The Weekly Brief: Mexico


December 7, 2020 edition—Goldbeck Solar’s projects; CNH’s changes; and El Bajío’s needs.




Last Week in a Minute or Less


Electric Power & Renewables. Goldbeck Solar is keeping busy in Querétaro; Alten Energías will add 100MW in Hidalgo; and El Bajío is thirsty for more electric projects.


Natural Gas Mid-Downstream & LNG. Mexico handed full control over natural gas supply to the CFE.


Liquid Fuels Mid-Downstream. Gas station permits are halted; Pemex’s gasoline sales dropped; and AMLO said Mexico will not import gasoline starting in 2023.


Oil & Gas Upstream. The CNH okayed changes to evaluation programs; private oil companies will produce 20% more; and Pemex will finally drill the Chauk well.


Government & NGO. AMLO granted equal benefits to both borders; investments in infrastructure will represent 2.3% of the GDP; and the private sector is more optimistic than Banxico.


Déjà vu all over again. Last week’s readers were particularly interested in SPIC’s purchase (Oil Price – English); DFI in the electricity sector (El Economista – Spanish); and CFE’s natural gas power plant (Natural Gas Intel – English).



Geopolitics & Trade


Mexico’s exports reached record high. The value of Mexican exports was US$41.9bn in October, a 2.9% increase (El Financiero – Spanish). Exports reached their highest levels since 1991, when data collection began. Oil exports dropped 30.2% in October.


Experts recommend AMLO recognize Biden. Only Russia, Brazil, and Mexico have not recognized Joe Biden’s victory in the US elections (El Financiero – Spanish). Experts said that diplomatic decision could generate certain inconveniences in the first 100 days of the administration.


The auto sector and the USMCA are not best friends. Direct foreign investment totaled US$389m less from July to September in 2020, the first quarter with the USMCA in operation (El Economista – Spanish). It is the first negative result since the third quarter of 2013.



Political Economy


The private sector is more optimistic than Banxico. According to Banxico’s survey, private sector analysts improved their forecast for an economic contraction from 9.31% to 9% (Forbes – Spanish). Mexico’s central bank expects 3.3% growth for 2021, but uncertainty still surrounds the future (El Financiero – Spanish).


Mexico’s GDP recovered in the third quarter, but not enough. The Mexican economy grew by 12.1% in real terms in the third quarter (El Economista – Spanish). The increase does not make up for the impact of the COVID-19 crisis on Mexico’s GDP.


AMLO granted equal benefits to both borders. President López Obrador signed a decree granting the southern border the same free zone that the northern border enjoys. Chetumal will become a free trade zone (Forbes – Spanish). Analysts expect fiscal stimulus in the zone to have a marginal impact on government income (El Economista – Spanish).


Infrastructure investments will represent 2.3% of the GDP. The first and second investment packages, which include 68 projects, will represent 2.3% of the GDP (El Economista – Spanish). The private sector is expected to provide over 50% of each project’s total investment.



Legal & Regulatory


The CNH okayed changes to three evaluation programs. The National Hydrocarbons Commission approved changes to evaluation programs to develop exploration activities in oil wells (El Financiero – Spanish). Jaguar wants to drill more wells, Pemex is evaluating two deposits, and Consorcio Petrolero 5M del Golfo needs more time.


Gas station permits are halted. Thirteen companies are waiting for the Energy Regulatory Commission (CRE) to grant permits (El Financiero – Spanish). Some requests were denied because the projects do not fulfill the established requirements.


Mexico handed full control over natural gas supply to the CFE. Mexico granted full control over natural gas supply to the CFE and Pemex through a recently published five-year plan for infrastructure development  (Platts – English). The plan is designed to meet the CFE’s needs and limit access to other distributors.


The second set of infrastructure projects went out. Mexico announced the second set of infrastructure projects to revitalize Mexico’s economy, including 29 new projects (Platts – English) (El Economista – Spanish). The CFE will develop eight out of nine projects devoted to the energy sector (Forbes – Spanish).


