The Weekly Brief: Mexico


January 15, 2018 edition—Yucatán blows; Pemex’s open pipelines; and pricey tortillas.




Last Week in a Minute or Less


Renewables & Electricity. Yucatán will power up CFE with wind parks; Interpuerto Monterrey will develop cogeneration projects; and clean energies will get the most power investments.


Natural Gas & Liquid Fuels. Pemex launched a pipeline open season; refineries will add capacity by 2026; and most gasoline will come from abroad.


Oil & Gas Upstream. Five companies will compete for Round 2.4.


Money & Power. Canada is certain Trump will abandon NAFTA; inflation is on a tear; and Osorio left the Interior Ministry.


Déjà vu all over again. Last week’s readers were particularly interested in the problems observed at the electricity auction (Spanish); China’s interest in Latin American trade (Spanish); and Amexhi’s suggestion to speed up rounds and farmouts (Spanish).



NAFTA Negotiation


Canada is sure Trump will abandon NAFTA… Canada is convinced President Donald Trump will announce in the next few weeks that the US will withdraw from NAFTA (English). Sources expect Trump will make the announcement around the same time as the sixth round of talks (Spanish).


… and the World Bank warned about the impact on global trade. The World Bank (WB) forecasts the end of NAFTA could affect trade between the member countries (Spanish) and their interconnection to the global economy. Costs could increase and trade volume will be reduced.


Canada targeted pro-NAFTA Republicans ahead of Round 6. Justin Trudeau’s lead NAFTA minister is contacting Republican senators (English) to avoid the Trump administration’s withdrawal from NAFTA. Foreign Affairs Minister Chrystia Freeland met with Commerce Secretary Wilbur Ross, and was due to meet with Republican senators who have supported NAFTA publicly.


Mexico’s Economy Minister pointed to a deal on US car content. Ildefonso Guajardo, Mexico’s Economy Minister, said there is common ground on regional content rules (English) for cars in the NAFTA talks. Guajardo said the Montreal talks are “crucial” (Spanish) for sending clear signals about the renegotiation.



The Road to Reform


Five companies will fight for Round 2.4. Round 2.4 will take place on January 31, and 16 companies are expected to compete as operators. Participating companies reported a combined US$208.5bn available for investment, of which BP, Petronas, Royal Dutch Shell, Statoil, and Total account for 63.5% of the total (Spanish).


The special gasoline tax can keep prices stable. The Finance Ministry announced an increase in tax stimulus for premium gasoline and diesel, to 50.89% and 61.09%, respectively (Spanish). The Finance Ministry said there is no reason for an abrupt rise (Spanish) in gasoline prices.


Pemex launched a pipeline open season. Pemex announced an open season for pipelines and storage terminals that will assign capacity on March 14 (Spanish). The first 2018 open season includes two sections of the Satélite-Monclova-Sabinas pipeline (Spanish), where illegal fuel taps are common.


The AMLO team will not abandon energy reform. Rocío Nahle, a likely Energy Minister under left wing presidential candidate Andrés Manuel López Obrador, promised not to change the energy reform completely (Spanish), but “redirect” it. Nahle accepted the energy sector opening, but disagreed with the strategy.



Political Economy


Inflation skyrocketed, as did tortilla prices. Inflation reached 6.77% in 2017 (Spanish), with energy products, food, drinks, and tobacco contributing to the increases. Tortilla prices went up to 20 pesos per kilo in two states (Spanish) and, after a meeting with the government, producers agreed prices will be maintained (Spanish), with funds to reduce operational costs.


The World Bank cut Mexico’s growth estimate slightly. The World Bank had forecast 2.2% growth for 2018 (Spanish), but the NAFTA renegotiation and the presidential elections have lowered the estimated growth to 2.1% (English). The World Bank expects 2.6% growth in 2019.


Banxico could increase rates three times in 2018. According to analysts, the Bank of Mexico could be more restrictive in 2018 and implement three increases to its target rate. Analysts estimate the first increase will take place on February 8, leaving the reference rate at 7.5% (Spanish).


