The Weekly Brief: Mexico


February 4, 2019 edition—Oaxaca and BC lines canceled; Dos Bocas tender restricted; and Pemex’s troubles.




Last Week in a Minute or Less


Renewables & Electricity. The Oaxaca and Baja California power lines were canceled; and Solar Power Mexico expects Mexico to increase solar power in homes.


Natural Gas & Liquid Fuels. The Dos Bocas refinery tender will be restricted; Engie will invest US$70m in Yucatán’s gas network; and four companies will work on storage centers.


Oil & Gas Upstream. Talos Energy continues with the Zama; and Pemex production is up.


Money & Power. Fitch lowered Pemex’s rating; Moody’s is concerned with Mexico’s growth; and the IMF gave AMLO a piece of advice.


Déjà vu all over again. Last week’s readers were particularly interested in Avant Energy’s solar plans (El Financiero – Spanish); natural gas infrastructure (El Economista – Spanish); and waste power generation (El Financiero – Spanish).



NAFTA Negotiation


Mexico’s Senate is worried about the USMCA. According to the majority leader, Mexico’s Senate is concerned over the new NAFTA, as there are “very delicate areas” that are still being studied in the Senate (Bloomberg – English).


Mexico hit a record-high trade surplus. Despite the NAFTA renegotiation, Mexico reached a trade surplus of US$1.8bn in December (Bloomberg – English), the highest since data started being collected (in 1999). Oil product imports fell 15.5% to US$1.38bn.


The US trade agency gave Congress work to do on USMCA. US Trade Representative Robert Lighthizer sent Congress a list of legislative work necessary to implement the USMCA, a key step to replace NAFTA (Reuters – English). The list includes changes in rules of origin for autos and the exclusion of Canada and Mexico from “global safeguard” tariffs.


Mexico will not accept at-risk asylum seekers. The US and Mexico have worked out details of a new plan to return migrants seeking US asylum, but Mexico will not accept migrants with a credible threat back home (Reuters – English). President Trump said the US would send non-Mexican migrants back to wait in Mexico.



The Road to Reform


The Sener is checking Pemex’s hydrogen supply contracts. The Energy Ministry is investigating possible corruption in the state-owned company’s hydrogen supply contracts for the Tula and Madero refineries. Energy Minister Rocío Nahle said the prices at which Pemex sold the hydrogen plants and the supply contracts were suspicious (Platts – English).


The Oaxaca and Baja California power lines were canceled. The two transmission lines with combined investments estimated of US$3.3bn were canceled, according to Banobras (El Economista – Spanish) (ICIS – English). The CFE said that there are no conditions to continue with the tender (El Financiero – Spanish).


The Sener will complicate gas stations’ permits. The Energy Ministry warned legislators about the requirements to issue new gas station permits (El Economista – Spanish). Currently, there are 554 permits to import 8,300 million barrels of gasoline.


The Dos Bocas refinery tender will be restricted. The Energy Ministry said the bidding for the new refinery of Dos Bocas, in Tabasco, will be limited to “specialized and serious companies” (El Financiero – Spanish). Pemex could choose at least three companies to present their proposals for the project.


The CRE asked for the candidate shortlist. The president of the Energy Regulatory Commission (CRE) asked President López Obrador to send recommendations to the Senate for four new commissioners to cover vacancies (El Financiero – Spanish).



Political Economy


Mexico bought 670 fuel trucks. The Mexican government purchased 670 distribution trucks to ease the fuel shortages that continued in several states (Platts – English). The total cost of the trucks is US$92m, and the full fleet will be in Mexico by March.


Mexico offered to mediate in the Venezuelan crisis. Mexico is willing to mediate between President Nicolás Maduro and the opposition leader and congress chief Juan Guaidó (Reuters – English). President López Obrador pledged not to take sides.


