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December 21, 2020 edition—CRE’s security rules; Pemex’s drilling investments; and a natural gas contract renegotiated.
Last Week in a Minute or Less
Electric Power & Renewables. The CRE okayed new electric transmission security rules; the Energy Ministry published the format for energy efficient certificates; and solar panels are a good option with CFE’s tariffs.
Natural Gas Mid-Downstream & LNG. CFEnergía won the natural gas contract renegotiation; and emissions may hit North American LNG export growth.
Liquid Fuels Mid-Downstream. Pemex is studying the Cadereyta refinery accident.
Oil & Gas Upstream. The CNH okayed Pemex’s drilling investments; Eni has big plans for Mexico’s Sureste basin; and Pemex may explore unconventional resources.
Government & NGO. ECLAC expects Mexico to bounce back with 3.8% growth; Banxico’s reform is up for debate; and Mexico’s industrial production recovered 2%.
Déjà vu all over again. Last week’s readers were particularly interested in radioactive installations (DOF – Spanish); Sener’s unique rule for hydrocarbons export and import (El Financiero – Spanish); and Braskem Idesa’s activity (Platts – English).
Editorial Interlude
This week’s edition will be the last for 2020 as our hard-working team takes a well-deserved break with friends and family. We wish you a safe, peaceful, and contemplative end to this most eventful year, and an invigorating start to the new. Our next edition will be issued on January 11, 2021. See you then!
– The Weekly Brief: Mexico team
Geopolitics & Trade
How are Biden and Mexico going to get along? AMLO was one of the last world leaders to recognize Biden’s victory, and Biden will face an uncertain relationship with Mexico’s president (Forbes – English). When it comes to rhetoric and policy ideas, Biden and López Obrador are not always going to agree.
The industrial sector asked to take advantage of the USMCA. The national president of Index asked AMLO’s government to modernize the program of the manufacturing industry to take advantage of the USMCA and the other 14 trade treaties that Mexico has with 46 countries (El Financiero – Spanish). The CEO assured his support of actions to fight corruption and fiscal evasion.
The USMCA corridor will be there in 15 years. The USMCA corridor will connect Mazatlán’s port with the eastern US and the logistical centers in Winnipeg, Canadá. With an initial investment of US$3.3bn, the construction will take 15 years (El Financiero – Spanish).
Labor reform is still a concern for USMCA supervisors. The independent observer board found flaws in the protocol of legitimation of collective contracts and suggested changes in the implementation calendar (El Economista – Spanish). Workers are still unable to choose their union leaders in a democratic way.
Political Economy
Banxico’s reform is up for debate. The reform to be voted in Congress to force Mexico’s central bank to buy dollars in cash weakens its autonomy (Forbes – Spanish). Moody’s considered the possible modification of Banxico’s law to be negative.
Moody’s placed Pemex in a negative outlook. The international rating agency gave the state-owned company a negative outlook due to the weak recovery in economic activity for 2021 and low fuel demand (El Financiero – Spanish). Pemex’s profitability growth in 2021 will depend on oil prices and production levels.
Pemex’s debt may be extra heavy in 2021. According to experts, the state-owned company with the highest debt on the planet will have to plan an improvement in the financial situation that menaces Mexico’s public finances (El Financiero – Spanish).
ECLAC expects Mexico to bounce back with 3.8% growth. According to the Economic Commission for Latin America and the Caribbean, Mexico’s economy will grow by 3.8% in 2021. For 2020, the ECLAC kept the forecast of a 9% contraction (El Financiero – Spanish).
Legal & Regulatory
The CRE okayed new electric transmission security rules. The Energy Regulatory Commission (CRE) approved rules that established the security specifications and technical rules for the transmission network and the national power grid (El Financiero – Spanish). The goal of the rules is to provide security to clients and people.
The Energy Ministry published the format for energy efficient certificates. The Energy Ministry published the format to be used to develop the approval process of people accredited to evaluate the official energy efficiency norms (DOF – Spanish).
The CNH okayed Pemex’s drilling investments. According to the National Hydrocarbons Commission, the state-owned company could invest US$7.9bn in 63 plans related to drilling 12 wells targeting new crude reserves (El Financiero – Spanish). The investment period will be from 2020 to 2023.
Mexico dropped down in the RECAI’s positions. Mexico fell eight places to 33rd place in the RECAI ranking. More than 250 renewable projects in Mexico could be negatively affected by CFE’s new tariffs (Forbes – Spanish). The new tariffs experienced an increase of 469%.
Market Trends
Emissions targets may hit North American LNG export growth. North American LNG export developers may lose buyers in 2021, as European utilities appear hesitant to sign new long-term commitments for shale gas due to carbon emission reduction goals (Platts – English).
Mexico’s industrial production recovered 2%. Industrial production in Mexico grew 2% in October. The Monthly Index of Industrial Activity (IMAI) reached 96.8 points, still under the levels registered before the pandemic, when it was at 98.5 units (El Financiero – Spanish).
Solar panels are a good option with CFE’s tariffs. Nuevo León has the second highest level of solar power contracts, behind only Jalisco, with a 30% increase in solar capacity. Considering the increase in CFE tariffs, solar panels could pay for themselves in 2 or 3 years (El Financiero – Spanish).
Strategy & Operations
Pemex may explore unconventional resources. The state-owned company plans to explore the Tampico-Misantla basin where vast unconventional resources are expected (Platts – English). Pemex expects to increase its crude production by 300,000 barrels per day, amounting to 1.9 million barrels per day, by the end of the year.
Pemex and Vitol broke up after a bribery settlement. The state-owned company halted all business with Vitol after the world’s biggest independent oil trader paid US$160m to settle charges that it plotted to pay bribes in Latin America (Bloomberg – English). Pemex imposed a temporary ban on doing business with the trader.
Pemex is studying the Cadereyta refinery. The state-owned company is investigating the cause of two gas explosions that took place at its 275,000 barrels per day refining complex in Cadereyta, Nuevo León (OGJ – English). Pemex said the incident did not cause any major personal injuries or material damages at the site.
Eni has big plans for Mexico’s Sureste basin. Eni plans to drill two new oil and gas exploration wells at one of the eight blocks it operates in the Sureste basin (Platts – English). Eni identified 300 million barrels of oil equivalent in prospective resources.
CFEnergía won the natural gas contract renegotiation. CFE’s subsidiary renegotiated eight natural gas contracts to recover service costs, gaining US$200m. CFEnergía has worked to recover costs of natural gas transportation, recovering more than MXN5bn in June, July, and August of 2020 (El Financiero – Spanish).
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
The Energy Ministry announced clean infrastructure growth. The infrastructure to generate solar and wind energy grew in the last two years with the installation of 74.6% of the capacity needed to use 5,049MW (El Financiero – Spanish). The growth was achieved through earlier auctions.
Quote of the Week
“Wisdom lies neither in fixity nor in change, but in the dialectic between the two.”
– Octavio Paz (1914-1998), Mexican poet and diplomat.
We hope you have a productive week. Please send any news, comments, or clean infrastructure plans to MexicoWeekly@energynarrative.com.
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