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August 20, 2018 edition—Delayed pipelines; Murphy’s drilling; and pricey tomatoes.
Last Week in a Minute or Less
Renewables & Electricity. Nuevo León and Tamaulipas plan two new wind parks; and the biggest wind park in Latin America is open.
Natural Gas & Liquid Fuels. ExxonMobil will use Kinder Morgan’s pipeline; the CRE eased pipeline use requirements; and Mexico’s natural gas demand was hit by pipeline delays.
Oil & Gas Upstream. Murphy Oil plans to drill in Mexico.
Money & Power. A NAFTA deal may be reached this month; Pemex workers were hurt by fuel robbery; and July brought more expensive gasoline and tomatoes.
Déjà vu all over again. Last week’s readers were particularly interested in AMLO’s plans for hydropower (Platts – English); the Texas-Tuxpan pipeline’s problems with pollution (El Financiero – Spanish); and Quintana Roo’s new solar plant (El Financiero – Spanish).
NAFTA Negotiation
Trump likes the progress negotiating with Mexico, but warns Canada. President Trump said the US and Mexico were making progress on a trade deal. President Trump threatened Canada with possibly taxing their auto exports if an agreement cannot be reached with Ottawa (Reuters – English).
Autos complicate NAFTA talks…Talks continue after new sticking points emerged over President Trump’s threat to impose automotive tariffs (Reuters – English). Mexico’s economy minister said they are working hard to reach a deal with the US on new rules for the auto industry (Reuters – English).
… but Canada went along with stricter rules of origin. Mexico and Canada accepted almost all the demands of the US auto sector in the NAFTA renegotiation. Canada discussed privately with the US that it is ready to accept the US demands (El Economista – Spanish).
Mexico said an agreement is “very close”… Mexico’s Economy Minister Ildefonso Guajardo said an agreement on the sticking points of the NAFTA deal is “very close” (Reuters – English). Mexican officials held new fresh talks over the NAFTA renegotiation with US officials in Washington (Reuters – English).
… and it could be this month. Depending on the political flexibility of the Trump administration, the US, Mexico, and Canada may reach a NAFTA deal this month (Bloomberg – English). About 90% progress has been achieved in the NAFTA negotiation (El Economista – Spanish).
The Road to Reform
López Obrador promised US$11bn for refineries. President-elect Andrés Manuel López Obrador pledged to invest more than US$11bn to increase the country’s refining capacity (Reuters – English) (El Financiero – Spanish). AMLO plans to invest US$2.6bn to modernize existing refineries and US$8.4bn to build a new refinery.
Moody’s warned Pemex over modifying the energy reform. The state-owned company could suffer a major credit risk in 2019 if the energy reform is modified (El Financiero – Spanish), according to Moody’s. The rating agency is analyzing changes that the new administration could make in the regulation.
The CRE eased pipeline use requirements. The Energy Regulatory Commission (CRE) approved modifications in the dispositions to access pipeline capacity and natural gas storage in order to simplify and speed up procedures, requirements, and periods (El Financiero – Spanish) for permit holders looking to offer the service.
Nahle and Coldwell met to start the transition. Rocío Nahle, the next Energy Minister, met with Pedro Joaquín Coldwell, the current secretary, to start the transition process (El Financiero – Spanish).
Political Economy
Gasoline and tomatoes push inflation up. In July, Mexican inflation rose to its highest level since March due to gasoline and tomato prices (El Economista – Spanish). Mexican consumer prices have risen 4.81% this year through July (Reuters – English).
A power outage shut the Salina Cruz refinery down. Pemex’s Salina Cruz refinery closed due to a power outage and restarted operations on August 9 (Reuters – English) (El Financiero – Spanish). The Oaxacan refinery processes 238,000 barrels per day, well under its 330,000 barrels per day capacity.
Industrial production is up by 0.5%. Industrial production increased 0.3% in real terms compared to the previous month, 0.5% in annual terms (La Jornada – Spanish). Power transmission and distribution, and natural gas and water supply increased by 1.4%.
Pemex workers were hurt by fuel robbery. Three Pemex workers died and 25 were hurt (Reforma – Spanish) from 2017 through July 2018 due to fuel theft. Among the people hurt in fuel robbery acts, 18 belong to the Deputy Direction of Strategic Protection.
