The Weekly Brief: Mexico


January 22, 2018 edition—Alpek on sale; 13 in Round 3.1; and NAFTA’s cow problem.




Last Week in a Minute or Less


Renewables & Electricity. Matamoros and San Luis Potosí will bet on solar; Alpek offered to sell two co-generation plants; and Mexico said no to a hydroelectric plant in Oaxaca.


Natural Gas & Liquid Fuels. Four pipelines will supply cheaper gasoline; Total opened its first Mexican gas station; and Pemex supplemented stocks with US ethane.


Oil & Gas Upstream. Thirteen companies will compete in Round 3.1.


Money & Power. Trump said benefits from a new NAFTA deal could pay for the wall; Inegi predicts volatile inflation; and natural gas production fell by 13%.


Déjà vu all over again. Last week’s readers were particularly interested in AMLO’s team maintaining the energy reform (Spanish); companies interested in Round 2.4 (Spanish); and Canada’s conviction on Trump’s withdrawal (English).



NAFTA Negotiation


Trump linked NAFTA talks to his border wall. President Donald Trump repeated his threat to withdraw from NAFTA, saying the gains from a new deal could pay for the wall (English) at the Mexican border. The president assured he will be “a little bit flexible” until after Mexico’s presidential election.


The three ministers will meet at Davos. US Trade Representative Robert Lighthizer, Mexico’s Economy Minister Ildefonso Guajardo, and Canada’s Foreign Minister Christia Freeland will attend the World Economic Forum in Switzerland. The same day, the sixth round of NAFTA talks will start in Montreal (English).


Ryan blamed Canadian dairy producers for NAFTA’s problems. US House speaker Paul Ryan said the main problem with the NAFTA negotiation is with Canadian dairy producers who dump low-cost dairy products on the market to compete with Wisconsin farms (English). Ryan said the end of NAFTA could risk higher tariffs for US exported cheese.


The end of NAFTA could hamper North American energy integration. The possible US withdrawal from NAFTA could delay projects designed to export US natural gas (English) to Mexico. This could affect the Trump administration’s goal to establish US energy dominance.



The Road to Reform


The Cofece suggested six strategies for electricity competition. The Federal Commission on Economic Competition (Cofece) assured the success of energy reform lies with the transformation of the state, CFE, and Pemex. The Cofece suggested six basic conditions (Spanish) to make the new electricity market more competitive.


Four pipelines will offer cheaper gasoline. Four pipelines are being built for private companies to import gasoline from the US (Spanish) and countries such as India. The pipelines will start operation in the first half of 2018 and will connect the main import areas to Mexico City, Monterrey, and the Bajío.


Nuevo León’s energy investments will go through the roof. In 2018, Nuevo León will capture US$2.2bn in energy sector investments (Spanish) resulting from projects that are already in progress. Two natural gas pipelines, one oil products pipeline, three wind parks, one solar farm, and one power plant are under construction.


Thirteen companies will put up a fight in Round 3.1. The National Hydrocarbons Commission (CNH) approved an extension to allow companies to sign up (Spanish) for Round 3 and access the Data Room information. Round 3 will receive bids through March 27, and 13 companies have shown interest.



Political Economy


Mexico’s country risk suffered a weekly increase. The country risk of Mexico reached 185 basis points (Spanish), four units above the previous week’s level. Mexico’s country risk closed 2016 at 232 basis points, similar to its level in 2015.


The peso enjoyed a good Blue Monday. Mexico’s peso enjoyed a good Blue Monday, with the exchange rate at 18.858 pesos per dollar (Spanish). The peso appreciated by 2.71% in three consecutive sessions.


Inegi forecasts volatile inflation. Inflation will be more volatile this year due to a methodological change in its calculation, giving more weight to fresh and processed food (Spanish). The new measure will be national and not solely focused on urban areas, as it will include populations with less than 15,000 inhabitants.


Guanajuato and Michoacán suffer illegal taps daily. Every day, four illegal taps (Spanish) are discovered in the Pemex pipelines crossing Guanajuato and Michoacán. Military troops are monitoring both states to fight criminal groups that steal fuel.




Sponsored Content


For the third consecutive year, the Energy Mexico Oil Gas Power Expo & Congress will be the main energy event in Mexico, where all sectors of the industry will come together: oil, gas, power, and renewables. It is the only event organized by business people for business people that combines a world-class congress with an international level exhibit floor.




Market Trends


Natural gas-fired electricity generation will be on the rise… The Energy Ministry forecast natural gas-fired electricity generation will increase from 52.1% of all electricity produced in 2016 to 61.6% in 2031. Import levels will reach 4.6 billion cubic feet per day (Spanish), a 10.6% increase.


… and the US could become a net exporter. The United States could become a net exporter of natural gas in 2018 (Spanish) for the first time in more than 50 years. The Energy Department said that US LNG export capacity will be the third largest in the world in 2019.


Natural gas production fell by 13%. In November 2017, Pemex produced 13% less natural gas (Spanish) compared to the same month in 2016, from 5.5 billion cubic feet (Bcf) per day to 4.8 Bcf per day.


Green bonds are getting all the attention. The global green bond market reached a new annual record in 2017, growing 78% compared to 2016. New bond issues reached US$155.4bn (Spanish) in 2017, well above the US$130bn initially forecast.



Strategy & Operations


Alpek made a US$700m asset sale. The Alfa subsidiary offered to sell two co-generation plants (Spanish) in Cosoleacaque, Veracruz and Altamira, and Tamaulipas for US$716m. The 60-day period to negotiate the sale ended January 9 (Spanish).


Matamoros and San Luis Potosí will shine brighter. Energía Solar de Poniente is preparing to build Parque Solar Andalucía II in Matamoros with a US$50m investment (Spanish). Saudi Arabia’s Abdul Latif Jameel Energy provided financing to start building a solar energy project (Spanish) in San Luis Potosí in 2018.


Pemex imported ethane from the US to supplement stocks. The state-owned company boosted its supply of the petrochemical feedstock, importing ethane from the US (English). The cargo is part of a multi-month term deal, with Vitol chartering a vessel on behalf of Enterprise Product Partners.


Oaxaca said no to a hydroelectric plant. The federal government denied the environmental permits to build a hydroelectric plant (Spanish) in San Agustín Etla, Oaxaca. The plant was to receive an investment of MXN182m to generate power from the Rio Grande.


Total cut the ribbon on its first Mexican gas station. The French company opened its first gas station in Lomas de Chapultepec, in Mexico City. Total announced that the company will open between 80 and 100 gas stations in 2018 (Spanish) and plans to have 250 stations by 2019.



Old School Social


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


The dialogue A World Without NAFTA? will be held January 25 at the Wilson Center, NW Washington, D. C.


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


The panel on Political Uncertainty and Mexico’s Energy Reform will be held February 15 at the James A. Baker III Hall, Rice University, in Houston, Texas.


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.


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


The biggest flooded cave was found in Tulum. Divers participating in the Gran Acuifero Maya (GAM) project found the biggest flooded cave (Spanish) on Earth, at 347km. The discovery allows researchers to better understand and appreciate local pre-Hispanic rituals (English), pilgrimage sites, and settlements.



Quote of the Week


“Soy los libros que he leído.”


“I am the books I have read.”


-Andrés Henestrosa (1906-2008), Mexican poet, writer, and politician.



We hope you have a productive week. Please send any news, comments, or locations of big flooded caves to


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