The Weekly Brief: Mexico


April 16, 2018 edition—The TransCanada pipeline halted; IGSA’s solar parks; and a new package of farmouts.




Last Week in a Minute or Less


Renewables & Electricity. Windarmex will build 200 wind towers; IGSA will develop solar parks; and NeoPetrol will explain the benefits of cogeneration.


Natural Gas & Liquid Fuels. The Tuxpan-Tula pipeline was stopped by amparo; LP gas suppliers demand fewer administrative obstacles; and Pemex uses incentives to maintain its gas station market.


Oil & Gas Upstream. Pemex is getting a new farmout package ready; the CRE asked for regulatory coordination to help oil projects; and Wood Mackenzie thinks Mexico’s oil projects are competitively located.


Money & Power. NAFTA entered an intensive phase; the UN Cepal lowered Mexico’s growth forecast; and inflation dropped.


Déjà vu all over again. Last week’s readers were particularly interested in the delays in 70% of the clean energy projects (El Financiero – Spanish); Atlas Renewable Energy’s solar project (El Financiero – Spanish); and new jet fuel suppliers (Reforma – Spanish).



NAFTA Negotiation


NAFTA entered an intensive phase. Ministers met in Washington, initiating the NAFTA renegotiation’s technical round (Bloomberg – English) (El Financiero – Spanish). Mexico’s economy minister Ildefonso Guajardo said a final NAFTA deal will not be reached in this round and pointed to the first week of May (Bloomberg – English) (El Financiero – Spanish).


Neither the US nor Canada are in a rush for a NAFTA deal… President Donald Trump said a NAFTA deal may be reached soon but played down expectations (Bloomberg – English) of a quick announcement. The Canadian ambassador in Mexico said Canada is not pressured to reach an agreement (El Financiero – Spanish) in the first week of May, compared to Mexico’s private and public sectors.


…and it was confirmed with Trump skipping Peru’s summit. The Trump administration pushed to announce a framework NAFTA deal (Bloomberg – English) at a summit with other Western Hemisphere leaders in Peru. President Trump cancelled the trip and the talks continued in Washington.


Trump relaxed on regional car content. The Trump administration softened its NAFTA demand (Bloomberg – English) for more North American content in car manufacturing. This gesture could be an olive branch on the biggest points of disagreement in the negotiations.


Trudeau found significant progress in the NAFTA negotiations. Canadian Prime Minister Justin Trudeau assured NAFTA negotiations have picked up momentum (Bloomberg – English), seeing “significant” progress and signaling a deal could soon be reached.



The Road to Reform


Pemex is preparing a new farmout package. The state-owned company will present a new package of farmouts to the National Hydrocarbons Commission for authorization (CNH). Pemex will continue looking for partners for a group of seven clusters (El Financiero – Spanish) on top of the Ayin-Batsil and Nobilis Maximino fields.


LP gas suppliers demand fewer administrative obstacles. Representatives of the LP gas associations pointed to administrative barriers as the main obstacle for new players (El Economista – Spanish) to enter the market. The OECD is developing a study to recommend a deregulation process to the Mexican government.


Natural gas projects are in demand. Mexico’s Energy Ministry forecast a potential additional demand of 265 MMcf/d by 2022 (Platts – English). Most of the needed capacity is located in the northern states of Nuevo León (1.16Bcf/d) and Tamaulipas (664 MMcf/d).


The CRE asked for regulatory coordination to help oil projects. The Energy Regulatory Commission (CRE) said Mexican energy regulators are facing difficulties in coordinating with local and state governments (Platts – English), endangering oil projects. Certain companies have found obstacles due to right of way and land use permits and the lack of homologation among federal, state, and local levels.



Political Economy


Inflation caught a break thanks to fruits and vegetables. The fall in the price of fruits and vegetables slowed inflation to 5.04% (El Economista – Spanish), the lowest in 13 months. LP gas prices fell by 3.62% as compared to February.


The UN Cepal questioned Mexico’s forecasted growth. The UN Economic Commission for Latin America and the Caribbean (Cepal) forecast 2.3% growth in 2018 for Mexico’s economy (El Financiero – Spanish). The Cepal lowered the prediction published in the Preliminary Balance of the Latin American and Caribbean Economies 2017.


What are the presidential candidates planning for energy? Analyzing the presidential platforms of the nine parties, the oil sector is mentioned lightly in the platforms (Pulso Energético – Spanish). Centralizing hydrocarbon exploration and production in Pemex, making production more efficient and clean, and overseeing private companies’ activities are among the proposals.


Peña Nieto answered Trump’s border threat. In a national address, President Peña Nieto said Mexico will cooperate with the US but not at the expense of its sovereignty (TWP – English) after Trump signed an order to deploy National Guard troops. Peña Nieto noted that the Mexican Senate, the four leading candidates, and he himself condemned Trump’s remarks.



Market Trends


Long-term debt issues hit a record. The long-term debt market reached an historic high, registering 22 placements of MXN58bn (El Economista – Spanish), the highest amount in the Mexican stock market. The average placement amount in 2016 was MXN14bn, while in 2017 it was MXN26bn.


Saudi Arabia will keep the oil taps off in April. Saudi Arabia will keep its crude oil production in April below 10 million barrels per day, maintaining exports under 7 million barrels per day (Reuters – English) (El Economista – Spanish). Since January, Saudi Arabia has been producing below its OPEC target.


The Fed will hit the gas on rate increases. The chairman of the Federal Reserve, Jerome Powell, warned that additional rate increases will be needed (El Economista – Spanish) if the US economy continues on its current path. The goal is to balance between the inflation tendency and the strength of the labor market.



Strategy & Operations


The Tuxpan-Tula pipeline was stopped by amparo. The TransCanada project is paralyzed by the writ of amparo obtained by three indigenous communities in the Pahuatlán and Tlacuilotepec municipalities (El Financiero – Spanish). The Canadian company has redesigned the projects to benefit the inhabitants and to guarantee they will not be affected by the infrastructure.


Windarmex will build 200 wind towers. The Windarmex plant located in the Altamira port will produce 200 wind towers for the national and international market (El Financiero – Spanish). The plant required an investment of MXN400m and generated 200 direct jobs.


Wood Mackenzie is interested in Mexico’s oil. Wood Mackenzie said the UK, Mexico, and shallow-water Norway are the most competitive locations for new oil and gas projects (Platts – English). Wood Mackenzie noticed a drop in the average volume of oil and gas reserves associated with each project and an increase in the number of countries with projects approved.


IGSA will shine brighter. Mexican company IGSA plans to develop solar parks (El Financiero – Spanish) to generate power, creating a new business division besides its gas and diesel plants. IGSA signed an agreement with Siemens to assemble power generation plants.


Pemex bets on incentives to maintain its gas station market. The state-owned company offered cash bonuses to maintain the establishments, which can mean profits of MXN30,000 monthly on top of sales (El Economista – Spanish). The bonus will be offered to those who invest in the visibility and the promotion of the Pemex brand in gas stations.



Old School Social


Events in the world beyond your screen—go see and be seen!


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.


AltFuels Mexico 2018 is scheduled for April 23-26 at the WTC in Mexico City.



Lateral Thinking


A Mexican robot will explore the US seabed. Mexican students developed an underwater robot to participate in the Marine Advanced Technology Education-ROV Competition. Submarine robots are used to map and research marine ground (El Financiero – Spanish).



Quote of the Week


“Vale más dar envidia que piedad.”


“It is more worthy to make someone jealous than pity them.”



-María de los Ángeles Féliz Güereña (1914-2002), Mexican film actress and singer.



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