The Weekly Brief: Mexico

February 6, 2017 edition— US gas capacity open to all; 3P reserves down 30%; and Nuevo León lures US$1.3bn for energy.





Last Week in a Minute or Less



Renewables & Electricity. CFE invests US$17m in the Yucatán peninsula; Nuevo León will get US$1.3bn for its energy sector; and the solar energy market will grow 150%.


Natural Gas & Liquid Fuels. Capacity opened to bring gas from the US; the biggest natural gas compressor is ready; and Yucatán will get a new natural gas plant.


Oil & Gas Upstream. 3P reserves plummeted 30% in 2016 and tenders in the next rounds will produce a total of 50 contracts.


Money & Power. Inflation will reach 5.25% by the end of 2017; Profeco watches LP gas suppliers; and the INAI asked Pemex to explain its contract with the OECD.


Déjà vu all over again. Last week’s readers were particularly interested in virtual schemes for CELs (Spanish); Pemex’s four cogeneration plants (Spanish); and the NAFTA renegotiation (English).



The Road to Reform


Pipeline capacity for everyone! The Energy Regulatory Commission (CRE) announced that the pipelines used by Pemex and CFE to bring gas from the United States can now be used by private companies (Spanish). IEnova plans to compete with the biggest US gas suppliers for pipeline capacity (Spanish).


The second gasoline price adjustment was postponed… The Finance Ministry announced an increase in the subsidies on the special gasoline tax (IEPS) until Feb. 17 thanks to the exchange rate and international oil prices (Spanish) (Spanish). Magna gasoline will be kept at 15.99 pesos per liter and Premium gasoline at 17.79 pesos.


…although most “amparos” failed and the CRE defended it. The federal judge who received most of the “amparos” (injunction requests) rejected 50 of them for inadmissibility (Spanish). The Energy Regulatory Commission (CRE) pointed out that the rise in gasoline prices is a necessary factor for attracting investments to Mexico’s energy sector (Spanish).


The second electricity auction hit a home run. The Energy Ministry achieved the signing of 100% of the 16 photovoltaic projects offered in the second electricity tender. The projects will build capacity totaling 1,823MW that will come onstream by 2019 (Spanish). The tendered projects guarantee investments of more than US$2.3bn.



Political Economy


Inflation will reach 5.25% by the end of 2017. Private sector analysts increased to 5.25% their estimate for Mexico’s inflation by the end of 2017 and lowered to 1.4% the economic growth forecast (Spanish). The inflation projection rose from 4.13%, the estimate in the last survey conducted in December.


Profeco is keeping an eye on LP gas distributors. The Federal Prosecutor for Consumers (Profeco) is watching LP gas suppliers to detect and sanction irregularities in fuel sales. Profeco doubled the number of gas plants under observation to 90 this year, and sanctioned eight plants by immobilizing their tank trucks (Spanish).


INAI ordered Pemex to explain its OECD contract. The National Institute of Transparency, Access to Information and Personal Data Protection (INAI) ordered Pemex to make public the 658,000-euros contract signed with the Organisation for Economic Co-operation and Development (OECD). Ironically, the contract’s purpose was to develop new rules for procurement and supply (Spanish).


The Odebrecht case presumably points in Pemex’s direction. The Controller’s Office is studying the presumed bribes paid by Odebrecht to Mexican government officials to get contracts (Spanish). Odebrecht admitted to US justice officials paying US$10.5m to Mexican public servants to obtain US$39m in benefits. Pemex’s CEO pledged last December a full investigation.



Market Trends


New US rigs forced a fall in crude oil prices. On January 29, oil prices fell after the news of an increase in US drilling (English) (Spanish). The data stole the thunder from OPEC and other producers planning a supply cut to strengthen the market.


3P reserves sank 30% in a year. In 2016, Mexico’s total reserves of oil and gas dropped by 30.1%. The 3P reserves of oil fell to 19.4bn barrels from 26.1bn barrels while 3P reserves of gas plummeted by 40.7% in the last year (Spanish). Since 2012, 3P reserves of oil and gas fell 40%, from 43.8bn barrels.


Conermex projects Mexico’s solar energy market will grow 150%. This year 40,000 solar generation systems will be installed, a 150% increase compared to 2016 (English) (Spanish). These installations will create a market worth US$250m. Today, solar power systems are 25% cheaper than last year, while electricity tariffs have increased 27% in a year.


The energy reform has produced US$69.6bn in investment commitments. The new schemes for exploration and production and to tender, build, and operate energy infrastructure achieved US$69.6bn in pledges by private investors through 170 contracts (Spanish). The Energy Ministry (Sener) expects that 50 contracts will be signed by July, after the three scheduled tenders.



Strategy & Operations


ENGIE will inject US$25m in a natural gas plant in Yucatán. Energía Natural Peninsular, an ENGIE subsidiary, will invest US$25m to build a compressed natural gas plant on the peninsula (Spanish). The use of natural gas will save 40% in the energy costs and foster the region’s development.


The biggest natural gas compressor is up and ready. One of the biggest natural gas compressor systems in Mexico will start working in the El Encino-La Laguna stretch between March and June (Spanish). The system requires three turbo-compressors to inject pressures needed to propel gas from the border to Guadalajara.


Nuevo León becomes an energy investment magnet. Nuevo León announced that companies including Fonroche, Howard Energy, and Iberdrola will make investments totaling US$1.3bn in clean energy generation, hydrocarbon extraction, and a gas pipeline (Spanish). The state will receive US$641m for a combined-cycle plant, US$35m for photovoltaic energy, and about US$500m for a pipeline.


CFE will bet US$17m on the Yucatán peninsula. The state-owned company will invest US$17m in the next three years in energy generation, transmission, and distribution projects (Spanish). In 2017, improvements and equipment installations in the Ucú and Mérida Oriente substations are planned to guarantee medium voltage and electrical transformers to guarantee supply.


Pemex’s HDPE lines at Cangrejera are still shut down. The high density polyethylene lines at the state-owned company’s Cangrejera complex remained closed on Jan. 27 due to a lack of ethane and ethylene feedstock (English). The HDPE lines’ capacity at Cangrejera is 200,000/mt and PE prices are expected to rise in February in Mexico.



Old School Social


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


The Expo Manufactura 2017 is February 7-9 in Monterrey, Mexico.


The Mexico Energy Forum is February 15 at the Sheraton María Isabel, Mexico City.


Mexico WindPower 2017 is the most important exhibition and congress for the country’s wind power industry and the only event organized by GWEC and AMDEE together with E.J.Krause de México.



Lateral Thinking


The Wall could damage both bilateral relations and the planet. Besides harming US-Mexico relations, the construction of a wall could negatively affect the environment. The construction of a 1,600km wall requires 275 million cubic feet of concrete which would cause the  release of 1.9 million metric tons of carbon dioxide (English).



Quote of the Week


“Las masas humanas más peligrosas son aquellas en cuyas venas ha sido inyectado el veneno del miedo…. del miedo al cambio.”


“The most dangerous multitudes are the ones in whose veins the venom of fear has been injected…fear of change.”


– Octavio Paz (1914-1998), Mexican poet, writer, and Nobel prize winner



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