December 19, 2016 edition— CRE’s power payment schemes; CNH offers three onshore fields; and solar tech from Tamaulipas.
Editorial Interlude
This will be the last Weekly Brief: Mexico for 2016. The team is taking a well-earned break for the next few weeks, and will be back in action in January. With the New Year’s Day holiday falling on a Monday this year, the next Brief will hit your inbox first thing on January 9th.
Until then, we hope you have a relaxing holiday season filled with time with loved ones.
–the Weekly Brief: Mexico team
Last Week in a Minute or Less
Renewables & Electricity. Tamaulipas creates solar technology; two waste-processing plants needed in Mexico City; and CFE keeps 46,000 workers five years longer.
Natural Gas & Liquid Fuels. Final gas liberalization is here at last; IEnova restarted pipeline construction; and COFECE advised the CRE on gasoline liberalization.
Oil & Gas Upstream. The CNH offered three Pemex fields, and the security rules of Round 1.4 were published after the bidding.
Money & Power. Moody’s and Fitch changed CFE’s and Mexico’s outlook to negative from stable and US and Mexico businessmen partnered to protect NAFTA.
Déjà vu all over again. Last week’s readers were particularly interested in Avant Energy’s US$300m investment (English); the alliance between Pemex and BHP Billiton for Trion (English); and the increase in the industrial sector tariff rate (Spanish).
The Road to Reform
CRE’s Christmas present: payment schemes for generation. The Energy Regulatory Commission (CRE) established three payment schemes for distributed generation: one-on-one exchange per watt generated and consumed, cash payment for surplus energy, and the option of participating in the wholesale market (Spanish). The CRE will buy surplus energy at local marginal prices for installations up to 250kw.
The CNH offers three of Pemex’s onshore fields of Pemex. The National Hydrocarbons Commission (CNH) released information about three of the state-owned company’s onshore fields (Spanish). Pemex announced its plan to look for partnerships with private companies to strengthen its profitability and exploit the Cárdenas, Mora, and Ogarrio fields.
COFECE advised CRE on gasoline liberalization. The Federal Economic Competition Commission (COFECE) submitted its opinion on gasoline price liberalization and the schedule for liberalization of gasoline prices to the Energy Regulatory Commission (CRE) (Spanish). COFECE underscored the importance of reviewing availability, access to infrastructure, and stable and efficient supply.
Security rules published after Round 1.4 bidding. The rules for industrial and operational security and environmental protection of the deep-water fields were published one day after the Round 1.4 bidding. The rules are the responsibility of the Energy and Environmental Security Agency (ASEA) which is being formed, and is under budgeted and lacking personnel (Spanish).
Political Economy
China-Mexico friendship strengthens after Trump’s victory. Following Donald Trump’s win in the US election, China and Mexico pledged to strengthen ties to reduce Mexico’s economic dependence on the U.S. (English). In a Dec. 12 meeting of senior officials, both nations agreed to deepen cooperation on trade, investment, resources, infrastructure, and financial services.
OPEC and non-OPEC members agreed to a historic production cut. From January 1, Mexico will reduce production by 100,000 barrels per day as part of a historic global agreement (Spanish). Non-OPEC members agreed to cut output by 558,000 barrels per day to decrease world oil production and boost prices (English).
CFE will keep 46,000 workers five more years. The state-owned company will retain 46,000 workers at least five years due to modifications in age and seniority requirements for retirement (Spanish). Among the 51,607 employees who entered CFE before August 18, 2008, 90% will stay on five more years before reaching the new retirement age.
Special gasoline taxes surpass oil hedges. In 2016, for the second year in a row, the special gasoline taxes (IEPS) generated more income than oil hedges secured by the Energy Ministry. The IEPS amounted to MXN186.8bn in the first ten months of 2016, while Mexico received US$2.6bn from the hedging program (English) (Spanish).
Pemex detects corruption warning signs. The state-owned company’s Institutional Control Unit mapped the location of possible “risks” in procurement in new relationships with third parties (Spanish). The study identified 94 points in contracts for goods and services that are susceptible to corruption.
Market Trends
The New Year will bring final LP gas liberalization…After January 1, LP gas prices will fluctuate with differences among 146 regional zones, and 360 businessmen asked the federal government for patience to find a demand equilibrium (Spanish). The Energy Regulatory Commission (CRE) will create a webpage to post suppliers’ prices (Spanish).
