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April 26, 2020 edition—AMLO’s oil production limit; the hydrocarbons law okayed; and Puebla’s sun.
Last Week in a Minute or Less
Electric Power & Renewables. Impala Solar will enjoy Puebla’s sun; Minera Media Luna plans distribution lines; and AMLO will fight climate change by renovating 14 hydroelectric plants.
Natural Gas Mid-Downstream & LNG. US natural gas exports to Mexico keep surprising; and Mexico’s natural gas market may learn from US experience.
Liquid Fuels Mid-Downstream. AMLO’s new hydrocarbons law duplicates laws; Pemex expects gasoline sales to remain low; and the Senate okayed the hydrocarbons law.
Oil & Gas Upstream. AMLO plans to limit oil production to fight climate change; and Mexico’s proven reserves fell and may need help maintaining production.
Government & NGO. The IMF expects Mexico to recover by 2023; Citibanamex expects a 4.7% economic recovery; and Mexico is close to the 10 biggest worldwide exporters.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s hydrogen push (Natural Gas Intel – English); USMCA environmental issues (Braumiller Law – English); and cross-border carriers’ rules (Landline – English).
Geopolitics & Trade
Mexico is close to the 10 biggest worldwide exporters. According to the World Trade Organization, Mexico has surpassed Singapore, Canada, Russia, and the UK in the last decade and is just under Belgium by US$2bn (El Economista – Spanish). China, the US, Germany, Japan, the Netherlands, France, South Korea, Hong Kong, and Italy are ahead.
The US sold more food to Mexico. Mexico was the third-biggest market for US farm products in 2020, with a total value of US$18.09bn, after Canada and China (El Economista – Spanish). Mexico was the top US export destination for dairy products and corn.
Everyone wants a piece of Kansas City Southern’s business in Mexico. Kansas City Southern (KCS) received an offer from Canadian National Railway for US$33.7bn to create a rail network from Ontario to Veracruz, and from British Columbia to Nova Scotia (El Economista – Spanish). The offer is 34% above the one made by Canadian Pacific Railway.
Canada and the US maintained land border restrictions. Canada and the US extended a land border closure for non-essential travel, and air passengers arriving in Canada will be tested for COVID-19 ahead of a hotel quarantine period (Reuters – English). The restrictions were extended to May 21.
Political Economy
The IMF expects Mexico to recover by 2023. The International Monetary Fund (IMF) does not expect Mexico’s economy to recover to pre-COVID-19 pandemic levels until 2023 (El Financiero – Spanish). The reason is the lack of strong tax support and weakness in investments.
Mexico’s economy is still in the red. According to INEGI, the level of economic activity is still negative, with a 2.1% contraction (El Economista – Spanish). The reason is the modest dynamism of secondary activities and service sector contraction.
Citibanamex expects a 4.7% economic recovery… According to Citibanamex’s survey, Mexico’s economic recovery is forecasted to reach 4.7%, an improvement from the previous 4.6% forecast (El Financiero – Spanish). HSBC kept its 3.5% growth prediction.
…and forecasts a 4.2% inflation. The Citibanamex survey also noted the inflation forecast keeps increasing, reaching 4.2% and a peak in April of 5.72% (El Economista – Spanish). Food and fuel price increases are feeding the effects in the INPC.
BBVA expects a 4.7% GDP growth. BBVA improved the GDP forecast for Mexico in 2021, from 3.2% to 4.7% (El Economista – Spanish). The bank does not expect Mexico’s economy to recover to the levels from before the COVID-19 pandemic until the end of 2022 or the start of 2023.
Legal & Regulatory
AMLO’s new hydrocarbons law duplicates rules. The new hydrocarbons law duplicates the regulation that already exists to fight illegal taps, specifically the volume control checks (El Financiero – Spanish). The reform forces the companies to inform the CRE on bought and sold volumes before selling them.
