August 23, 2021 edition—The Isthmus pipeline; Pemex’s drilling troubles; and Sonora’s solar.
Last Week in a Minute or Less
Electric Power & Renewables.
Baja California’s former Finance Minister was accused of irregularities in a power plant bid; Zacatecas and Sonora will shine bright; and after a 10-month break, the CRE handed out a power generation permit.
Natural Gas Mid-Downstream & LNG. US natural gas exports are expected to skyrocket; AMLO hopes for a Jaltipán-Salina Cruz natural gas pipeline; and the new airport will be powered by natural gas and diesel.
Liquid Fuels Mid-Downstream. Mexican homes spend 507 pesos in power and fuels; and the Cofece is after power abuse in fuel retail.
Oil & Gas Upstream. Pemex has no way to develop Zama; E&P companies in Mexico are looking for an out; and Pemex stopped the Valeriana drilling.
Government & NGO. IMEF has high expectations for Mexico’s GDP; Mexico attracted less FDI; and Clouthier warned the US on USMCA complaints.
Déjà vu all over again. Last week’s readers were particularly interested in the effect of the new LNG rules in the natural gas market (Natural Gas Intel – English); the four LP gas companies that did not follow the new rules (El Financiero – Spanish); and the new head of the Cenace (El Financiero – Spanish).
Geopolitics & Trade
Clouthier warned the US on USMCA complaints. The Economy Minister warned that Mexico will not accept complaints from the US from before the USMCA was signed (Proceso – Spanish). She said, “Mexico does not need for anyone to tell it what to do.”
Tridonex agreed to ensure workers’ rights. Mexico’s auto parts company agreed to ensure workers’ rights, pay severance, and back wages to settle an early labor rights complaint under USMCA (Reuters – English). The back pay totals more than US$600,000.
GM workers’ union vote challenges the USMCA. Approximately 6,500 unionized workers will vote to oust their union, accused of protecting the company’s interests. The vote puts the new USMCA labor rules to the test (Auto News – English) (El Financiero – Spanish).
Mexico attracted less FDI. During the first half of the year, Mexico’s foreign direct investment grew 2.6% to US$18.4bn (El Economista – Spanish). US investments represent 50.8%, Spain’s 9.1%, UK’s 5.9%, and Germany’s 5.9%. Mexico’s FDI in 2020 went down by 14.7%.
IMEF has high expectations for Mexico’s GDP… The Mexican Institute of Finance Executives (IMEF) improved its forecast for Mexico’s economy from 5.9% to 6% for 2021 (El Financiero – Spanish). For 2022, the GDP is expected to grow by 2.8%.
…and FocusEconomics expects a similar outcome. According to FocusEconomics, Mexico’s GDP growth will be 5.8% in 2021 thanks to the speedy growth of the US economy (El Economista – Spanish). For the next year, the international consulting agency expects a 3% economic growth.
As expected, Banxico increased the interest rate. Mexico’s central bank increased the interest rate of reference by 25 points, and it is expected to continue to do so in each meeting until the end of the year (El Financiero – Spanish). Banxico expects inflation to close 2021 at 5.7%.
Legal & Regulatory
AMLO hopes for a Jaltipán-Salina Cruz natural gas pipeline. President López Obrador announced that a natural gas pipeline connecting the Atlantic and Pacific coasts, crossing the Isthmus of Tehuantepec, will go ahead (Natural Gas Intel – English). Acquiring lands for the project and public consultations are ongoing.
After a 10-month break, the CRE handed out a permit. After almost 10 months without giving any permits to generate electric power, the Energy Regulatory Commission (CRE) handed one to Flex Américas (Milenio – Spanish). The company will have a natural gas-powered plant with a 15.10MW capacity.
The new airport will be powered by natural gas and diesel. The National Defense Ministry (Sedena), in charge of the new international airport Santa Lucía, is building a power plant powered by natural gas and diesel to power up the airport (Forbes – Spanish).
The Cofece is after power abuse in fuel retail. Mexico’s market watchdog started a trial against an economic agent that was accused of abusing its power over the fuel sale, storage, and transportation market (El Economista – Spanish). The only economic agent that has that power in Mexico is Pemex.
Baja California’s former Finance Minister was accused of irregularities in a power plant bid. Rodolfo Castro Valdez, former Finance Minister of Baja California, was accused of various irregularities in the bidding and construction of a solar power plant (El Financiero – Spanish).
US natural gas exports are expected to skyrocket. The Energy Information Administration (EIA) forecasted that US gas exports would exceed imports by an average of 11.0 Bcf/d in 2021 thanks to strong demand from both Europe and Asia and high levels of pipeline deliveries to Mexico (Natural Gas Intel – English).
Hurricane Grace will not hit Mexico’s crude production. Hurricane Grace is not expected to impact national crude production or power generation, but measures are being taken to prepare for hurricane season (Platts – English). Grace is expected to lose strength as it moves further west, where crude oil is produced.
Banxico will offer US$400m. Mexico’s central bank offered a financial auction of US$400m with an 84-day maturity as part of a swap mechanism between Banxico and the Fed (Proceso – Spanish). The goal is to offer additional liquid assets in dollars.
Mexican homes spend 507 pesos on power and fuels. Mexican homes spend an average of 507 pesos each month in power generation and fuels, 5.1% of the expenses of a Mexican household (El Financiero – Spanish). The expenses increased 2.3% compared to the data observed in 2018.
Strategy & Operations
E&P companies in Mexico are looking for an out. Exploration and production companies in Mexico are weighing global trends and local factors to consider exiting the market (Platts – English). Small companies operating contracts in onshore deposits are exploring mergers and acquisitions.
Pemex stopped the Valeriana drilling. The state-owned company halted the Valeriana 1 drilling in the state of Tabasco and is considering a new interpretation of seismic studies (Platts – English). Pemex had planned to drill four more exploration wells at the site, a plan that will also likely be modified.
Pemex has no way to develop Zama. After fighting with Talos for the field, the state-owned company does not have the US$2bn needed to develop the project in the next five to seven years (Expansión – Spanish). An agreement with Talos was suggested to obtain financing, but neither Pemex nor the Sener representatives considered it.
Zacatecas and Sonora will shine bright. Zacateca’s Energy State Agency announced that the state has 1,342 contracts of distributed generation that amount to 10.66MW of capacity (PV Magazine – Spanish). Sonora will power up 40 municipalities with solar energy (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!)
Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.
Mexico Assembly will be held in May, 2022 in Mexico City.
Mexico’s drought will hit the energy sector. According to Moody’s, the extraordinary drought in Mexico will affect the electricity generation, mining, and drinks industries (Forbes – Spanish). The water shortage will reduce the generation capacity of hydroelectric energy.
Quote of the Week
“No hay reglas ni leyes ni tradiciones que se puedan aplicar universalmente… incluyendo ésta.”
“There are no rules or laws or traditions that can be applied universally…including this one.”
– Rosario Castellanos (1875-1964), Mexican painter and writer.
We hope you have a productive week. Please send any news, comments, or drought damages to MexicoWeekly@energynarrative.com.
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