The Mayan train may hit 27 states. Guanajuato’s Tourism minister warned 27 states will be left without tourism promotion abroad for six years to finance the Mayan train (El Financiero – Spanish). AMLO announced that part of the funds for the train will come from the funds collected from the tourism tax.
Market Trends
Mexico’s natural gas demand was hit by pipeline delays. While US natural gas imports skyrocketed, a delay in the construction of pipelines inside Mexico has kept increases below available capacity (Reuters – English) (Pulso Energético – Spanish). US gas exports to Mexico through pipelines tripled to 4.9 billion cubic feet per day in August.
Pemex raised Maya crude oil prices. Pemex increased the differentials for September Maya, Isthums, and Olmeca crude deliveries to the Americas and the US West Coast (Platts – English). The K factor for September Maya deliveries rose US$1.15 and US$1.20 to plus US$3.45/barrel and plus US$3.35/barrel, respectively.
Gasoline prices kept increasing in July. The price of regular gasoline reached 18.4 pesos per liter during July. Between June and July 2018, regular gasoline prices increased by 1.99%, 36 cents per liter (El Economista – Spanish).
Moody’s trusts AMLO and Mexico’s rating. Moody’s will maintain Mexico’s rating at “A3/stable perspective” for the first year of President-elect López Obrador’s presidency (El Economista – Spanish). In general, Mexican companies’ credit quality will be maintained at stable in most sectors until June 2019, except for the gas and oil sector.
Banxico is under pressure. The market is getting worried as inflation has increased well above the maximum goal of 4%, and an increase in interest rates is expected (El Financiero – Spanish). The probability of Banxico increasing the reference rate by October 4 increased to 78.4%.
Strategy & Operations
The biggest wind park in Latin America is up and running. The Tamaulipas governor cut the ribbon on the Parque Eólico Reynosa I wind park, located in the Charco Escondido communal land. The park will have the capacity to produce 424MW (El Financiero – Spanish).
Murphy Oil plans to drill in Mexico. Murphy Oil plans to drill the Palenque prospect offshore, with a projected 200 million boe of mean gross resource potential in the fourth quarter (Platts – English). In the deepwater Gulf of Mexico, Murphy brought an exploration shop to help it develop prospects.
Etileno XXI was halted due to an ethane shortage. Etileno XXI reduced operation levels by 13% in the second quarter due to the lack of ethane supply and technical stops for maintenance (El Financiero – Spanish). The result was an 8% drop in sales, while Pemex’s ethylene and polyethylene production ran normally (Platts – English).
Nuevo León and Tamaulipas plan two wind parks. Nuevo León and Tamaulipas will start construction of two wind parks. The El Mezquite wind park in the Mina municipality will have 100 generators that will produce 250MW and the Salitrillos wind park will have 103MW of capacity in the first half of 2019 (El Economista – Spanish).
ExxonMobil will use Kinder Morgan’s pipeline. ExxonMobil will be a client of the pipeline planned by Kinder Morgan that will connect the state of Texas with Mexico’s natural gas distribution grids (El Financiero – Spanish). An ExxonMobil subsidiary, XTO Energy, signed a letter of intent to use 450,000 dekatherm per day of capacity.
Old School Social
Events in the world beyond your screen—go see and be seen!
Expo Eficiencia Energética is scheduled for August 22-24 at Cintermex in Monterrey.
The Congreso Internacional de Recursos Naturales will be held August 25-28 at the Centro de Convenciones Tabasco 2000.
The Mexico Summit 2018 is scheduled for September 6 at the St. Regis Mexico City.
Lateral Thinking
Really old Mayan skeletons were discovered in a cave. Archaeologists have discovered 7,000-year-old ancient Mayan remains in the Puyil cave, in Tabasco’s Tacotalpa municipality (Independent – English). The oldest skeletons were from a period transitioning from hunting to a sedentary lifestyle.
Quote of the Week
“La patria es una flor que hay que alimentar con justicia, libertad, y sobre todo Fe en Dios.”
“The fatherland is a flower that must be fed with justice, liberty, and above all, faith in God.”
-Mariano Matamoros (1770-1814), Mexican priest and revolutionary rebel soldier.
We hope you have a productive week. Please send any news, comments, or caves with interesting findings to MexicoWeekly@energynarrative.com.
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