The Weekly Brief: Mexico


August 24, 2020 edition—CRE’s schedule; Pemex’s plans; and CEMDA’s victory.




Last Week in a Minute or Less


Electric Power & Renewables. Rengen asked for certainty; Greenpeace and CEMDA won against the new Sener rules; and the solar sector opposes the CRE’s new rules.


Natural Gas Mid-Downstream & LNG. The energy infrastructure agreement is going full steam ahead.


Liquid Fuels Mid-Downstream. Fuel quality evaluators will be assessed; and the CRE is stopping new gas station permits.


Oil & Gas Upstream. The CRE resumed its schedule; Pemex will bet big in Veracruz; and the CNH okayed Hokchi’s appraisal plan.


Government & NGO. Mexico may take advantage of the US-China rift; Banxico’s deputy governor expects a U-shaped recovery; and Banxico left the interest rate at 4.5%.


Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s natural gas exports (El Financiero – Spanish); Talos’ hopes (Natural Gas Intel – English); and AMLO’s energy promises (El Financiero – Spanish).



Geopolitics & Trade


Mexico and the US extended the ban on non-essential travel. Mexico and the US will maintain the border restrictions to stop the COVID-19 advance (El Economista – Spanish). Both countries will try to coordinate health measures, which will be operational until September 21, in the border region.


The USMCA may convince Kyungshin Cable to grow in Mexico. Kyungshin Cable recently completed a US$30m expansion at its factory in Durango City, Mexico (Freight Waves – English). The company is transferring production from South Korea to Mexico to comply with the new country of origin provisions in the USMCA.


Trump may look for a toll on the border to finance the wall. President Donald Trump is considering imposing a toll on cars crossing into the US from Mexico to finance the construction of the promised border wall (LA Times – English).


Mexico may take advantage of the US-China rift. Considering the tensions between the US and China, the Mexican government is launching a “relocation strategy,” a campaign to convince companies that they will be safer producing closer to the US market (Washington Post – English).



Political Economy


Banxico left the interest rate at 4.5%. Mexico’s central bank cut the interest rate to 4.5%, reaching 10 consecutive cuts (El Economista – Spanish). Banxico’s plan is to have an interest reference rate that is consistent with its inflation target.


Banxico’s deputy governor expects a U-shaped recovery. The deputy governor of Mexico’s central bank, Javier Guzmán, said the economic recovery will have a U shape, although a W shape should not be dismissed, while inflation will remain at the 3% goal (El Economista – Spanish).


FDI went down 0.7% in the first half of 2020. Foreign Direct Investment (FDI) during the first half of the year reached US$17.9bn, a 0.7% fall (El Financiero – Spanish). Foreign investment suffered the highest contraction since 2014, and it is the first time that it has fallen in six years.


The IMEF warned about the dangers of debt increase. The Mexican Institute of Finance Executives (IMEF) warned that the increase in debt could limit economic growth (El Financiero – Spanish). The debt increase could also bring an additional downgrade in the debt rating.


BofA forecasts a slow recovery. Bank of America expects Mexico to have a slow economic recovery despite the support of remittances (El Economista – Spanish). The bank pointed to the lack of COVID-19 containment, its impact on tourism, and the limited tax stimulus.



Legal & Regulatory


Greenpeace and CEMDA won against the new Sener rules. The Mexican Center of Environmental Law (CEMDA) reached a definite suspension regarding the Sener’s and Cenace’s rules published in May (El Financiero – Spanish). The cancellation adds to the other two suspensions handed down by judges.


The energy infrastructure agreement is going full steam ahead. The government will revive the energy sector infrastructure plan agreed upon with the private sector (El Financiero – Spanish). The government said that the plan could be announced in two weeks.


Fuel quality evaluators will be assessed. The Energy Regulatory Commission (CRE) will evaluate the personnel of 29 companies that have been accredited to review gas stations and their fuel quality (El Economista – Spanish). Evaluations will be developed between August 18 and October 15.


The CRE resumed its schedule… The Energy Regulatory Commission (CRE) resumed the deadlines and legal periods that were put on hold to fight the COVID-19 crisis (DOF – Spanish). The new agreement will start after the publication of the Federal Official Diary on August 14.


…while stopping new gas station permits. The Energy Regulatory Commission has not handed out permits for gas stations since May (El Financiero – Spanish). The reason offered by anonymous members of the energy sector is that the CRE decided to only give permits to Pemex.



Market Trends


AMLO’s energy plan may bring power tariff increases. One of the requests made by President López Obrador to energy sector regulators could produce an increase in power tariffs (El Financiero – Spanish). The request is to modify the way in which certain plants are favored without considering the production method.


Gasoline demand in Mexico keeps recovering. Gasoline sales started their recovery after several weeks in which fuel demand dropped due to the stop in activities because of the COVID-19 pandemic (El Financiero – Spanish). Simultaneously, fuel prices have recovered after reaching their lowest levels in April since September 2016.


Private companies import more fuel. According to the Energy Ministry, the fall in demand and low fuel prices during the first half of the year allowed private companies to increase their share of the market by 10 points (El Economista – Spanish).



Strategy & Operations


Pemex will bet big in Veracruz. The state-owned company will invest US$138m in exploration activities in deep waters in the Gulf of Mexico (El Financiero – Spanish). The CNH approved three exploration plans for Pemex, AE-0172-Holok, AE-0173-Holok, and AE-0174-Holok, while saying no to 0170-Holok.


The CNH okayed Hokchi’s appraisal plan. The National Hydrocarbon Commission approved an appraisal plan presented by Hokchi Energy for the Xaxamani shallow water field off the coast of Veracruz (Natural Gas Intel – English). The plan includes the processing of 3-D seismic data and the drilling of four appraisal wells.


Rengen asked for certainty. The company said that considering these times, Mexico needs certainty in the energy sector for its development, finances, and project continuity (Mundo Ejecutivo – Spanish). Rengen recommended the capitalization of CFE’s assets or clarification of the transmission lines for service demand.


The solar sector opposes the CRE’s new rules. The Energy Regulatory Commission (CRE) issued two new deliberations forbidding the establishment of solar energy communities and blocking solar-plus-storage deployment (PV Magazine – English). The new measures cancel provisions that allowed solar system owners to sell excess power.



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!)



The 2nd Edition of The Madrid Energy Virtual Conference will be held September 28-October 2.


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.


The Mexican Energy Forum is rescheduled for November 17-18 in Mexico City.


2nd Edition of Shallow and Deepwater Mexico was postponed to February 16-18, 2021, at Ciudad del Carmen, Campeche.


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 banned junk food sales to children. Considering how being overweight increases the risk of serious illness with an infection by COVID-19, several Mexican states are banning the sale of junk food to children (Washington Post – English). The COVID-19 pandemic is prompting new bills considering the vulnerability of the diabetic population.



Quote of the Week


“Cuando hayas de quererme no me quieras por mis merecimientos, que nada merezco.”


“When you love me, do not love me for my merits, I deserve none.”



– Federico Gamboa (1864-1939), Mexican writer and diplomat.



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