The Senate’s Energy Commission encouraged private companies to bet on oil and power… The president of the Senate Energy Commission said the private sector should play a more active role in energy infrastructure projects (El Financiero – Spanish). The investment could boost small and medium-sized companies.


…and proposed a new fiscal regime for natural gas. The president of the Senate Energy Commission proposed a specific fiscal regime for natural gas to make some fields profitable (El Financiero – Spanish). Currently there is no difference between oil and gas in the royalties for hydrocarbon fields.



Market Trends


Pemex’s production fell in October… The state-owned company’s production was 1,627,000 barrels per day, a reduction of 28,000 barrels, or 1.7% (El Financiero – Spanish). Crude processing in Pemex’s refineries experienced a monthly reduction of 13% in October (El Economista – Spanish).


…and so did Pemex’s gasoline sales. In October, gasoline sales were 34% less than the sales made in the same month in 2019 (El Financiero – Spanish). The sale of premium gasoline increased by 24.3%, generating MXN$7.6bn in sales, while Magna dropped 45.7%.


Private oil companies will produce 20% more. According to the Mexican Association of Hydrocarbons Companies, private oil companies will increase their production by 20%, or 57,000 barrels per day (El Financiero – Spanish). For 2024, production is expected to reach the goal of 280,000 barrels per day.


Oil hedges will bring in US$2.5bn. Mexico will receive a payment of US$2.5bn thanks to this year’s oil hedges. Mexico will receive the benefits just when the agreement with OPEC is being challenged by internal fighting over production levels (El Financiero – Spanish).


AMLO said Mexico will not import gasoline starting in 2023. President López Obrador announced that in three years, Mexico will halt gasoline imports as self-supply will be achieved with the Dos Bocas refinery and the modernization of existing refineries (El Financiero – Spanish).



Strategy & Operations


Gentor will bet MXN7.8bn on green energy. Grupo Gentor will develop a sustainable megaproject in Monterrey, including the construction of 13 vertical buildings with an investment of MXN7.8bn (El Financiero – Spanish). The project will treat residual water for reuse and will boost renewables.


Alten Energías will add 100MW in Hidalgo. The Environment and Natural Resources Ministry received the environmental impact evaluation of Planta Fotovoltaica Alten Hidalgo (PV Magazine – Spanish). The project will have a 100MW capacity with 34 inverters in the Nopala de Villagrán municipality.


A CFE substation caught fire in Mexico City. A fire started in a power substation of the state-owned company located in the Benito Juárez Boroughs, producing blackouts (Forbes – Spanish). This substation had a fatal explosion in 2010 (El Financiero – Spanish).


El Bajío is thirsty for more electric projects. The National Union of Electromechanic Builders (UNCE) pointed out the need for electric energy supply and the low availability of public grids in El Bajío (El Economista – Spanish). The UNCE emphasized the opportunity for new energy generation plants.


Goldbeck Solar is keeping busy in Querétaro. The German company is considering the development of projects in the Bajío region and new ones in Querétaro (El Economista – Spanish). The Autódromo project was finished in Querétaro with an installed capacity of 554kWp.


Pemex will finally drill the Chauk well. The state-owned company is four months behind schedule in its exploration plans at Chauk, in the Sureste basin (Platts – English). Pemex will evaluate the continuity of Chauk’s deposits at 1-2 miles of depth.



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!)



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


Several states asked CFE to use less fuel oil. The governments of Mexico City, Hidalgo, Puebla, Morelos, Tlaxcala, Querétaro, and Estado de México asked the state-owned company to reduce fuel oil use in the wintertime, as the pollutants could increase and worsen COVID-19 cases (Reforma – Spanish).



Quote of the Week


“Quiero morir siendo esclavo de los principios, no de los hombres.”


“I want to die being a slave to principles, not men.”



– Emiliano Zapata (1879-1919), leader in the Mexican Revolution.



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