the state-owned company will require US$2.1bn between 2021 and 2026 to finance its operations (El Financiero – Spanish). Pemex is looking to attract capital to develop exploration and extraction contracts.
The IMF may give Mexico a hand. The International Monetary Fund (IMF) plans to issue US$650bn to strengthen reserves, and Mexico may benefit from it (El Financiero – Spanish). The IMF expects Mexico to have a two-track recovery (IMF – English) and 5% growth (El Economista – Spanish).
Legal & Regulatory
If the budget comes through, Dos Bocas will be running by 2023. The state-owned company said the Dos Bocas refinery will start processing hydrocarbons by 2023 if the annual budget for the work reaches MXN300bn in the next year, 28% above the amount spent in 2020 (El Economista – Spanish).
The Sener accused gas stations of cashing in on subsidies. Energy Minister Rocío Nahle said that certain gas station businesses are taking the fuel subsidies, increasing their profit margins (El Financiero – Spanish). The ministry will review their permits and respond accordingly.
Experts hope CFE’s tenders launch soon. Market observers are optimistic about CFE’s tender to build six natural gas-powered plants, despite delays in the publication of its guidelines (Platts – English). The tenders will be some of the few investment opportunities during the López Obrador administration.
Pemex’s production went up in February. The state-owned company said dry natural gas output declined in February but fuel oil production from its refineries increased (Natural Gas Intel – English). The Finance Ministry expects Pemex’s crude oil production to reach 1.86 million barrels per day in 2022 (El Economista – Spanish).
Industry power tariffs dropped 2.6%. For April, the state-owned company’s power tariffs for the industry sector registered an annual decrease of between 1.6% and 2.6%, depending on the area and voltage (El Norte – Spanish).
Mexico should work on its fiscal framework for natural gas storage. According to the chairman of the Atlantic Council Global Energy Center’s Energy Advisory Board, Mexico needs to develop a fiscal framework that compensates people for building and operating natural gas storage (Natural Gas Intel – English).
Strategy & Operations
Mexico City and CFE will update the subway. The city government and the state-owned company signed a cooperation agreement. The goal is to increase network reliability and modernize subway power installations (El Economista – Spanish).
CFE’s use of dirty plants skyrocketed. Between December and January, the state-owned company’s reliance on thermoelectric plants powered by fuel oil increased 362% (El Norte – Spanish). According to lawmaker Jesús Horacio González, the reason is CFE’s need to ease the fuel inventory (El Norte – Spanish).
Illegal taps multiply in 2021. In the first two months of 2021, 1,901 illegal taps were found in Pemex’s pipelines, 141 more than in the same period in 2020, an 8% increase (El Economista – Spanish). The illegal taps are concentrated in Hidalgo (794) and Puebla (449).
Sempra offered KKR a slice of Costa Azul. Sempra Energy will sell a 20% stake in a new infrastructure unit to KKR for US$3.37bn in cash (Platts – English). The transaction is expected to be completed by mid-2021.
Fuel thieves hit Nuevo León’s fuel imports. The president of the Energy Cluster of Nuevo León explained that fuel theft hit fuel imports in Nuevo León due to railroad contraband in six or seven points (El Economista – Spanish). Fuel theft cut the tax income by MXN22bn.
BP returned to Altamira. BP announced that their teams returned to the Cassia C Platform construction yard in Altamira, Mexico, as it is now safe under COVID-19 guidelines (Energy Now – English). The project is forecast to start up in 2022, allowing access to low pressure gas resources from over 30 wells.
Old School Social Goes Viral
(Editor’s note: For the duration of the COVID-19 outbreak, this section will refocus on announcements of event delays or cancellations, events that are moved online, and scheduled webinars and public conference calls. Stay safe!)
The Conference “Norms for measuring instruments in the sector” will be held April 13.
The Institute of the Americas’ “México Próspero – A Presentation by Tatiana Clouthier, Mexico’s Secretary of Economy” is scheduled for April 14.
Mexico Assembly is rescheduled for May 26-27, 2021, at Hyatt Regency, in Mexico City.
The Mexican Petroleum Congress is rescheduled for June 23-26, 2021, in Monterrey.
Iberdrola and Luces de Esperanza will power up the Huasteca Potosina region. Iberdrola promotes the implementation of the second phase of the program Luces de Esperanza (Hope Lights) that started in 2019 to bring power to rural communities in Huasteca Potosina (PV Magazine – Spanish).
Quote of the Week
“No mires de dónde vienes, sino a dónde vas.”
“Don’t look where you come from, but where you are going.”
– Heberto Castillo Martínez (1928-1997), Mexican civil engineer and political activist.
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