The Weekly Brief: Mexico

December 18, 2017 edition— Eni got luckier; open seasons redefined; and NAFTA beware the Ides of March.




Last Week in a Minute or Less


Renewables & Electricity. CFE Calificados will offer back up power supply and Nuevo León’s energy cluster is looking for finance to develop its power sector.


Natural Gas & Liquid Fuels. Jalisco will power 4,000 cars with natural gas; open seasons will be redefined; and the first LP gas storage cavern is operating.


Oil & Gas Upstream. Eni discovered more than expected in Área 1; the CNH approved changes in Pemex’s allocated areas; and Mexico canceled the Maximino-Nobilis auction and waits for a partner.


Money & Power. Canada’s ambassador to the US hopes NAFTA will be done by March; AMLO proposed new refineries; and green bonds skyrocketed in 2017.


Déjà vu all over again. Last week’s readers were particularly interested in Goldman Sachs’ forecast for NAFTA (English); NAFTA’s breaking point (English); and the IMF’s view on challenges facing the new president (Spanish).




Editorial Interlude


Dear Readers –


A Brief reminder that this is the last edition of the Weekly Brief: Mexico for 2017. We will not publish the Brief on December 25th or January 1 to allow our staff and you to enjoy the holidays undisturbed.  The next edition will go out first thing on January 8, 2018.


In the meantime, we wish you a safe and happy holiday season, and a prosperous New Year.


— the Weekly Brief: Mexico team





NAFTA Negotiation


Canada’s ambassador to the US hopes NAFTA will be agreed by March. Canada’s ambassador to the US declared an agreement to modernize NAFTA could still be reached during March if negotiators can overcome the most controversial US demands (English). Canada has proposed constructive alternatives to raising US content in autos.


Canada backed Mexico on energy. Canada supported Mexico’s initiative to create an energy chapter in NAFTA. The US is analyzing the proposal and an answer is expected in next week’s technical negotiation meeting in Washington DC or in the sixth round in Montreal in January (Spanish).


Ford plans to produce electric SUVs in Mexico. Ford is moving the production of small electric-powered sport utility vehicles from a Michigan factory to Mexico (English). The company will save money on labor costs, helping support the business case for producing costly self-driving vehicles in Michigan.


Round 5.5 will deal with auto rules of origin. From Dec. 9 to Dec. 22, more than 400 officials from the three NAFTA countries will discuss rules of origin, especially those related to the auto sector (Spanish). Other controversial issues, including dispute settlement, government procurement, agriculture, and investment, were left off the agenda.


NAFTA will show the world how to facilitate trade. Analysts predict that NAFTA’s renegotiated chapter on trade facilitation will be an example for trade flows worldwide. Operations will happen even faster, with no customs procedures required (Spanish). The debate will center on the value of shipments exempt from customs reviews.



The Road to Reform


Open seasons will be redefined. According to the new Pemex CEO, Carlos Treviño Medina, the oil transportation and storage systems’ open seasons turned out to be more complex than anticipated (Spanish). The next open seasons will put surplus capacity up for bid or will build up demand first.


Maximino-Nobilis was left at the altar. The National Hydrocarbons Commission (CNH) canceled the auction to find a partner for Pemex in the Maximino-Nobilis area as no firm expressed interest (English) (Spanish). Pemex will work to reduce the project’s risks and will evaluate when to auction it again (Spanish) (Spanish).


CFE Calificados will be there when you need it most. CFE Calificados signed with the National Center of Energy Control (Cenace) the first Market Participant Contract to act as a supplier of last resort (Spanish). This contract brings certainty to the electricity market, guaranteeing continuity of service when qualified suppliers fail (Spanish).


The CNH okayed changes in Pemex’s areas. The National Hydrocarbons Commission (CNH) approved modifications in 11 allotments awarded to Pemex (Spanish). Ten are located in the Chicontepec area and one in Poza Rica. The assignments were reconfigured according to location, goals, and current operation.



Political Economy


The Salina Cruz refinery was blocked. An organization of communities from the Isthmus of Tehuantepec blocked the Salina Cruz refinery for more than 12 hours to demand payment for environmental damages produced by the June 14 explosion (Spanish). The 100 protesters said the explosion damaged their water wells and caused diseases.


