January 16, 2017 edition— Eleven companies vie for Rounds 2.1 and 2.2; solar panels to the rescue; and five renewable projects in sight.
Last Week in a Minute or Less
Renewables & Electricity. Solar panels will save MXN5.9bn; Northern Mexico will soon host five new renewable energy projects; and Yucatán will get a new wind farm.
Natural Gas & Liquid Fuels. Natural gas imports are up 83.7% in two years; the fight over fuel prices continues; and Trump can send gasoline prices even higher.
Oil & Gas Upstream. Upstream tenders will save Mexico’s production and eleven companies prequalified for Round 2.1 and 2.2.
Money & Power. OECD bets on Mexico’s growth in 2017; US and Mexico share rules on electricity cooperation; and Banxico sold dollars to support the peso.
Déjà vu all over again. Last week’s readers were particularly interested in the new pipeline in Yucatán (Spanish); the extension of the natural gas open season (Spanish); and the 30% growth in solar energy (Spanish).
The Road to Reform
Round 1 to the rescue of Mexico’s oil production. The Round 1 auctions will allow Mexico to increase its production by 17.5% in 10 years (Spanish). KPMG Energy and Natural Resources analysts report that Mexican output drops by around 3.8% annually, and will grow by 43% in 10 years with production from deep-water fields.
…and more fields must be tendered. Mexico’s production can improve only if a greater number of fields are auctioned to private companies. The 2016-2030 Crude Oil Outlook considers two scenarios: the minimum average annual extraction could be 2.291 million barrels per day and the maximum, three million barrels per day within six years (Spanish).
Eleven companies pre-qualified for Round 2.1 and 2.2. Information from the National Hydrocarbons Commission (CNH) shows that ten companies aim to compete for 15 contractual areas for exploration and extraction (Spanish). For Round 2.2, Geo Power Solution is the only company prequalified to bid for 12 onshore fields.
Solar panels save the day…and MXN5.9bn. According to the Energy Minister, new, user-friendly regulations facilitating the installation of residential solar panels will save MXN5.9bn in subsidies and more than 680 million of liters of water (Spanish) (Spanish). In Mexico, only 0.23% of homes have solar panels installed.
Peña Nieto says the gasoline price hike is “a responsible measure” and “Calderón’s fault”. Pres. Peña Nieto blames his predecessor, Felipe Calderón, for holding gasoline prices down, wasting almost a trillion pesos in subsidies (Spanish). Peña Nieto considered the gasoline price spike a “responsible” measure to align with rising international oil prices (English).
On the bright side, the gasoline tax rate was down in January. From January 1 to February 4, taxes paid on gasoline will be lower than in January 2016. Today, taxes total 36% of the final gasoline price, 5.75 pesos, while in the same month last year it was 45%, or 5.90 pesos per liter (Spanish).
Coparmex and Conago refuse to back the federal economic agreement. The business confederation (Coparmex) and the National Conference of Governors (Conago) refused to sign the Agreement for the Strengthening the Economy and Protecting Family Economies (Spanish). The management organization argued that the agreement has no clear goals or metrics for assessing progress.
US and Mexico signed rules for electricity cooperation. Both nations signed 11 guidelines for cooperating in the regular exchange of electricity in case of disasters and vulnerabilities (Spanish). The US Department of Energy emphasized the high degree of interconnection of the two grids and the need to strengthen security measures.
Banxico sold dollars to bolster the peso. After the peso dropped due to Trump’s threats over protectionist policies, Mexico’s central bank sold dollars in Asia, Mexico, and New York (English) (Spanish). Mexico does not discard further dollar auctions to back up the peso, boost liquidity, and reduce volatility (English).
Natural gas imports rise 83.7% in two years. Mexico’s natural gas imports from the US reached 1.3 billion cubic feet per day, a 31.3% increase compared to 2015 and up 83.7% compared to 2014 (Spanish). Mexico has 17 trillion cubic feet of proven natural gas reserves.
Trump can make gasoline prices go even higher in February. The Energy Regulatory Commission (CRE) expects a hike in gasoline prices following Trump’s inauguration (Spanish). The first decisions taken by the new administration could strengthen the dollar against the peso and, as a result, impact the cost of fuel imports.
The OECD expects Mexico to grow faster in 2017. OECD chief José Ángel Gurria foresees higher growth for Mexico this year, countering consensus views that Donald Trump’s protectionist policies will dampen growth (English). The peso depreciation will boost exports, lifting the economy over the 2.2 percent growth rate of 2016 and improving more in 2018.
Strategy & Operations
Five renewable energy projects are waiting for an okay. In the last quarter of 2016, five projects in northern Mexico sought permits from the Environment and Natural Resources Ministry (Semarnat) to change land use provisions and rule on environmental impact (Spanish). Two projects are located in Coahuila, two in Chihuahua, and Sonora will have a combined-cycle plant.
Yucatán may get a new wind park. The Energy Regulatory Commission (CRE) is considering the approval of a new wind park in the Dzilam de Bravo municipality. The project would mean an investment of MXN2bn for the Central Eólica de la Península with a 60 MW capacity (Spanish).
SHCP and Conago will seek to lure investment to combat higher fuel prices. The Finance Ministry and the National Conference of Governors (Conago) agreed to review investment schemes in oil-producing states and reduce costs for fuel delivery and storage (Spanish). The Ministry and Conago will create task forces to respond to public protests.
Blockades continue at two Pemex terminals. The state-owned company reported that only two of 11 blockades remain at storage terminals – in Durango and Rosarito (Spanish). Protests prompted over 250 arrests nationwide, 79 stores were sacked and 170 closed due to blockades, and 27 blockades were set up in Mexico City alone (English).
Old School Social
Events in the world beyond your screen – go see and be seen!
The Mexico Infrastructure Projects Forum is January 18-19 in Monterrey, Nuevo León.
The Solar Summit: Mexico is January 27-28 at the Presidente Intercontinental Mexico City.
Energy Mexico 2017 is the main energy sector event that covers all activities within the energy industry, and the only one organized by the private sector that includes a conference with the most prestigious speakers and an international scale B2B exhibit. http://www.energymexico.mx/
Small earthquakes shake the northern border. Over 250 small earthquakes along the California-Mexico border worried residents in both countries. Scientists monitored the swarm of earthquakes for the possibility that a magnitude 5 earthquake might happen in the Brawley Seismic Zone which connects the San Andreas and Imperial faults (English).
Quote of the Week
“El amor es la locura más lúcida que tiene el hombre.”
“Love is the most lucid madness men have.”
– Andrés Henestrosa (1906-2008), Mexican writer and politician
We hope you have a productive week. Please send any news, comments, or earthquake warnings to MexicoWeekly@energynarrative.com.
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