The Weekly Brief: Mexico


August 31, 2020 edition—Iberdrola’s plans with Bayer; Pemex’s fields; and natural gas imports.




Last Week in a Minute or Less


Electric Power & Renewables. Baja California’s solar tender may not take place; and Iberdrola will power up Bayer.


Natural Gas Mid-Downstream & LNG. California and Arizona feed Mexico’s natural gas demand; Mexico wants an export plant in exchange for IEnova’s permit; and Mexico’s LNG imports dropped in July.


Liquid Fuels Mid-Downstream. Braskem-Idesa warns Pemex on sanctions; gasoline and diesel are out of luck and subsidies; and gasoline production slipped.


Oil & Gas Upstream. Sener asked Pemex to keep its relegated areas; Organizations asked the Sener to ban fracking; and Pemex installed the Yaxche-C platform.


Déjà vu all over again. Last week’s readers were particularly interested in AMLO’s energy infrastructure plan (El Financiero – Spanish); Rengen’s opinion on the energy sector (Mundo Ejecutivo – Spanish); and CEMDA’s win (El Financiero – Spanish).



Geopolitics & Trade


The US-Canada dairy dispute continues. New Mexico’s dairy producers are not happy with the new USMCA (LCSUN – English). A group of 25 senators sent a letter identifying challenges with implementing several dairy-related provisions in the USMCA (Dairy Foods – English).


EPA discusses USMCA’s environmental provisions. EPA Administrator Andrew Wheeler announced the new NAFTA will be “the first time ever environmental provisions are the center of a North American Trade Agreement” (The Rising – English). The USMCA will strengthen environmental standards while promoting domestic competition.


Travel restrictions make border crossings difficult. After US officials imposed new COVID-19 restrictions on cross-border travel by US citizens and permanent residents, crossing the border from Mexico to the US registered long wait times (Reuters – English). The US closed lanes at certain ports of entry (Reuters – English).



Political Economy


CFE lost MXN6bn during the first months of the COVID-19 pandemic. The state-owned company lost MXN6.9bn in income between April and July (El Financiero – Spanish). The lack of income is due to the decision to not reclassify domestic users in the high demand tariff.


The Citibanamex survey expects a 9.9% contraction… According to the Citibanamex survey of 26 financial institutions, Mexico’s economy will contract by 9.9% (El Financiero – Spanish). The survey still reflects great uncertainty, and forecasts range between 7.2% and 12%.


…and Banxico expects even worse. Mexico’s central bank expects the country to reach its worst economic contraction since 1932 (El Financiero – Spanish). Banxico expects the worst-case scenario to be a 12.8% contraction, and the best to be an 8.8% fall.


Inflation is getting away from Banxico’s goal. In the first two weeks of August, inflation reached 3.99%, the limit of Mexico’s central bank goal, set at 3% +/- 1 percentage point (El Economista – Spanish). The reason could be the lack of certain products in recent months and the closing of certain shops.


Moody’s expects worse from Mexico’s economic future. The international rating agency adjusted its Mexican economic outlook with a 10% contraction of the GDP (El Financiero – Spanish). For 2021, Moody’s expects a 3.7% contraction.


Inegi confirms a historic drop of the GDP of 18.7%. According to the National Institute of Statistics and Geography, the Mexican economy registered an annual fall of 18.7%, the highest fall in economic activity for the second quarter (El Economista – Spanish).



Legal & Regulatory


The Senate’s Energy Commission discussed the new rules. The president of the Senate’s Energy Commission presented a technical analysis regarding the new rules on renewable energy generation to provide elements for the resolution of the debate between the Cofece and the Sener (El Economista – Spanish).


Organizations asked the Sener to ban fracking. More than 40 organizations that created the Mexican Alliance against Fracking asked the Energy Ministry to follow President López Obrador’s wish of banning fracking of non-conventional fields during his administration (El Economista – Spanish).


Sener wants Pemex to keep its assigned areas a bit longer. The Energy Ministry requested the National Hydrocarbons Commission (CNH) for more time for Pemex to explore the assignments that would have expired in 2014 (El Economista – Spanish). The extension handed by the CNH was going to expire in September.



Market Trends


Gasoline and diesel are out of luck and subsidies. The Finance Ministry left diesel and gasoline without subsidies (El Financiero – Spanish). Regular gasoline has been 23 weeks without the subsidy, while premium gasoline has been 42 weeks without the subsidy.


Gasoline production and crude extraction sagged. The state-owned company’s refineries produced 157,000 barrels per day, the lowest amount since January 2019, when production reached 153,000 per day (El Financiero – Spanish). Pemex and partners extracted 1.595 million barrels per day, the lowest amount in the last 40 years (El Economista – Spanish).


California and Arizona feed Mexico’s natural gas demand. Pipeline natural gas exports from the US to Mexico are above 6 Bcf/d in August thanks to the jump in exports from California and Arizona by 12% and 6% (Natural Gas Intel – English).


Mexico’s LNG imports dropped in July. Mexico imported 203,500t of LNG in July, down from 507,700t a year earlier and 260,300t in June (Argus Media – English). Lower pipeline deliveries from the US didn’t support LNG receipts in July as the economic contraction weakened demand.



Strategy & Operations


Braskem-Idesa warns Pemex on sanctions. After President López Obrador said that considering the agreement was signed through corrupt acts, the contract should be canceled and reviewed (El Economista – Spanish), Braskem-Idesa explained that if any of the parties do not fulfill the contract, they must be penalized.


Pemex installed Yaxche-C platform. The state-owned company installed the jacket and topside for Yaxche-C using Heerema’s Balder deepwater construction vessel (OGJ – English). Yaxche is in Mexico’s Amoca Yaxche blocks, offshore Tabasco state in the Bay of Campeche at water depths from 20-50m.


Sener handed 21 new fields to Pemex. The National Hydrocarbons Commission (CNH) decided to hand Pemex the first three new fields located in the Tampico Misantla basin (El Economista – Spanish). The CNH explained that the Sener decided to hand over fields to Pemex since the beginning of 2020.


Baja California’s solar tender may not take place. Baja California announced a new solar project in the state (PV Magazine – Spanish). However, Energy Minister Rocío Nahle asked Baja California’s governor to place a hold on the tender as the federal government had a plan to build a generation plant in that area (PV magazine – Spanish).


Mexico wants an export plant in exchange for IEnova’s permit. According to people familiar with the matter, Mexico’s government wants IEnova to build a natural gas export facility in exchange for the export permit for the gas liquefaction facility at its regasification terminal Energía Costa Azul (Reuters – English).


Iberdrola will power up Bayer. Iberdrola completed a contract with Bayer to supply long-term wind energy from the Santiago onshore wind farm with 105MW of capacity in Guanajuato (EV Wind – English). The contract will last 15 years.



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 will donate ventilators to Caribbean countries. Mexico is making its own ventilators to treat COVID-19 patients, and it will donate the machines to Antigua and Barbuda, Belize, Guyana, Haiti, Santa Lucía, Suriname, the Dominican Republic, and Trinidad & Tobago (KRCRTV – English).


Quote of the Week


“Si exhala el sitio con fragancias bellas, si el campo vive con color suave, gozando en cada flor crespas centellas, que el cielo todo en Guadalupe cabe.”


“If the place exhales beautiful fragrances, if the field lives with soft colors, enjoying each flower’s crisp flashes, that all heaven fits in Guadalupe.”


– Carlos de Sigüenza y Góngora (1645-1700), historian and writer in New Spain.



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