April 27, 2020 edition—Pemex’s farmouts; Next Energy’s solar; and Panaba’s wind parks.
Last Week in a Minute or Less
Electric Power & Renewables. Next Energy will take advantage of Nuevo León’s sun; White River Renewables purchased the Viborillas and San Ignacio solar parks; and Panaba’s wind parks in Yucatán handed in its environmental studies.
Natural Gas Mid-Downstream & LNG. Natural gas imports are expected to increase; and the USMCA will secure North America’s oil and natural gas alliance.
Liquid Fuels Mid-Downstream. Despite the COVID-19 crisis, the Dos Bocas refinery will continue; Pemex’s oil export price plunged; and Pemex will start refining a million barrels in May.
Oil & Gas Upstream. The CNH said Pemex will look for farmouts; and the oil price crisis will hit Mexican companies that won oil rounds.
Government & NGO. Moody’s and Fitch downgraded Pemex’s rating to junk; Fitch also cut CFE’s rating; and Coparmex is also concerned with the downgrades.
Déjà vu all over again. Last week’s readers were particularly interested in AMLO’s support of renewables (Renewables Now – English); impacts of COVID-19 in the energy sector (Pulso Energético – Spanish); and Bartlett’s decision on power tariffs (Forbes – Spanish).
Geopolitics & Trade
The Trump administration does not want any further USMCA delays. Despite calls asking to postpone the USMCA start date considering the COVID-19 pandemic, the US government will continue with the July 1 implementation date of the new NAFTA (GTR – English).
The USMCA will secure North America’s oil and natural gas alliance. The new NAFTA solidifies what is considered the greatest energy partnership in the world, allowing free flow of energy products across North America: US crude oil imports from Canada, US natural gas exports to Canada and Mexico, and US oil product exports to Mexico (Forbes – English).
COVID-19 drove Trump and AMLO closer. President Donald Trump and President López Obrador have shared common ground in handling the COVID-19 pandemic with both being eager to reactivate their economies (The Republic – English). AMLO is even considering visiting his counterpart in the US.
Moody’s and Fitch downgraded Pemex’s rating to junk… Moody’s downgraded Mexico’s credit rating and placed the state-owned company’s debt in junk status (Reuters – English) (El Economista – Spanish). Fitch downgraded Pemex to BB-, its second downgrade this month (Reuters – English) (El Economista – Spanish).
…and the Finance Ministry is worried. The Finance Ministry is “very concerned” about Mexico’s ratings downgrade but understands the decision considering the circumstances (Reuters – English). The good news is that Mexico maintains an investment rating, allowing the government access to financing (El Economista – Spanish).
Fitch also cut CFE’s rating. The international rating agency downgraded CFE’s rating to BBB- (El Economista – Spanish). Fitch pointed to the COVID-19 pandemic’s effect on the economy and the expected economic contraction as reasons for the second ratings revision in a month.
Coparmex is also concerned about the downgrades. According to the Mexican Management Confederation (Coparmex), Pemex and CFE’s downgrades place the national economy “close to the abyss” (Forbes – Spanish). The Coparmex is also concerned with the economic uncertainty due to the COVID-19 pandemic.
Legal & Regulatory
The CNH said Pemex will look for farmouts. The head of the National Hydrocarbons Commission (CNH) said the state-owned company will seek new farmouts soon due to the large number of projects that Pemex has not been able to develop alone (approximately 100 projects) (Reuters – English).
The Finance Ministry froze home power tariffs due to the COVID-19 pandemic. Residential electricity customers will not experience an increase in their power tariff during the COVID-19 pandemic (El Economista – Spanish). The Finance Ministry is expecting an increase in residential power demand due to the lockdown and decided to suspend the DAC Tariff.
Despite the COVID-19 crisis, the Dos Bocas refinery will continue. President López Obrador announced an emergency plan to face the COVID-19 economic crisis, but oil production, the maintenance work in six refineries, and the Dos Bocas refinery construction will continue as planned (Forbes – Spanish).
The oil price crisis will hit Mexican companies that won oil rounds. The fall in oil prices to negative levels will affect companies from Nuevo León that invested in the exploration and extraction sector after winning oil rounds (El Financiero – Spanish). Fuel imports have increased as they are 15% cheaper than local products.
Mexico’s energy demand will drop 9%. National power demand is expected to fall 9% due to the COVID-19 lockdown and halt in industrial activity across the country (Reforma – Spanish). Residential demand is expected to increase by 30% as a consequence of the lockdown (Reforma – Spanish).
Pemex’s oil export price plunged. Maya shipments to the US Gulf Coast reached US$5.15 per barrel, its lowest level on record (Platts – English). Mexico’s oil export basket even dropped to negative territory at US$-2.37 per barrel (Reuters – English).
Pemex will start refining a million barrels in May. President López Obrador announced that Pemex will start processing a million barrels per day in its refineries in May, five months after the date originally estimated by his administration (Forbes – Spanish). Today, Pemex’s refineries process 800,000 barrels per day.
Natural gas imports are expected to increase. While US natural gas futures increased 6% due to the shutdown in shale basin wells, Mexico’s natural gas imports are expected to increase slightly from the previous week and LNG exports to drop (Reuters – English).
Strategy & Operations
Iberdrola guarantees power supply during the COVID-19 pandemic. The company has implemented a plan of action to secure its workers’ and contractors’ health as well as maintain continuous power supply for its clients (Mural – Spanish).
Next Energy will take advantage of Nuevo León’s sun. Next Energy is planning the Palapa I solar park in the Cerralvo municipality of Nuevo León, with an investment of US$38.9m (El Financiero – Spanish). The plant will have a generation capacity of 22.5MW and will generate 150 temporary jobs.
White River Renewables purchased the Viborillas and San Ignacio solar parks. The joint venture White River Renewables purchased the Viborillas project, located in Jalisco, with 130MWp of power as well as the San Ignacio power plant, located in Yucatán, with 25MWp of power (PV Magazine – Spanish).
EDP and Ammper Energía signed a new PPA. EDP Renovaveis signed a 15-year power purchase agreement with Ammper Energía (PV Magazine – Spanish). The Los Cuervos solar park will have 729,960 panels and will be in operation in 2021.
Panaba wind parks in Yucatán handed in their environmental homework. The Environment and Natural Resources Ministry received the necessary information for the environmental study to authorize Panaba’s wind parks in the Yucatán region. The Panaba 1A project will have a capacity of 153MW and Panaba 1B, 99MW (PV Magazine – Spanish).
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!)
2nd Edition of Shallow and Deepwater Mexico was postponed due to the coronavirus. Date TBD.
MIREC Week has been postponed from June 2-4 to October 8-10 at Centro Citibanamex.
Solar Power Mexico was postponed from March 24-26 to November 18-20 at Centro Citibanamex.
Mexico Assembly was postponed due to coronavirus. Date TBD.
The Mexican Energy Forum is rescheduled for November 17-18 in Mexico City.
The Mexican Petroleum Congress is scheduled for June 24-27 in Monterrey and may be postponed until September.
Mexico may be facing a megadrought. According to a study published in Science, the increasing temperatures caused by climate change are boosting what should have been a moderate drought affecting US Southwestern states and northern Mexico. It could result in a megadrought lasting more than 20 years (Science – English).
Quote of the Week
“Sin claridad no hay voz de sabiduría.”
“Without clarity there is no voice of wisdom.”
– Sor Juana Inés de la Cruz (1648-1695), writer, philosopher, and composer
We hope you have a productive week. Please send any news, comments, or megadrought predictions to MexicoWeekly@energynarrative.com.
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