The Weekly Brief: Mexico


December 17, 2018 edition—Refinery tenders by March but no Pemex farmouts until October.




Last Week in a Minute or Less


Renewables & Electricity. Enel will power up the China Municipality with wind; Iberdrola will cut the ribbon on its solar park in Sonora; and everyone is worried about the decision to cancel the fourth power auction.


Natural Gas & Liquid Fuels. Bartlett will audit pipeline contracts; the new refinery tenders are promised by March; and the Madero refinery will receive MXN5bn.


Oil & Gas Upstream. Pemex’s farmouts were pushed out until October; and AMLO will wait for oil production before offering new contracts.


Money & Power. The consequences of cancelling NAFTA; AMLO will increase Pemex’s budget by MXN75bn; and Mexico’s inflation improved in November, but less than expected.


Déjà vu all over again. Last week’s readers were particularly interested in Nahle’s team (O&G Magazine – Spanish); DEA’s purchase of Sierra Oil and Gas (Reuters – English); and the new head of the Cenace (El Financiero – Spanish).



Editorial Interlude


This week’s edition will be the last for 2018 as our hard working team takes a well-deserved break with friends and family. We wish you a peaceful and contemplative end of the year, and an invigorating start to the new. Our next edition will be issued on January 7, 2019. See you then!

– The Weekly Brief: Mexico team



NAFTA Negotiation


How could Democrats fix the new agreement? The House Democrats are expected to demand that the administration make changes to the procedures and structural provisions of the USMCA to ensure its enforcement and update (Reuters – English).


What could happen if Trump ends NAFTA? President Trump said he will inform the US Congress of the end of the NAFTA, which could have a limited impact on the movement of goods between Canada and the US while it would increase prices of goods traded between Mexico and the US (Reuters – English).


Mexico proposes work visas for Central Americans and wants the US to follow. President López Obrador suggested offering work visas for Central Americans and said the US should do the same. President López Obrador will discuss immigration with President Trump in the coming days (Reuters – English).


Mexico and the US will plan a new trade agenda. Economy Minister Gabriela Márquez and US Trade Representative Robert Lighthizer agreed over the phone to the new bilateral trade agenda between both countries (El Financiero – Spanish). One of the issues pending between the US and Mexico is steel and aluminum tariffs.



The Road to Reform


Bartlett will audit pipeline contracts. The general director of the CFE, Manuel Bartlett, warned that private pipeline contracts promoted to import gas from the US will be audited (El Financiero – Spanish). The system has been halted due to social problems and inefficiencies without adding gas to the system.


Mexico needs seven ethanol plants. According to the Energy Ministry, Mexico requires seven additional plants of 100 million liters per year to satisfy demand for ethanol in gasoline (El Economista – Spanish). The additional plants would cover 40% of the demand.


The new refinery tenders are promised by March. President López Obrador will tender the construction of a refinery near Dos Bocas by March (Reuters – English). The Security, Energy, and Environment Agency considered a complaint against the clearing of the lot where the refinery will be built (El Financiero – Spanish).


The decision to cancel the fourth power auction worries all. Energy sector associations showed the fourth power auction was called off (El Financiero – Spanish). Acciona expects the contracts awarded in the long-term power auctions to be reviewed in a reasonable and timely manner (El Financiero – Spanish).


Pemex’s farmouts pushed back to October. The National Hydrocarbons Commission (CNH) confirmed the cancellation of two biddings for hydrocarbons exploration and exploitation and pushed until October 2019 Pemex’s onshore farmout (El Financiero – Spanish). The bidding will be held on October 9, instead of February 14, as previously announced.



Political Economy


The 2019 budget favored Pemex. The Finance Ministry proposed an 18.9% increase on Pemex’s Budget for 2019 (El Financiero – Spanish). President López Obrador plans to increase oil production by almost a million barrels per day by the end of his administration (El Economista – Spanish) and his refining plan will cost MXN71bn (El Financiero – Spanish).


Mexico sweetens its airport bond repurchase. The Mexico City Airport Trust offered a better deal to repurchase bonds issued to finance the new airport cancelled by President Obrador (Reuters – English). The trust is offering a fixed price of US$1,000 per each US$1,000 principal of notes tendered.


AMLO wants results before offering new contracts. President López Obrador wants to see production from existing contracts before considering new auctions but will not cancel the oil contracts awarded under the previous administration. AMLO wants to ensure oil companies are not using contracts for speculation and are producing oil (Reuters – English).


AMLO will go after drug cartel finances. President López Obrador has the finances of the Jalisco cartel in sight, according to a top anti-money laundering official, as an opening to fight criminal gangs (Reuters – English). The Finance Ministry filed a complaint against three businesses and seven people connected to the Jalisco New Generation Cartel.



Market Trends


The airport’s cancellation hit green bonds. The cancellation of the new airport in Mexico City affected bonds for US$6bn to finance the terminal area that were sold with the green label between foreign investors (El Economista – Spanish). The project was designed to save 65 million gallons of water per year and include a solar farm to power it up.


Moody’s hasn’t stopped believing in Mexico’s states. The international rating agency kept the outlook for the Mexican states in 2019 stable as economic growth will support the increase in federal transfers (El Economista – Spanish).


Mexico’s inflation improved in November, but less than expected… Mexico’s inflation rate rose 4.72% in the year through November, compared to the expect rate of 4.63% (Reuters – English) (El Economista – Spanish). Analysts expect the central bank to increase rates again this month as a consequence.


…and Mexican bonds suggest a slow fall in inflation. The results of the last auction of governmental debt reflected an increase in interest rates in the short and long term (El Financiero – Spanish). Investors expect a slow drop in inflation in the country.



Strategy & Operations


The Madero refinery will receive MXN5bn. The refinery will be updated with an investment of MXN5bn (El Norte – Spanish). In the coming years, Tamaulipas expects investments of US$60bn in oil exploitation and clean energy development (SDP Noticias – Spanish).


Enlight is expanding in 2019. The company Enlight plans a big expansion for 2019 in two cities and a 150% growth in installations (El Financiero – Spanish). Enlight has projects with the bank and airport sectors and has the Monterrey and Bajío regions in sight.


Enel will power up the China Municipality with wind. Enel Green Power México started the construction of the Dolores wind park in the China municipality in Nuevo León with an investment of US$280m (El Economista – Spanish). The plant will have a total 244MW capacity and an annual production of 850GWh.


Iberdrola will cut the ribbon on its solar park in Sonora. The Spanish company plans to start operations before the end of 2018 in the Hermosillo solar park in Sonora, with an investment of US$135m (El Financiero – Spanish). The park has a total installed capacity of 100MW.



Old School Social


Events in the world beyond your screen—go see and be seen!


The North American Gas Winter Outlook webinar is scheduled for December 18.


Energy Mexico 2019 will be held January 29-31 at Centro Cultural Banamex in Mexico City.



Lateral Thinking


A scientist clarified the scorpion family tree. A postdoctoral researcher at the University of Wisconsin-Madison is classifying the diversity of some 2,400 species of scorpions by the shape of their venom (Eurekalert – English). Using the genomic sequences from 55 scorpion species and more than 3,000 genes, a preliminary family tree was constructed.



Quote of the Week


“No se cree más que cuando no se entiende.”


“No one believes more than when he/she does not understand.”


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



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