The Weekly Brief: Mexico


January 11, 2020 edition—Transmission failures; new fuel import rules; and Pemex’s drilling.




Last Week in a Minute or Less


Electric Power & Renewables. Transmission failures blacked out Mexico; Grupo Dragon will bet on Baja California’s power; and the Cenace will turn down renewables.


Natural Gas Mid-Downstream & LNG. Solensa rides natural gas distribution.


Liquid Fuels Mid-Downstream. New rules will limit private fuel imports; the CRE finally issued gasoline permits; and Pemex refining suffered in 2020.


Oil & Gas Upstream. Pemex will invest more in drilling; and Pemex’s production level will remain unchanged.


Government & NGO. Inflation reached 3.22% in December; Mexico’s exports went up in November; and the World Bank said the USMCA will help Mexico out.


Déjà vu all over again. Last edition’s readers were particularly interested in Biden’s and Mexico’s relationship (Forbes – English); North American LNG exports (Platts – English); and CFEnergía’s natural gas renegotiation (El Financiero – Spanish).



Geopolitics & Trade


The US okayed the US-Mexico Economic Partnership Act. The H.R.133 proposal named the US-Mexico Economic Partnership Act was finally passed to boost professional development and economic growth in both countries, with a special focus on the energy, health, business creation, and education sectors (El Financiero – Spanish).


Mexico’s exports went up in November. The value of Mexican exports was US$38.3bn in November, a 2.3% increase over the annual rate (El Financiero – Spanish). Fuel exports were US$1.5bn, a 17.1% drop.


Automakers asked for time to meet USMCA requirements. Some automakers in Mexico asked for alternative transition regimes to have flexibility to meet the requirements established in the new NAFTA (Collison Repair Mag – English). The new labor standards in Mexico under USMCA have also caused conflict.


The World Bank said the USMCA will help Mexico. The World Bank believes the new NAFTA will become the motor of Mexico’s economic activity with a GDP recovery of 3.7% (El Economista – Spanish). Mexico’s economy will improve with an increase in exports and when the US recovers.



Political Economy


Banxico’s survey expects a 3.54% GDP growth. According to Banxico’s survey, a weak internal market and the uncertainty surrounding the domestic economic situation are the factors that could affect Mexico’s growth (El Economista – Spanish). Experts left the expected 2020 GDP contraction at 8.99% and forecast a 3.54% GDP growth in 2021.


Inflation reached 3.22% in December. In the first two weeks of December, Mexico’s inflation reached 3.22%, the lowest number since June (El Financiero – Spanish). Tourist transportation and girls’ clothing increased their prices.


AMLO let Pemex pay taxes in bonds. President López Obrador approved that the state-owned company and its subsidiaries can pay taxes in deferred bonds due to low oil prices and the oil war that started in March between Russia and Saudi Arabia (El Financiero – Spanish).


AMLO pledged to recover lost jobs. President López Obrador promised to recover the lost lobs in the first quarter (El Financiero – Spanish). AMLO pointed out the loss of jobs in December due to the COVID-19 pandemic and the workers who were fired to avoid paying Christmas bonuses.


Coparmex plans to help Mexico face economic challenges. The president of the Mexican business confederation offered to dialogue with the federal government and to boost agreements to reactivate the economy (El Economista – Spanish). The organization will help to solve the crisis that Mexico is experiencing in the health, economic, and security sectors.



Legal & Regulatory


The CRE finally gave out gasoline permits. After months without issuing new permits, the Energy Regulatory Commission handed licenses to open gas stations in Nuevo León, Michoacán, Coahuila, Tamaulipas, and Veracruz (El Financiero – Spanish). Just in Nuevo León, 35 permits for gas stations were delayed.


New rules will limit private fuel imports… Mexico’s government issued new regulations to limit private firms’ ability to import fuel, benefiting Pemex (Reuters – English) (El Economista – Spanish). The private sector warned that the Sener’s decision to shorten permits for importing fuel would reduce investment.


…and the Cofece is concerned. The Cofece recommended the Energy Ministry stop a project that modifies the regulation to obtain import and export permits for hydrocarbons and oil (El Economista – Spanish). The Cofece believes the project could make fuel sales very difficult.


The Cenace will turn down renewables. The state-owned company said that the National Center of Energy Control (Cenace) will take intermittent renewable generation out of operation to secure the reliability of the national system when demand goes down (El Financiero – Spanish).


AMLO’s energy policy may affect 200 energy projects. Approximately 200 wind parks, natural gas plants, solar farms, and other projects could be halted as President López Obrador mandated a stop to permits (El Financiero – Spanish). Iberdrola postponed new investments while AES delayed an agreement for a US$400m wind park.



Market Trends


Nuevo León expects solar generation to expand. In 2021, Nuevo León’s energy cluster expects power plants that are 0.5 MW or smaller to continue growing (El Economista – Spanish). The Wholesale Electricity Market (MEM) is expected to attract private sector consumers looking for clean energy at a lower cost.


Mexico placed bonds in Taiwan and Luxembourg. The Finance Ministry placed a new bond of reference for 50 years for US$3bn at a 3.75% rate (Forbes – Spanish). The operation took place simultaneously in two markets in Taiwan and Luxembourg.


Pemex’s production level will remain unchanged. The Energy Minister Rocío Nahle said the country will maintain its oil production quota during February and March (El Financiero – Spanish). In November, Mexico’s production reached 1,633,000 daily barrels. The announcement was made after OPEC’s last meeting.


Pemex refining suffered in 2020. Through November 2020, fuel refining was between 0.5% and 10.2% below the latest goals of the state-owned company (El Economista – Spanish). November averaged 548,480 barrels per day, while oil production in Pemex’s fields could be at its second lowest level in 30 years.



Strategy & Operations


Pemex will invest more in drilling. The state-owned company’s investment in drilling wells will increase 1.49% to reach US$8.1bn. The CNH approved the exploration plan for the AE-0135-Cuichapa field (El Financiero – Spanish).


Transmission failures blacked out Mexico. The failure of two transmission lines in Tamaulipas forced the CFE to shut down power supply to several areas of the country (Platts – English). CFE pointed to a fire as the reason for the blackout, but later denied it (El Economista – Spanish).


Grupo Dragón will bet on Baja California’s power. Grupo Dragón will invest MXN798m to build a natural gas plant to generate power in Baja California (Forbes – Spanish). The power plant will have a 140MW capacity.


Cementos Moctezuma will power up with the sun. The company invested MXN220m in the installation and construction of a solar park in San Luis Potosí (Forbes – Spanish). The power generated by the solar plant will be available for other users in the area where the cement plant is located.


Solensa rides natural gas distribution. The company from Nuevo León distributes natural gas via LNG trucks to regions that traditional infrastructure does not reach (El Financiero – Spanish). Solensa has the first LNG liquefaction plant in the country.



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!)



The 6th Mexico Infrastructure Projects Forum will be held January 19-21 as a virtual event.


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


Nuevo León’s energy cluster was awarded the National Prize of Energy Innovation. The Nuevo León Energy Cluster was recognized for the best projects by higher education and graduate students who participated in the National Prize of Energy Innovation (El Financiero – Spanish). The winning project was a cooling/heating system for homes using geothermal energy.



Quote of the Week


“Los tiempos son malos y hay que aprovechar, porque si hay días que nada el pato, hay días que ni agua bebe.”


“Times are bad, and we have to take advantage, because if there are days the duck swims, there are others that it does not even drink water.”



– Mariano Azuela (1873-1952), Mexican author and physician.



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