Osorio left the Interior Ministry. After losing the battle to become the presidential candidate, Miguel Ángel Osorio Chong left his position as head of the Interior Ministry to seek a position in the Senate (Spanish). President Enrique Peña Nieto assured Osorio Chong was key to his political project (Spanish).





Sponsored Content


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Market Trends


Most gasoline will come from abroad. According to the 2017-2031 Prospective of the Energy Ministry, Mexico will import half of the gasoline consumed by 2021 (Spanish). Import volumes will remain over 367,000 barrels per day (bpd), after 2017 imports averaged a historic level of more than 442,800 bpd.


Doubts surround natural gas flows after the bomb cyclone. The natural gas industry was not concerned about supply since the winter storm did not stop flows (Spanish). However, from December 2, 2017 to January 2, 2018, US natural gas demand increased by 114% (Spanish) due to low temperatures.


LP gas prices went up with the new year… LP gas prices increased an average of 2.3% in 2018 to 18.86 pesos per kilogram (Spanish) from the 18.43 pesos reported in December 2017. The Energy Regulatory Commission (CRE) explained LP gas prices change depending on access to storage and transport infrastructure.


… and are expected to go higher still. International LP gas prices are at a three-year high (Spanish) and US LP gas, consumed in seven out of 10 homes in Mexico, is at 94.37 cents per gallon. This level has not been seen since October 10, 2014.



Strategy & Operations


Yucatán will power up CFE with wind parks. Yucatán will invest US$550m in three wind parks (Spanish) in the first half of 2018 to generate more than 50MW in clean energy. The energy will supply CFE, Mexico’s central area, and corporations.


Interpuerto Monterrey will go into cogeneration. Interpuerto Monterrey is considering power cogeneration projects with natural gas (Spanish), to be ready by 2021, with investments averaging a million pesos per megawatt. The goal is to provide clients with a complete and competitive infrastructure.


Refineries will add capacity by 2026. Mexico will add new capacity for gasoline, diesel, and jet fuel production (Spanish) in its refineries by 2026. The Madero refinery’s production fell 30% in 2017 (Spanish) due to a programmed maintenance shutdown that started in September.


Clean energies will be the big investment winners. From 2017 to 2030, 7.1 of every 10 pesos invested in power infrastructure will be directed to wind and solar power. By 2030, 49% of all power investment will be clean (Spanish).



Old School Social


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


NAFTA and European Investors: Impacts Across the Atlantic will be held January 17 at the Wilson Center, in Washington, D.C.


The 3rd Mexico Infrastructure Projects Forum is scheduled for January 17-18 at Hotel Camino Real in Monterrey.


The 4th Natural Gas Power Plant Construction Summit, Mexico 2018, will be held February 28-March 1. The meeting 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.


The Solar Summit Mexico is scheduled for February 13-14 at the Hyatt Regency Mexico City, Mexico City.


Mexico WindPower is scheduled for February 28-March 1 at Centro Citibanamex in Mexico City. In its seventh edition, Mexico WindPower 2018 consolidates its position as Mexico’s most important congress and exhibition event in the wind power sector. In addition, you can network with key personalities in the industry and meet real buyers face-to-face.



Lateral Thinking


A 1,000-year-old stone structure may represent the Earth’s origin. Archaeologists believe a 1,000-year-old stone structure in Mexico may be a representation of the Earth’s creation (English) in ancient Mesoamerica. The shrine, perhaps a miniature universe model, is located in a pond where the water flow gives the visual effect of a water mirror (English).



Quote of the Week


“Hacía tantos años que no alzaba la cara, que me olvidé del cielo.”


“I had not raised my face for so many years that I forgot about heaven.”



-Juan Rulfo (1896-1974), Mexican writer, screenwriter, and photographer. The quote is from Pedro Páramo.



We hope you have a productive week. Please send any news, comments, or representations of the Earth’s origin to


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