The Weekly Brief: Mexico


January 18, 2020 edition—Transmission tariffs; LNG export hub; and CNH exploration plans.




Last Week in a Minute or Less


Electric Power & Renewables. IEnova is after all of Baja California’s wind; CRE increased transmission tariffs by 800%; and Mexico’s solar could feed 8 million homes by now.


Natural Gas Mid-Downstream & LNG. Mexico may build an LNG export hub in Salina Cruz; Mexico may enjoy more US natural gas; and Braskem Idesa restarted operations.


Liquid Fuels Mid-Downstream. AMLO is considering doing away with energy regulators and the competition watchdog.


Oil & Gas Upstream. The CNH okayed exploration and extraction plans.


Government & NGO. Banxico expects Mexico’s GDP to reach 5.3%; farm trade could be a wild card in energy row negotiations; and menacing autonomous regulators go against the USMCA.


Déjà vu all over again. Last week’s readers were particularly interested in Cenace’s switching renewables off (El Financiero – Spanish); refining’s worst year (El Economista – Spanish); and Mexico’s private fuel imports (Reuters – English).



Geopolitics & Trade


Menacing autonomous regulators goes against the USMCA. The Federal Institute of Telecommunications (IFT) warned that making autonomous regulators disappear will weaken the state and breach the USMCA (El Financiero – Spanish). The IFT is open to dialogue to improve the regulator.


Mexico focuses on COVID-19 fighting exports. During the first half of 2020, Mexico was the fifth major exporter of medical equipment needed to fight COVID-19. Mexico exported US$6.2bn of these types of products, an 8.4% increase compared to the same period in 2019 (El Financiero – Spanish).


The Economy Ministry expects US exports to help Mexico. According to the Economy Ministry, Mexico’s export market and US fiscal support could boost the Mexican economy to a 6% recovery rate (El Financiero – Spanish). Mexico would have to take advantage of the US and China’s trade war.


The USMCA may cover migrant workers’ vaccines. Mexico will appeal to the labor chapter in the new NAFTA to have migrant workers receive the COVID-19 vaccination in the US (El Economista – Spanish). The statement responds to Nebraska Governor Pete Ricketts’ comments regarding illegal workers and their vaccination.


Farm trade could be a wild card in energy row negotiations. Economy Minister Tatiana Clouthier said that Mexico could mention concerns over potential barriers to its agriculture exports to the US in negotiations over Mexico’s new energy policy (Reuters – English).



Political Economy


The IMF forecasts a 5-year recovery period. The International Monetary Fund (IMF) expects the recovery from the COVID-19 pandemic to be slower due to the actions implemented, and it could take at least five years to return to pre-COVID levels (El Financiero – Spanish).


Inflation reached 3.15% in December. The National Index of Consumer Prices (INPC) reached 3.15% in December 2020, well in the range of Banxico’s goal (El Financiero – Spanish). It was the lowest level since May 2020, when it reached 2.84%.


Banxico expects Mexico’s GDP growth to reach 5.3%. According to Banxico, the Mexican GDP could increase 5.3% if the economic sectors normalize with the vaccination against COVID-19 (El Economista – Spanish). Banxico’s governor said demand will remain down for a couple more years.


Moody’s does not expect much growth. The international rating agency said Mexico’s economic recovery will be limited due to several factors, including efficient implementation of the vaccine and US economic growth (El Financiero – Spanish). Moody’s warned that the government’s fiscal austerity is a risk factor when dealing with the pandemic.



Legal & Regulatory


AMLO cut 70% of autonomous energy regulators’ budgets. Since the beginning of his administration, President López Obrador has reduced the budgets of energy regulators by 70% on average (Forbes – Spanish). The Energy Ministry’s budget has increased to support the construction of Pemex’s new refinery.


AMLO is considering getting rid of energy regulators and the competition watchdog… President López Obrador plans to dissolve autonomous regulators into government ministries to save the government US$1bn (Argus Media – English). The decision would further hit business confidence (Natural Gas Intel – English). The bill could include the Cofece, the CRE, and the CNH.


…and Bartlett has some in mind. The head of the state-owned company, Manuel Bartlett, said that autonomous regulators, especially the Energy Regulatory Commission and the Federal Institute of Telecommunications, “are disturbing” and should be absorbed (El Financiero – Spanish). He believes all could be absorbed.


The CNH okayed exploration and extraction plans. The National Hydrocarbon Commission approved the work plans and budgets for crude exploration plans made by Servicios Múltiples Burgos and DS Servicios Petroleros. The CNH okayed the 2021 work plan and budget of Total E&P Mexico (El Financiero – Spanish).



Market Trends


Mexico may build an LNG export hub in Salina Cruz. Mexico is considering the construction of an LNG export terminal in the port of Salina Cruz to use Mexico’s excess natural gas (Platts – English).


CRE increased transmission tariffs by 800%. The Energy Regulatory Commission (CRE) increased transmission tariffs by 800% for low tension (El Financiero – Spanish). The reason provided was the recovery of costs generated for the service.


The CFE is set to break some clean energy promises. The state-owned company plans to boost 60 hydroelectric plants to fulfill 2024 clean energy goals. However, experts agree the effort would not be enough if it is not complemented with the use of solar and wind power plants (El Norte – Spanish).


Mexico may enjoy more US natural gas. Experts forecast an increased dependence on US natural gas in Mexico with a push to decarbonize the US and an increase in short- and mid-term demand from Mexico (Natural gas Intel – English). Natural gas is expected to be favored in the new US administration.



Strategy & Operations


Nuevo León’s energy hub could suffer from Mexico’s energy policy shift. Considering President López Obrador’s regulatory changes fortifying Pemex and CFE, foreign and local energy companies are delaying or canceling new power generation projects in Nuevo León, a destination for energy investment due to its high solar irradiation levels and proximity to the US (Argus Media – English).


IEnova is after all of Baja California’s wind. The company sent a request to the Federal Energy Regulatory Commission (FERC) to acquire Saavi Energía’s share in Energía Sierra Juárez (Milenio – Spanish). Energía Sierra Juarez is located in the Tecate municipality, in Baja California.


Fisterra Energy got funds in Mexico. The subsidiary of the Spanish company, Ciclo Combinado Tierra Mojada (CCTM), received US$1.1bn to refinance debt incurred for the construction of the natural gas combined cycle plant Tierra Mojada, with an 874.5MW capacity, located in Zapotlanejo, Jalisco (Lex Latin – Spanish).


Mexico’s solar could feed 8 million homes by now. According to the Mexican Association of Solar Energy, Mexico could become the seventh-largest producer of solar energy worldwide, today producing 4,752MW of solar energy (Energía Limpia Para Todos – Spanish). Solar plants in the country have received US$9.6bn in estimated investment in 16 states.


Braskem Idesa restarted operations. Braskem Idesa restored operations of polyethylene production under an experimental business model (Mexico Business – English). The agreement complies with safety standards while reducing the impact on the Mexican plastic industry’s supply chain.



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


Iberdrola won a prize given by APQO. The subsidiary of the Spanish company won the Global Performance Excellence Award (GPEA) 2020 awarded by the Asia-Pacific Organization for Excellence (APQO), for its “business management” (Archyde – English) (EFE – Spanish). The APQO invites companies that have previously achieved national and regional recognition to participate.



Quote of the Week


“El periodismo es la actividad puntiaguda, plena de escollos que sólo el más sabio puede sortear y esquivar.”


“Journalism is a sharp activity, full of obstacles that only the wisest can negotiate and dodge.”




– Mariano Azuela (1873-1952), Mexican writer and politician.



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