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August 9, 2021 edition—Eni’s discovery; LP gas prices; and CFE and TransCanada’s pipeline.
Last Week in a Minute or Less
Electric Power & Renewables. Self-supply clients in Nuevo León could change to the MEM; the CRE lowered LP gas prices by 9%; and CFE electricity transmission jobs are pending.
Natural Gas Mid-Downstream & LNG. CFE and TransCanada will have to work together on the pipeline.
Liquid Fuels Mid-Downstream. LP gas prices will be set each week; the government will fight LP gas price abuses; and LP gas distributors threatened with a strike.
Oil & Gas Upstream. Eni found oil in Block 10; and Pemex’s production data is in question.
Government & NGO. The IMF expects Mexico’s reforms and tax benefits; remittances went up in the first quarter; and inflation is expected to be close to 6%.
Déjà vu all over again. Last week’s readers were particularly interested in CFE’s petition to stop renewable energies (El Economista – Spanish); TPI’s operations (Renewables Now – English); and X-Elio’s funds for a solar project (Renewables Now – English).
Geopolitics & Trade
Mexico sued US gun manufacturers. The government sued some of the biggest US gun manufacturers for contributing to illegal arms trafficking, linked to many deaths (BBC – English). Officials say Mexico is seeking as much as $10bn (£7.2bn) in compensation, though any amount would be decided by the court.
The Finance Committee asked for stricter USMCA enforcement. Senate Finance Committee chair Ron Wyden said the text was among the strongest agreements with regard to workers’ rights, environmental protections, and trade law enforcement (The Fence Post – English). Wyden said promised key reforms to Mexican labor laws to protect their workers has been too slow, blaming these problems on the weak text of the USMCA.
Mexico wants to lead in the region. Mexico demonstrated its diplomatic muscle, hosting the 238th birthday of Simón Bolívar and a meeting of the Community of Latin American and Caribbean States (CELAC) (Americas Quarterly – English). AMLO planned to both sustain the commercial, political, and social ties with the US while launching a new rapprochement with Latin America.
Political Economy
Mexico’s GDP keeps recovering. The Mexican economy showed a 1.5% progress in the second quarter (El Economista – Spanish). Mexico’s GDP had an annual growth of 19.6% compared to the second quarter in 2020, a rate not seen in 40 years.
The IMF expects Mexico’s reforms and tax benefits. The International Monetary Fund advised Mexico to increase tax supports to stop the pandemic and ease a steady economic recovery and to develop structural reforms to generate solid investments (El Financiero – Spanish).
Remittances went up in the first quarter. In the first six months of 2021, remittances from the US to Mexico reached US$23bn, 22.4% more than in the same period in the previous year (El Financiero – Spanish). In June alone, remittances reached US$4.4bn.
Inflation is expected to be close to 6%. According to analysts surveyed by Mexico’s central bank, inflation is expected to reach 5.94% (El Financiero – Spanish). For 2022, analysts expect inflation to reach 3.7%.
Legal & Regulatory
The government will fight LP gas price abuses. The government announced that an app will be launched to report abusive retail LP gas prices (El Financiero – Spanish). Consumer watchdog Profeco warned LP gas distributors that if they do not comply with the prices set by the government, they will lose the Energy Regulatory Commission’s permit (Reforma – Spanish).
Mexico wants to attract investment in batteries. Economy Minister Tatiana Clouthier Carrillo said the country is interested in attracting investments in semiconductors and batteries (El Economista – Spanish). The ministry also expects investment in the aerospace and pharmaceutical sectors.
The CRE lowered LP gas prices by 9%. The Energy Regulatory Commission (CRE) published the limit for LP gas prices through August 7 with a 9% reduction in the average national price (El Economista – Spanish). In Mexico City, the maximum price would be 21.33 pesos per kilogram, a 21.5% cut.
The Sener published the rules for radioactive installations. The national Committee of Nuclear Security Normalization published the rules for designing Type II radioactive installations, considering the radioactive material to be used and the types of operations (DOF – Spanish).
Sedena will be allowed to power up the Santa Lucía airport. The Energy Regulatory Commission granted the National Defense Ministry a permit to generate electric power in the International Airport Felipe Ángeles (El Financiero – Spanish). Experts assume it must be for a self-supply diesel plant.
Market Trends
LP gas prices will be set each week… The Energy Regulatory Commission (CRE) published the methodology to establish the regulation of maximum LP gas prices (DOF – Spanish) (El Financiero – Spanish). The goal is both to protect final users and help distributors recover their costs.
…and analysts are not happy with it. Analysts warned that the LP gas subsidy could cost the government between MXN150bn and 200bn per year (El Financiero – Spanish). Others warned that controlling LP gas prices could generate more problems than benefits by distorting the market (El Financiero – Spanish).
The Finance Ministry gave drivers a break. The Finance Ministry increased the subsidy for gasoline and diesel prices for this week (El Economista – Spanish). Regular gasoline subsidies will increase from 46.25% to 52.34%.
LP gas distributors threatened to strike. LP gas distributors in Mexico City and Estado de México asked for a strike to protest the imposition of LP gas price caps (El Economista – Spanish). President López Obrador threatened to report distributors that do not fulfill their obligation to supply LP gas (El Financiero – Spanish). The strike ended in 36 hours (El Economista – Spanish).
Pemex’s production data is in question. The state-owned company measures crude production at a higher temperature (20oC) than the National Hydrocarbons Commission’s standard of 15.56oC (El Financiero – Spanish). The temperature increased production numbers by 16,000 barrels since the beginning of 2020.
Strategy & Operations
CFE and TransCanada will have to work together on the pipeline. The state-owned company and the Canadian company signed an agreement to finish the Tuxpan-Tula pipeline to develop a natural gas transportation system to Mexico’s southeast, and to consolidate the pipeline systems into one contract (El Economista – Spanish).
Eni found oil in Block 10. Eni, Lukoil, and Cairn Energy discovered an estimated 150m-200m barrels of oil equivalent offshore Mexico, at the Sayulita prospect (Platts – English) (El Financiero – Spanish). The Sayulita-1 well “found 55 meters of net pay of good quality oil in the Upper Miocene sequences.”
CFE electricity transmission jobs are pending. The state-owned company has 17 projects pending to broaden and modernize the transmission system (El Norte – Spanish). Some should have been completed by now, others have made a minimum progress of between 2% and 5%.
Self-supply clients in Nuevo León could change to the MEM. Consumers that have self-supply contracts about to expire in Nuevo León could remain in the same system or migrate to the Wholesale Electricity Market (MEM) (El Economista – Spanish). The head of Nuevo León’s energy cluster recommended that companies analyze their energy use.
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!)
Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.
Mexico Assembly will be held in May, 2022 in Mexico City.
Lateral Thinking
The CFE will invest US$200m for solar and hydropower. The state-owned company plans to use a credit line of US$200m on renewable energy projects such as the solar plant in Sonora and the restoration of 14 hydropower companies (El Economista – Spanish).
Quote of the Week
“Luciérnagas en un árbol… ¿Navidad en verano?”
“Fireflies on a tree… Christmas in summer?”
– José Juan Tablada (1871-1945), Mexican poet, critic, and diplomat.
We hope you have a productive week. Please send any news, comments, or solar and hydropower projects to MexicoWeekly@energynarrative.com.
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