The private sector is fighting the new hydrocarbons law. Despite the new power law, companies affected by the new hydrocarbons law will not be able to obtain suspensions (El Economista – Spanish). The sector asked for an effective implementation of the current sanctions instead of a new law (El Economista – Spanish).
The Senate okayed the hydrocarbons law. The Energy and Legal Studies commissions of the Senate approved the new hydrocarbons law, with the opposition’s criticism (El Financiero – Spanish).
AMLO plans to limit oil production to fight climate change. President López Obrador will present President Joe Biden with a proposal to fight climate change by limiting oil production (El Economista – Spanish). The extraction limit will be set at 2 million daily barrels.
The CRE took the CONAMER’s project back. The Energy Regulatory Commission (CRE) requested that the National Commission of Regulatory Improvement (CONAMER) take back a project agreement to reinstate the legal terms and periods halted due to the COVID-19 emergency (Onexpo – Spanish). The reason is the continuation of the halted deadlines due to the COVID-19 crisis.
Market Trends
Pemex expects gasoline sales to remain low. The state-owned company expects gasoline sales to reach 16% less than in 2019 (El Financiero – Spanish). Gasoline demand was down 70% in April 2020 due to the pandemic, and Pemex lost 13 gas stations.
Mexico’s proven reserves fell and may need help maintaining production. The National Hydrocarbons Commission (CNH) said that proven hydrocarbons reserves fell 1% in January 2021 (El Economista – Spanish). Despite production growth expected in the next three years, investment is still needed in exploration and development activities (Offshore Technology – English).
US natural gas exports to Mexico keep surprising. On April 14, the US to Mexico natural gas record was broken with exports reaching 7.1 Bcf/d (Natural Gas Intel – English). Some of the higher demand for US gas in Mexico is explained by the new pipelines.
Mexico’s natural gas market may learn from US experience. Mexico’s natural gas market lacks competition, structural reforms need to be carried out, and certainty regarding the rules is needed. Natural gas exports to Mexico are expected to hit 6.5 Bcf/d this summer (Natural Gas Intel – English).
Strategy & Operations
AMLO will fight climate change by renovating 14 hydroelectric plants. Regarding climate change, President López Obrador suggested President Joe Biden invest in the update of 14 hydroelectric plants (PV Magazine – Spanish). The proposal will be complemented with the cap on oil extraction.
Minera Media Luna plans distribution lines. The Environmental and Natural Resources Ministry received the documents to build the 7.26MW Planta Solar Minera Media Luna solar plant and several distribution lines (PV Magazine – Spanish). All the generated power will be used in the mining operation.
Impala Solar will enjoy Puebla’s sun. The company Impala Solar is pushing to get the environmental permit to build a solar park in the Tepeyahualco municipality with MXN1.5bn in investment to generate 150MW (El Economista – Spanish). The park will contribute to the national power generation capacity.
Power failures hit the Morelos Petrochemical Complex. The state-owned company said the petrochemical complex had to close due to power failures that left four people injured (El Financiero – Spanish). The Pajaritos Petrochemical complex in Coatzacoalcos also registered a fire.
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!)
XXX La Jolla Energy Virtual Conference will be held on Wednesdays and Fridays throughout May, 2021.
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.
Lateral Thinking
Mexico’s fuel thieves built impressive tunnels. Similar to major drug smuggling rings, fuel thieves are building tunnels with electricity, ventilation, and wooden boards and planks to siphon gasoline from Mexico’s pipelines (InSight Crime – English). The fuel thieves have used high-tech tricks to evade detection.
Quote of the Week
“No estudio por saber más, sino por ignorar menos.”
“I don’t study to know more, but to be ignorant of less.”
– Sor Juana Inés de la Cruz (1648-1695), Mexican writer, philosopher, composer, and poet of the Baroque period.
We hope you have a productive week. Please send any news, comments, or impressive tunnels to MexicoWeekly@energynarrative.com.
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