The Weekly Brief: Mexico


December 14, 2020 edition—Total’s share in LNG; Pemex’s new drilling; and CFE and France’s geothermal energy.




Last Week in a Minute or Less


Electric Power & Renewables. CFE and France will boost geothermal energy; Nissan accused the CRE of slowing its request; and CFE will work on its power generation.


Natural Gas Mid-Downstream & LNG. Braskem Idesa stopped activities after the natural gas cut; Total is interested in IEnova’s LNG project; and Sempra plans to unify subsidiaries.


Liquid Fuels Mid-Downstream. Pemex is losing Nuevo León’s market.


Oil & Gas Upstream. The CNH okayed Pemex’s new drilling strategy; Tamaulipas’ oil will get a US$3bn boost; and Pemex ended contracts with AMLO’s cousin.


Government & NGO. Citibanamex’s survey improved Mexico’s GDP forecast; FocusEconomics has high hopes for Mexico’s GDP; and S&P and Fitch trust Mexico.


Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s natural gas control (Platts – English); Gentor’s new project (El Financiero – Spanish); and Guadiana’s recommendation for a natural gas fiscal regime (El Financiero – Spanish).



Geopolitics & Trade


China beat Mexico as the main US trade partner. China started the last quarter of 2020 as the main trade partner of the US (El Financiero – Spanish). Between January and October, trade between the US and China reached US$444.5bn.


The auto sector helped Mexico’s exports. The added value of global auto industry manufacturing exports reached 20.3% of the total manufacturing production in Mexico in 2019 (El Economista – Spanish). The result represents an increase of 0.8 percentage points compared to the previous year.


The US and Canada fight over dairy tariffs. The US is exercising its rights under the USMCA to challenge Canada’s allocation of dairy tariff rate quotas (Reuters – English). US Trade Representative Robert Lighthizer said Canada’s measures harm “US dairy farmers and producers.”


Biden may rebuild an Asia Pacific trade deal. Analysts expect President-elect Joe Biden to join a rebranded and restructured Asia-Pacific initiative to allow the US to build on the CPTPP. A new deal’s biggest potential improvement over the TPP (and USMCA) could be in encouraging the development and distribution of renewable energy resources (CNBC – English).



Political Economy


Fitch trusts Mexico, S&P to a point… S&P confirmed Mexico’s BBB rating while maintaining its negative outlook (El Financiero – Spanish). Fitch improved the global economic outlook from a 4.4% contraction to a 3.7% cut (El Financiero – Spanish).


…and the Finance Ministry is happy with it. After the S&P ratification, the Finance Ministry assured that the decision will ensure funds for Mexico in the national and international market (El Financiero – Spanish). The decision adds to Fitch’s conclusion to maintain the credit rating.


Citibanamex’s survey improved Mexico’s GDP forecast. According to the Citibanamex survey, Mexico’s GDP will contract only by 9%, not 9.3% as previously forecasted (El Financiero – Spanish). In 2021, Mexico will grow by 3.5%, as previously predicted, with the forecast ranging from 1.7% to 6%.


FocusEconomics has high hopes for Mexico’s GDP. FocusEconomics said Mexico’s GDP will grow by 3.7% in 2021, after a 9.9% contraction during the COVID-19 pandemic (El Economista – Spanish). Analysts expect inflation to oscillate between 3.5% and 3.6%.



Legal & Regulatory


The Energy Ministry plans only one rule for hydrocarbons. According to the Energy Ministry, the provisions to export and import hydrocarbons and fuels will be established in one unique regulation (El Financiero – Spanish). A permit to import and export fuels could be extended twice for the same period of the permit.


Pemex ended contracts with AMLO’s cousin. The state-owned company defended the cancellation of contracts with Felipa Obrador, cousin of President López Obrador, valued around MXN365m (El Economista – Spanish). The company Litoral Laboratorios Industriales participated in four international public biddings.


The Energy Ministry changed its radioactive installation design. The Energy Ministry changed the design specifications for radioactive installations Type II, considering its classification due to use, operation type, and radiotoxicity of the material (DOF – Spanish). The Energy Ministry answered public inquiries regarding fissionable substances (DOF – Spanish).


Nissan accused the CRE of slowing its request. The Energy Regulatory Commission (CRE) has spent 18 months without authorizing an alliance between Nissan and the Spanish company Iberdrola to allow Iberdrola to provide electrical energy to the Japanese company’s plants (El Norte – Spanish).


The CNH okayed Pemex’s new drilling strategy. The National Hydrocarbons Commission (CNH) approved the state-owned company’s change of strategies to explore wells that were identified 70 years ago (El Financiero – Spanish). Pemex will drill 18 wells that include non-conventional rocks.



Market Trends


S&P maintained Pemex’s rating. The international rating agency confirmed the state-owned company’s rating as BBB with a negative perspective (El Financiero – Spanish). S&P considered Mexico’s energy policy under the current administration, positioning Pemex in the leading role and stopping the flow of private capital in the sector.


Pemex is losing Nuevo León’s market. The COVID-19 pandemic and competition from private gas stations are hitting Pemex’s share of Nuevo León’s sales, with a 32% drop in the first eight months of 2020 compared to the same period in 2019 (El Financiero – Spanish).


The chemical industry needs natural gas. Mexico’s national chemical industry has a deficit of 200 million cubic feet per day of natural gas to satisfy its demand, on top of its ethane needs (El Norte – Spanish). Ethane is one of the necessary feedstocks to produce plastics.



Strategy & Operations


Braskem Idesa stopped activities after a natural gas cut. Braskem Idesa halted its activities after the Cenagas cut supply to the petrochemical complex (Platts – English). On November 2, President López Obrador said the gas contract had expired and will not be renewed.


Tamaulipas’s oil will get a US$3bn boost. Tamaulipas will receive an investment of more than US$3.3bn from contracts awarded to explore and exploit hydrocarbons (El Economista – Spanish). The state government reiterated its commitment to guarantee companies their work in Tamaulipas.


CFE will work on its power generation. In the next five years, the state-owned company will expand its generation facilities with an investment of MXN62bn, adding 4,347MW in new capacity (El Financiero – Spanish). The CFE will increase its power generation by 4.5% (El Economista – Spanish).


Sempra plans to unify its subsidiaries. Sempra plans to unify Sempra LNG and Mexican firm Infraestructura Energética Nova (IEnova) after the company was approved for the construction of the US$2bn Energía Costa Azul LNG export terminal (Natural Gas Intel – English).


CFE and France will boost geothermal energy. France’s ambassador to Mexico and the head of the state-owned company CFE announced the launch of a study to consider the implementation of binary cycle technology in CFE’s geothermal fields (El Economista – Spanish).


Total is interested in IEnova’s LNG project. Total purchased 16.6% of the shares in the LNG export project in Energía Costa Azul, located in Baja California (El Financiero – Spanish). IEnova and Sempra LNG will each keep a 41.7% share of the project.



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


Mexico may have a new whale species. Researchers have seen three beaked whales surfacing about 160 kilometers north of Mexico’s San Benito Islands (Stuff – English). Environmental genetic samples were collected and are expected to confirm the existence of a new species.



Quote of the Week


“La materia, inmortal como la gloria cambia de formas, pero nunca muere.”


“Matter, immortal like glory, changes forms, but never dies.”



– Manuel Acuña (1849-1873), Mexican writer.



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