The Weekly Brief: Mexico


February 19, 2018 edition—Pilot shale tender pending; the historic T-line Bases posted; and NAFTA looks good.




Last Week in a Minute or Less


Renewables & Electricity. The Oaxaca-Mexico City transmission tender Bases is out; Energía Solar del Poniente will finally build its solar park; and the industrial power tariff formula will be changed.


Natural Gas & Liquid Fuels. The CRE will reconsider ethanol; Avant plans to import refined products; and CCCC has Pemex’s refineries in sight.


Oil & Gas Upstream. A pilot shale tender could be published this year.


Money & Power. The US and Canada found a clear path to a NAFTA deal; the pre-campaign is over; and pensions invest in Fibra E.


Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s doubling gasoline storage (El Economista – Spanish); Trudeau’s strength facing US NAFTA negotiators (The Hill – English); and Acciona’s solar project (PVTECH – English).



NAFTA Negotiation


Trudeau is “optimistic” about NAFTA’s path… Canada’s Prime Minister Justin Trudeau said there is a “clear path” to a NAFTA deal (Bloomberg – English), while resisting the US proposals. Trudeau rejected the idea that trade deals are a “win” by one country over another.


…and the US agreed for a change. The Trump administration found progress on the NAFTA talks, particularly with Mexico (Bloomberg – English) and criticized Canada’s trade case filed against the US at the World Trade Organization. Trade Representative Robert Lighthizer minimized the likelihood of a US withdrawal from NAFTA.


NAFTA’s red tape is under discussion. Canada, Mexico, and the US are discussing a proposal to strengthen NAFTA’s powers to cut red tape (Bloomberg – English). Canada wants to extend the existing US-Canada Regulatory Cooperation Council into NAFTA (El Financiero – Spanish), a pact President Trump threatened to quit.


Citigroup warns the end of NAFTA could hurt everyone. Citigroup assured that the three North American countries could suffer negative consequences (El Financiero – Spanish) if the Trump administration decides to abandon NAFTA. The withdrawal could impact supply chains and manufacturing.



The Road to Reform


The CFE published the Oaxaca-Mexico City tender Bases. The state-owned company launched the tender for the biggest transmission line (El Economista – Spanish) in Mexico’s history, a 1,200km-long transmission line with a 3,000MW capacity. The CFE will develop a public-private partnership as a BOT, with a 25-year contract after the project starts.


The industrial power tariff formula will be transformed. After 300,000 companies were charged excessive power tariffs, the Energy Regulatory Commission (CRE) agreed with the business sector to modify the new formula (El Economista – Spanish) to bill industrial power customers. The goal is to mitigate the damage caused to the companies by offering discounts or readjustments.


The CRE will reconsider ethanol. After a writ of amparo against increasing the share of ethanol in gasoline, the Energy Regulatory Commission (CRE) presented an appeal for a revision (Reforma – Spanish). Environmentalist groups have presented five writs of amparo against the 10% ethanol blend approved by the CRE.


A shale tender could be in Mexico’s near future. The Energy Ministry is pondering the launch of a pilot tender for shale fields this year (Reforma – Spanish). According to analysts, Mexico should introduce fiscal incentives (Platts – English) to ensure the economic competitiveness of shale exploration.





Sponsored Content


In its seventh edition, Mexico WindPower 2018 consolidates its position as Mexico’s most important Congress and Exhibition event in the wind power sector. It is the only event organized by the Global Wind Energy Council (GWEC) and the Mexican Wind Energy Association (AMDEE), together with E. J. Krause of Mexico. In addition, you can network with key industry personalities.





Political Economy


AMLO published his energy plans. AMLO’s proposed Energy Minister said two refineries would be built in Tabasco and Campeche (Forbes – Spanish) with an investment of US$6bn to produce 300,000 barrels per day and achieve national self-sufficiency. The current Energy Ministry assured tenders will continue regardless of the election results (Reuters – Spanish).


