April 17, 2017 edition—The third electricity auction is so far a fight among five; six new fields approved; and less crude processed.
Last Week in a Minute or Less
Renewables & Electricity. Five companies are ready to compete in the third electricity auction; Engie invests US$2.3bn in Mexico; and CFE’s finances are in trouble.
Natural Gas & Liquid Fuels. The CRE is worried about LP gas prices and refineries processed less crude.
Oil & Gas Upstream. Oil fields are wanted and needed; Hokchi Energy will produce more from its shallow waters; and the CNH approved six new fields.
Money & Power. Mexico’s long-term debt was reduced; Banxico will take more moderate measures; and the 2018 election race is on.
Déjà vu all over again. Last week’s readers were particularly interested in Pemex’s future partners in hydrogen plants (Spanish); Sener’s recommendation on consulting indigenous communities (Spanish); and 10 private companies importing gasoline (Spanish).
The Road to Reform
Five companies are ready to fight in the third electricity auction… On April 28, the National Center of Energy Control (Cenace) will launch the third long term electricity auction with projects valued at more than US$1.6bn (Spanish). Five rivals that have already announced their intention to compete include Aldesa, Cubico Sustainable Investments, Engie, GranSolar, and IEnova.
…and five will bet US$111m on Round 1.3. CMM Calibrator, Grupo Mareógrafo, Perseus Fortuna Nacional, Renaissance Oil, and Servicios de Extracción Petrolera Lifting which won Round 1.3 licenses for contracts will invest US$111m in evaluation and development plans (Spanish). The drilling and repair operations will be developed in Chiapas, Nuevo León, and Tabasco.
The CNH okayed six oil fields. The National Hydrocarbons Commission (CNH) approved the evaluation and development plans for Barcodón 1, Duna, Paraíso, Primavera, Tajón, and Tomen (Spanish). The fields are under 25-year contracts and have the potential to continue extracting oil and gas.
The Ayín-Batsil farm-out was rescheduled for October. The National Hydrocarbons Commission (CNH) postponed the bidding for the Ayín-Batsil farm-out with Pemex until October 4 (Spanish) (English). The deadline was moved from June 19 to allow more time for companies to bid for the farm-out and 15 shallow water fields.
The CRE threatened to put LP distributors on a leash. Retail LP gas prices still reflect increases of between 19% and 40% in the last year, and private distributors have not lowered prices despite drops in international prices (Spanish). The Energy Regulatory Commission (CRE) warned that the law allows for a return to controlled prices.
Electricity losses may harm CFE’s finances… The state-owned company considers the theft of electricity significant enough that it threatens its financial viability. CFE’s goal is to reduce losses in medium and low voltage to 10.9% by 2021 from the expected level of 13.6% in 2018 (Spanish).
…and so could liabilities. The state-owned company’s liabilities remain a burden for its finances. CFE must pay MXN51.1bn this year in liabilities –17% of its total revenues- and is concerned about payments owed to 45,340 retired workers whose pensions were not affected by the renegotiation (Spanish).
Mexico’s long-term debt service got cheaper. The cost of long-term debt issued by the Mexican government was reduced due to expectations over lower inflation in coming years and the strength of public finances (Spanish). Mexican 20- and 30-year bonds show a drop of 34 and 24 basis points, respectively.
Yarrington was arrested in Italy. Former Tamaulipas governor, Tomás Yarrington was captured in Italy (English). A 2013 US federal indictment accused Yarrington of receiving millions of dollars in bribes from cartels. During his term as governor (1999-2005), the Gulf Cartel controlled the state and Tamaulipas became one of Mexico’s most violent states.
Businessmen signed Morena’s agreement. Andrés Manuel López Obrador, together with businesspeople, including María Asunción Aramburuzabala, former PRI politicians, and even singers signed the Political Agreement for Unity (Spanish). López Obrador called for the US government to stay out of Mexico’s 2018 presidential election at a demonstration in Mexico City attended by thousands.
Refineries processed less crude through February. From January to February, 923,000 barrels of crude were processed in the National Refining System, 14% less than the levels registered last year (Spanish). Pemex expects to invest MXN20bn in 2017 on maintenance for the six refineries to avoid scheduled and unscheduled work stoppages.
More oil fields wanted. The Mexican Association of Hydrocarbons Companies (Amexhi) estimates between 11.5 and 22.3 billion barrels of oil must be discovered to achieve a balance between reserves and production by 2030 (Spanish). By January 1, 2017, Mexico’s proven reserves of crude totaled 9.16 billion barrels, 10% less than in 2016.
Banxico will take it slow. In the minutes of its mid-April meeting, the Board of Mexico’s central bank foresees that the coming adjustments will be of a lesser scale than in the past 15 months (Spanish). Banxico considers measures taken since 2015 produced an “appropriate position” for dealing with external shocks.
Mexico’s consumer confidence is on the rise. Mexico’s consumer confidence increased to its highest level since December, reaching 81.5 in March’s index (English). After confidence dropped following the spike in inflation in January, the peso recovered, helped by comments of US Commerce Secretary Wilbur Ross on the importance of a trade deal.
Strategy & Operations
Hokchi Energy will make the most of its shallow waters. The consortium of BP subsidiary Panamerican Energy and E&P Hidrocarburos increased by 30% its estimate of reserves in the shallow water fields it operates (Spanish). The National Hydrocarbons Commission (CNH) approved Hokchi’s new Evaluation Plan to save 18% on its investment.
Engie bets US$2.3bn on Mexico. The French company will invest US$2.3bn to create new multimodal electric and natural gas charging stations in the next three to four years (Spanish). Engie is also considering partnerships with other multimodal gas station companies.
Pemex is paying its debts to Tabasco suppliers. In the first quarter, the state-owned company has paid almost MXN9bn to 279 suppliers and has programmed payments for MXN3.4bn more to 190 suppliers during 2017 (Spanish). In 2016, Pemex paid almost MXN34bn, the total debt acquired with 549 suppliers in Tabasco.
Braskem-Idesa denies corrupt practices with Pemex. The Brazilian-Mexican consortium stated that no irregularity was committed in its activities in Mexico by the Odebrecht subsidiary which is involved in a bribery scandal in South America (Spanish). Braskem’s ethane supply contract is not included in the company’s 2016 agreement with the US Securities Exchange Commission.
Old School Social
Events in the world beyond your screen – go see and be seen!
The Platts Mexican Energy Forum is April 18 at Camino Real Polanco, in Mexico City.
The Mexican Energy Forum is April 25-26 in Mexico City.
Wireless solar traffic lights will guide drivers. The Research and Advanced Studies Center (Cinvestav), University of Colima, and Tairda Innovations developed a project of synchronized wireless solar powered traffic lights (Spanish). The goal was to design and implement a centralized system to coordinate traffic in cities and public services devoted to health emergencies and security.
Quote of the Week
“Contra la fuerza se necesita emplear la fuerza; contra las situaciones de hecho, no hay más que la acción directa.”
“Against force, force must be applied; against realities, there is nothing to be done but direct action.”
-Luis Cabrera (1876-1954), Mexican lawyer and writer
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