The PAN’s leader will fight for the presidency. Ricardo Anaya resigned as president of the conservative National Action Party (PAN) to run for the presidency under a left-right coalition, taking second place in early polls (English). The coalition includes the PAN party, the Democratic Revolution Party (PRD), and the Citizens’ Movement Party (MC).


AMLO proposed new refineries and Pemex, their reactivation. Registering as a presidential candidate, Andrés Manuel López Obrador proposed modernizing six refineries and building two new ones to process oil in Mexico and stop imports of gasoline (Spanish). Pemex plans to invest MXN10bn in the refineries in 2018 to raise processing capacity to one million barrels of crude per day (Spanish).


Romero Deschamps was reelected as the Pemex union leader. Carlos Romero Deschamps will continue to lead Pemex’s union for another six-year term. Romero Deschamps has been formally accused of corruption, illicit enrichment, and collusion in fuel theft (Spanish).


Mexico and the IDB will fight climate change. Mexico’s government will receive a US$13.7m Inter-American Development Bank (IDB) grant to improve solid waste, clean energy production, and sanitation management in Campeche, La Paz, and Xalapa (English). The goal is to help the three cities mitigate the effects of climate change.



Market Trends


Mexico joins the International Energy Agency. Mexico’s Senate ratified Mexico’s application to join the International Energy Agency (Spanish). Mexico will now have access to technical assistance from the agency’s energy experts and access to global energy information.


The Americas united for carbon pricing. At the One Planet Summit, nations from Canada to Chile pledged to put a price on greenhouse gases as a strategy to fight climate change (English). The countries will share lessons and improve technical capacity to implement carbon pricing (English).


Green bonds broke the ceiling worldwide. Global green bond issues reached US$116.8bn in 2017, 43% more than the amount issued in 2016 (Spanish). Twelve more bonds are expected to be placed before 2017 ends.



Strategy & Operations


Mexico cut the ribbon on its LP gas storage cavern. Cydsa opened the first underground salt cavern to store LP gas, located in Coatzacoalcos, Veracruz, after investing more than US$200m (Spanish). The cavern will store 1.8 million barrels of LP gas with a capacity to inject and extract up to 120,000 barrels per day.


Nuevo León has ProEnergía funds in sight. The Nuevo León energy cluster will look to get MXN14m of federal resources from the ProEnergía trust (Spanish). The goal is to develop two projects to increase the number of power and hydrocarbon suppliers to meet the region’s energy needs.


Eni found a black gold mine in Área 1. Eni raised the estimate for Área 1 after completing the drilling phase, from 1.4 billion barrels of oil equivalent to 2 billion, 90% of which is oil and the rest gas (English) (Spanish). Production is expected to begin in the first half of 2019.


Jalisco will have 4,000 natural gas vehicles in 2018. In 2018, more than 4,000  Jalisco security patrol cars will run on natural gas (Spanish). In 2016, Guadalajara police forces spent more than MXN5.5m on gasoline.


The CRE faces ample amparos. The Energy Regulatory Commission (CRE) is facing four amparo demands to block the permits issued to the Aguaprieta, Samalayuca-Sésabe, Tuxpan-Tula, and San Luis Potosí pipelines (Spanish). The Mexican Natural Gas Association expressed its concern about pipeline construction delays (Spanish).



Old School Social


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


The 3rd Mexico Infrastructure Projects Forum is January 17-18 at Hotel Camino Real, in Monterrey.


Energy Mexico 2018 is January 30-February 1 at Centro Citibanamex, in Mexico City. For the third consecutive year, ENERGY MEXICO OIL GAS POWER EXPO & CONGRESS will be the main energy event in Mexico, where all the sectors of the industry will come together: oil, gas, power and renewables.


Mexico WindPower is February 28-March 1 at Centro Citibanamex, in Mexico City. In its seventh edition, Mexico WindPower 2018 consolidates its position as Mexico’s most important Congress and Exhibition event in the wind power sector. In addition, you can network with key personalities of the industry and meet real buyers face-to-face.



Lateral Thinking


A Mexican robot will compete in NASA’s contest. A group of students from ITESM-Querétaro campus developed a Mars-Rover type robot that will compete in NASA’s  international contest (Spanish). The robot has six wheels with three suspension axes.



Quote of the Week


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


“Faith is never stronger than when there is no understanding.”


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



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