Oil and gas brought industrial activity down. Industrial activity in Mexico dropped 0.6% in 2017 (El Economista – Spanish) due to the 10.3% fall in crude and gas activity. Pemex produced 1.948 million barrels per day, a 9.5% fall compared to 2016.


Mexico’s gasoline and diesel deficit went through the roof. Gasoline and diesel imports grew by 38%, reaching US$21.1bn in 2017 (El Economista – Spanish), with a 48-50% increase on the value of imports. Diesel imports increased by 63% between 2016 and 2017, amounting to US$6.6bn in 2017.


Mexico’s pre-campaign period is over. During the pre-campaign period, Andrés Manuel López Obrador gained the most support, reaching 27.1% (El Economista – Spanish), 4.8 points over Ricardo Anaya, representing the PAN-PRD-MC alliance, with 22.3% support, and followed by José Antonio Meade (18%), the PRI-PVEM-Panal candidate.



Market Trends


LP gas prices skyrocketed again… Between December 2016 and January 2018, LP gas prices increased from 267 pesos per 20 kilograms to 379.2 pesos, a 70% increase (Excelsior – Spanish). The Energy Regulatory Commission (CRE) justified the rise due to increases in demand and international levels of consumption.


…and natural gas imports hit a historic high. The value of natural gas imports broke all records in 2017, reaching US$6.1bn, a 52% increase over 2016 (El Economista – Spanish). The national pipeline network grew 30% in the year, helping push imports higher.


CFE placed more debt in Taiwan. The state-owned company placed a second bond in Taiwan for US$727m for a 30-year period (Reuters – Spanish). The bond provides a 5% yield.


Pensions go for Fibra E. The National Commission of the Pensions Saving System said 40 million Mexican workers will benefit from investments in Fibra E. Eight of the country’s 11 pension funds devoted MXN9.7bn to investments (El Economista – Spanish).



Strategy & Operations


CCCC wants to partner up with Pemex. China Communications Construction Company and its subsidiary are interested in a strategic partnership with Pemex (Reforma – Spanish) for the Salina Cruz or the Salamanca refinery. Investment could reach between US$3bn and US$3.5bn to reactivate production (Criterio – Spanish).


PWC purports prices and politics paralyzed power projects. According to PwC, one of every three companies in Mexico delayed power generation investment plans due to political uncertainty and energy price variations (El Financiero – Spanish). Only 26% of the companies pointed to the complexity of contracts and the low return on investment as the main deterring factors.


Avant plans to import refined products into Mexico. Avant Energy is considering building a logistics system to supply refined products via rail (Platts – English) from the Port of Altamira to the Bajio region. The network will be named Supera and will count on Savage Services and Kansas City Southern (KCS) as strategic partners.


Energía Solar del Poniente will start its solar park… at last. The construction of the Andalucía II solar farm will start in February after a two year delay (El Financiero – Spanish) due to bureaucratic procedures and land negotiations. The project will receive US$50m in investment to install 240,000 solar panels with 83MW of capacity.



Old School Social


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


The Mexico Oil & Gas Breakfast: Infrastructure Outlook & Fuels Market Development is scheduled for February 27 at the Marriott Reforma Hotel, Mexico City.


The 4th Natural Gas Power Plant Construction Summit, Mexico 2018, will be held February 28-March 1 at the Hotel Marquis Reforma. The summit is the most influential summit and the only tailor-made forum focusing on stimulating opportunities amongst natural gas power plant owners, developers, and EPCs in Mexico’s booming natural gas power market.




Lateral Thinking


A Mexican grad student won BSSw fellowship. PhD candidate in Computer Science at UC Santa Cruz, Ivo Jimenez, is the only graduate student recognized with a Better Scientific Software Fellowship (UCSC news – English) from the US Department of Energy’s Exascale Computing Project. The fellowship was created to recognize and fund advocates of high-quality scientific software.



Quote of the Week



“Nada hay tan vacío como un cerebro lleno de sí mismo.”


“There is nothing as empty as a brain full of itself.”



– Ignacio Manuel Altamirano (1834-1893), Mexican lawyer, writer, journalist, and teacher.



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