…and a 20.6% spike in gasoline prices. Analysts estimate Magna gasoline could reach 16.87 pesos per liter, an increase of 2.89 pesos, and Premium gasoline will rise by 2.94 pesos, to 17.75 pesos per liter. Previous estimates forecast hikes of nearly 10% but then the peso depreciated by 9% and oil prices increased 19% (Spanish).
As expected, the Fed raised interest rates. For the first time in 2016, the Federal Reserve raised interest rates by a quarter percentage point and forecast an acceleration of rate increases in 2017 (English). As a consequence, short-term bond yields and the dollar rose, and financial and tech stocks gained.
Moody’s changed CFE’s outlook to negative from stable…The rating outlook of the state-owned company was lowered to negative from stable and no improvement is foreseen in the short term (Spanish). Moody’s considered there is a risk of default by CFE, and is concerned about a possible increase in federal government liabilities with Pemex.
… and Fitch cut Mexico’s outlook, too. The rating agency reduced Mexico’s credit note outlook to negative from stable, but Fitch ratified the BBB+ sovereign rating (English) (Spanish). The reasons for the negative outlook are risks to growth, a possible increase of public debt, peso volatility, and uncertainty about renegotiating of North American trade arrangements.
Gasoline prices will hit inflation. Banorte-Ixe analysts project that gasoline price liberalization and the rise in the minimum wage nationwide will impact inflation in 2017 (Spanish) (Spanish). The National Institute of Statistics and Geography (INEGI) reported electricity tariffs and tomato prices ran inflation for 2016 up to 3.31% (Spanish).
Strategy & Operations
Call for waste-processing plants in Mexico City. The Mexico City government will auction the construction of two waste-processing plants that will generate electrical energy (Spanish). Using biodigestion and thermal processing, Mexico City will follow countries such as Argentina, Chile, Germany, Peru, and Spain where waste generates power and produces savings.
Tamaulipas produces solar energy technology. Mexico’s solar energy association announced that Tamaulipas is now a producer of solar panels and solar trackers (Spanish). Since last year, two-axis solar trackers have been developed, a patent filing is underway, and the manufacturer is negotiating with US companies to export its technology.
U.S. and Mexican businessmen partnered to protect NAFTA. During the US-Mexico CEO Dialogue, business leaders agreed to work together to update NAFTA and promote deeper trade ties (English) (Spanish). The US Chamber of Commerce told corporate and government leaders from both countries it will work to preserve NAFTA.
Guanajuato’s electricity generation, transmission, and distribution skyrocketed. The state saw an increase of 61.4% in its electricity energy generation, transmission, and distribution, with an annual variation of 51.8% (Spanish). According to the National Institute of Statistics and Geography (INEGI), industrial activity in Guanajuato increased 11.3% annually, while Querétaro suffered a drop of 2.5%.
IEnova renewed pipeline construction. The Sempra subsidiary rebooted the Loma de Bácum pipeline construction and transported materials across Yaqui territory despite a district judge’s October suspension order (Spanish). The group opposing the project considers the actions an “aggression” against the Yaqui tribe and a “disregard for the law”.
Old School Social
Events in the world beyond your screen – go see and be seen!
The Mexico Infrastructure Projects Forum is January 18-19 in Monterrey, Nuevo León.
Energy Mexico 2017 is the main energy sector event that covers all activities within the energy industry, and the only one organized by the private sector that includes a conference with the most prestigious speakers and an international scale B2B exhibit. http://www.energymexico.mx/
Lateral Thinking
Introducing the bees of the sea. Researchers from the National Autonomous University of Mexico observed invertebrates under water carrying pollen between marine plants and named this process zoobenthophilous pollination (English). Researchers confirmed the pollinating of sea grasses by transferring crustaceans to a turtle-grass aquarium and finding pollen placed on the female flowers.
Quote of the Week
“Nadie tiene derecho a lo superfluo, mientras alguien carezca de lo estricto.”
“Nobody has a right to superfluous things as long as there is someone lacking necessary items.”
– Salvador Díaz Mirón (1853-1928), Mexican poet influenced by Lord Byron and Victor Hugo
We hope you have a productive week. Please send any news, comments, or new pollination tricks to MexicoWeekly@energynarrative.com.
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