ASEA fines Pemex over the new refinery. The Security, Energy, and Environmental Agency fined Pemex more than MXN13m due to the environmental damage produced in the illegal clearing of trees in Dos Bocas, Tabasco (El Economista – Spanish) (Mexico News Daily – English). Pemex had neither the permits regarding environmental impact nor the change of land use.


Moody’s is concerned with Mexico’s growth. Moody’s is concerned with the effect of a lower GDP growth in Mexico’s sovereign rating (El Economista – Spanish). Considering the uncertainty of investors, Moody’s expects the economy to grow at 2% (WSJ – English).



Market Trends


US natural gas satisfied Mexico’s demand. US gas exports reached 5.2 billion cubic feet per day, just shy of the record in September. The increase took place in a period when exports usually decrease due to the high demand in the US (El Financiero – Spanish).


The IMF gave AMLO a piece of advice: continuity. The International Monetary Fund (IMF) advised the new administration to continue implementing the structural reforms developed by the previous government to boost growth (El Financiero – Spanish). The IMF warned that uncertainty may discourage investments and affect the economic growth rhythm.


Pemex production is up. The state-owned company’s production increased slightly, 0.8% in December compared to November, while exports rose by 5.6% (El Financiero – Spanish). Pemex produced less than previously reported during the past administration (El Financiero – Spanish).


Fitch lowered Pemex’s rating. Fitch lowered Pemex’s foreign currency long-term bond ratings from BBB+ to BBB- and national currency ratings from AAA to AA, with a negative perspective (El Economista – Spanish) (Reuters – English). Fitch said the government has been slow to strengthen the company’s credit.



Strategy & Operations


Talos Energy continues with the Zama. Talos Energy will continue drilling the Zama reservoir to derisk it (OGJ – English). The last goal of the Zama-2 well was to test Marte, a deeper exploration prospect, which was estimated at US$10m but amounted to US$2.5m.


Engie will invest US$70m in the Yucatán’s gas network. The company will devote US$70m to widen the supply network in the Yucatán Peninsula with 16km of additional pipelines to connect the Mayakan system with the national distribution network (El Financiero – Spanish). The goal is to increase the supply of natural gas to the industrial sector.


Solar Power Mexico expects Mexico to shine. According to Solar Power Mexico, more than 85,000 self-generation contracts with a total generation capacity of 500MW have been signed in the country, and this year is expected to pass 100,000 contracts (El Economista – Spanish).


Oil is coming by rail as never before. In 2018, 60.2 million barrels were moved into Mexico by train, a 25% increase compared with the previous year (El Financiero – Spanish). The recent blockages to the rail system may slow oil imports from other countries, mainly the US.


Four companies will work in storage centers. Two national and two foreign companies plan to build four fuel storage terminals with US$256m in investments (El Financiero – Spanish). Pemex left 22 of 34 infrastructure projects related to storage, delivery, and pipeline storage without a budget (El Financiero – Spanish).



Old School Social


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



MIREC WEEK is hosting a breakfast to discuss the impact of the new administration’s policies in renewables, scheduled for February 6 at the Sheraton María Isabel in Mexico City.


Mexico WindPower will be held March 20-21 at Centro Cultural Banamex in Mexico City. Mexico WindPower is the premier wind energy event in Mexico, with eight consecutive years showcasing the latest in innovations and technology for leading national and international decision-makers.



Lateral Thinking


The axolotl may be key for regenerating human tissues. Scientists have studied the genome of the aquatic salamander axolotl, the largest genome ever fully sequenced. The axolotl’s regeneration capabilities involve the use of stem cells, and the research of its genome could reveal genetic methods of regenerating tissue ( – English).



Quote of the Week


“Atenderé únicamente a la virtud y al mérito, y buscaré mi principal apoyo en los hombres de orden y progreso.”


“I will attend only to virtue and merit, and I will look for my main support in men of order and progress.”



– Ignacio Comonfort (1812-1863), Mexican politician and soldier.



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