The Weekly Brief: Mexico


December 6, 2021 edition—CFE’s pipeline; CRE’s new permit; and the Burgos basin plan.




Last Week in a Minute or Less


Electric Power & Renewables. CRE granted a power permit; and CFE’s control of the market will cost MXN1.4bn.


Liquid Fuels Mid-Downstream. The CFIUS delayed the Deer Park refinery sale; Pemex launched a new subsidiary to sell petrochemical products; and Repsol will develop a low-carbon fuel production center.


Natural Gas Mid-Downstream & LNG. CFE plans an offshore natural gas pipeline expansion; CFE must stop gas plant contracts; and why are natural gas imports more expensive?


Oil & Gas Upstream. Mexico okayed the plans for the Burgos basin; the CNH is unhappy with Perenco’s work; and private oil discoveries contributed 10% of oil reserves.


Government & NGO. Mexico’s trade deficit went up in October; AMLO still believes in the 6% growth forecast; and Rodríguez Ceja will respect Banxico’s independence.


Déjà vu all over again. Last week’s readers were particularly interested in the North American Methane strategy (Natural Gas Intel – English); and the new fuel import rule (El Financiero – Spanish).



Geopolitics & Trade                            


Mexico’s trade deficit went up in October. The country’s trade deficit reached US$2.7bn, an amount compared with the surplus of US$6.2bn for the same month in 2020 (Forbes – Spanish). Oil sales increased 105.9%, reaching US$2.7bn.


Industrial units are blowing up thanks to USMCA. The new NAFTA increased investment in industrial units, passing 484,000 square meters in the first nine months of 2021 (El Financiero – Spanish). This was a 29% increase compared to the square meters built in 2020.


Mexico and Canada will escalate the EV conflict. Economy Minister Tatiana Clouthier is working with the auto sector and the Canadian government to determine when to call for an arbitration panel to resolve a dispute with the United States over auto content rules (Reuters – English).


Mexico and the US will launch a development program in Central America. Mexico and the US launched the “Sowing Opportunities” program as a new cooperation strategy to deal with the irregular migration from El Salvador, Guatemala, and Honduras (El Economista – Spanish).



Political Economy


Citibanamex expects an increase in Banxico’s rate. The bank expects the reference rate to increase in December (El Economista – Spanish). Banxico believes there are several risks for Mexico’s inflation, including US inflation.


AMLO still believes in the 6% growth forecast… President López Obrador still expects the country to reach the 6% growth forecasted for this year (El Economista – Spanish). AMLO expects a V-shaped recovery thanks to the increase in formal employment.


…but Mexico’s economy fell hard in the third quarter. Mexico’s economy fell 0.4% in the third quarter, more than what was forecasted due to the COVID-19 third wave and the supply crisis (Forbes – Spanish). This is the first fall since the post-pandemic recovery started.


Rodríguez Ceja will respect Banxico’s independence. Victoria Rodríguez Ceja, AMLO’s nominee to become Banxico’s governor, received BBVA (Forbes – Spanish) and Citibanamex’s support (Forbes – Spanish) and promised to respect Banxico’s independence (El Economista – Spanish). Banxico cut its GDP forecast to 5.4% considering inflation, the pandemic, and the lack of supplies (El Economista – Spanish).



Legal & Regulatory


CRE granted a power permit. The Energy Regulatory Commission (CRE) finally awarded power energy generation permits to private companies (El Financiero – Spanish). Ingenio El Mante will generate 10MW with sugar cane.


Mexico okayed the plans for the Burgos basin. The National Hydrocarbon Commission (CNH) approved two onshore plans in the Burgos basin (BN Americas – English). Pantera plans to invest at least US$3m in the site by the end of 2023.


CFE’s control of the power market will cost MXN1.4bn. According to the Business Coordinator Board (CCE), approving the power reform would cost MXN1.4bn in the next 10 years due to the increase in the public deficit and public debt (El Economista – Spanish). The amount does not include the cost of compensations or investments to cover the power demand.


The CFIUS delayed the Deer Park refinery sale. The Committee on Foreign Investment in the United States’ (CFIUS) approval has delayed the sale of Shell’s controlling interest in the Texan refinery to Pemex (Reuters – English). The company still targets the end of 2021 for the transfer of Shell’s interest.


The CNH is unhappy with Perenco’s work. The National Hydrocarbons Commission (CNH) did not approve the 2022 work program of the main private hydrocarbon producer in Mexico (Forbes – Spanish). The program is for the Santuario-El Golpe onshore field.



Market Trends


Private oil discoveries contributed 10% of oil reserves. Oil contracts handed out after 2015 have contributed a total of 2,066 million barrels of crude resources, 9% of the total reserves certified by the National Hydrocarbons Commission (CNH) (El Economista – Spanish). Private contracts have drilled 117 new wells.


Why are natural gas imports more expensive? Natural gas production in the first half of the year fell 0.74%, compared to 2020, the year with the lowest industry demand, and caused an increase of 10.6% in natural gas imports with variations in prices (El Economista – Spanish).


National oil production went down in October. National oil production reached 1.651 million barrels per day in October, a 0.8% decrease compared to the previous month (El Economista – Spanish). This represents a 1.5% increase compared to the same month in the previous year, according to the National Hydrocarbon Commission (CNH).


Pemex’s gasoline imports went down. The state-owned company’s gasoline imports fell 20.8% in October compared to the same period in 2020 (La Jornada – Spanish). AMLO repeated his pledge of ending crude exports and gasoline imports by 2023 (El Economista – Spanish).



Strategy & Operations


Repsol will develop a low-carbon fuel production center. The Spanish company plans to develop a fuel production center that produces low-carbon emissions for Repsol’s project in the Salina Basin’s deep waters, in front of the Veracruz and Tabasco coasts (Forbes – Spanish).


CFE plans an offshore natural gas pipeline expansion. The state-owned company is working on an expansion of the 2.6 Bcf/d Sur de Texas-Tuxpan offshore pipeline (Natural Gas Intel – English) (PV Magazine – Spanish). CFE signed a memorandum of understanding (MOU) with TC to seek solutions to complete the stalled Tula-Villa de Reyes and Tuxpan-Tula pipeline.


AMLO celebrates the refineries’ makeover with fanfare. President López Obrador said “the rehabilitation of Mexico’s refineries is being achieved with the support of Pemex’s workers and without corruption” (El Universal – Spanish). AMLO accused former companies that did a similar job of charging a lot and doing a bad job.


CFE must stop gas plant contracts. A federal court ordered the state-owned company to stop the contracts for six combined cycle plants that use natural gas until the trial for Greenpeace’s writ of amparo is resolved (Forbes – Spanish). Greenpeace accused CFE of not following the judge’s orders.


Pemex launched a new subsidiary to sell petrochemical products. The state-owned company created a direct subsidiary to focus on the national marketing activities of oil, gas, and petrochemical products (Offshore Technology – English) (Forbes – Spanish). The new subsidiary will focus on strengthening and boosting Pemex’s place in the national market.



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!)



Expogas CDMX 2021 is scheduled for December 7 in Mexico City.


Mexico Assembly will be held in May 2022 in Mexico City.



Lateral Thinking


AHMSA paid Pemex for Agronitrogenados. AHMSA paid the first US$50m of the US$216.6m to repay the damage from the AgroNitrogenados case (El Financiero – Spanish). Pemex was already notified.



Quote of the Week


“As an artist I have always tried to be faithful to my vision of life, and I have frequently been in conflict with those who wanted me to paint not what I saw but what they wished me to see.”


– Diego Rivera (1886-1957), Mexican painter.




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