January 30, 2017 edition— Migration of contracts postponed; wind energy up 350% by 2030; and NAFTA on the table.
Last Week in a Minute or Less
Renewables & Electricity. Virtual CELs may save the day; wind energy will increase 350% by 2030; and an electrical highway will carry power from Oaxaca to Mexico City.
Natural Gas & Liquid Fuels. Cenagas offers two pipeline sections; natural gas and LP gas prices rose; and CRE approved the transfer of natural gas contracts.
Oil & Gas Upstream. Thirteen companies pre-qualified for Round 2.1 and the migration of new contracts was postponed.
Money & Power. Mexico and the US will renegotiate NAFTA; inflation jumped to 4.78%; and IEPS tax collections will amount to MXN870bn in two years.
Déjà vu all over again. Last week’s readers were particularly interested in CFE’s transmission rates (Spanish); the 10 companies that pre-qualified for Round 2 (Spanish); and IEnova’s investment in Mexico (English).
The Road to Reform
Migration to new contracts postponed. The National Hydrocarbons Commission (CNH) delayed until 2018 the migration of five oil contracts located in Chicontepec to licenses (Spanish) (Spanish). The fields are operated by private companies in partnership with Pemex and MXN960m will be invested in exploratory drilling in the next two years.
Virtual schemes may save CELs. Analysts believe that clean energy certificates (CELs) may become scarce in 2018, and the shortage may lead to sanctions and filing of injunctions (amparos) (Spanish). A mechanism that allows virtual CEL obligations could provide a short-term solution, and would be backed by real CELs in the next five years.
CRE approves the transfer of natural gas contracts. The Energy Regulatory Commission (CRE) approved the procedure for the implementation of transfer of natural gas contracts (Spanish). The program promotes new investments as well as new participants in the industry by allowing private companies to access 70% of the natural gas marketed by Pemex TRI.
Cenagas offers the first 578 km of pipelines. The National Center of Natural Gas Control (Cenagas) will tender two sections of the Jáltipan-Salina Cruz and Lázaro Cárdenas-Acapulco pipelines (Spanish). Together, the 578-km of pipeline will represent an investment of US$1.09bn and add almost 6% to the national grid.
Round 2.1. draws the attention of 13 oil companies. The National Hydrocarbons Commission (CNH) reported that 13 companies started the technical and financial pre-qualification process for 15 contracts for shared production (Spanish). An investment of US$11.2bn is expected and 1.585 million barrels of crude oil will be available.
US and Mexico gear up to renegotiate NAFTA. President Donald Trump talked with Mexico’s and Canada’s leaders to plan a renegotiation of the NAFTA trade agreement (English) (Spanish). Trump will look for a better deal and so will Mexico, and if neither party obtains “clear benefits”, both countries threaten to leave (Spanish) (English).
The Wall threatens Mexico-US relations. After Trump’s announcement of the Wall and Mexico’s refusal to pay for it, Peña Nieto canceled the meeting and Trump threatened to finance the Wall with a 20% border tax on Mexican products (English) (Spanish). In their meeting, Trump and Peña Nieto were going to discuss trade, migration, and security (Spanish) (English).
In two years, IEPS will collect MXN870bn. From 2015 to 2017, the special tax (IEPS) on gasoline and diesel will raise MXN870bn, equivalent to 84% of the subsidies on gasoline between 2006 and 2014 (Spanish). From the total amount collected, MXN403.7bn will be paid by the 20% of the population with the highest incomes.
Pemex will build four co-generation plants. In the second semester, the state-owned company will start construction of four co-generation plants that will provide steam and electricity (Spanish). With an investment of US$2.5bn, the plants will be ready in 2019 and 2020 and the trading contracts are being prepared.
Energy Mexico Oil Gas and Power 2017 Expo & Congress
Energy Mexico Oil Gas Power 2017 Expo & Congress is the main energy sector event that includes a conference with the most prestigious local and international speakers, covering all activities within the energy industry (oil, gas, power and renewable energies) from different angles like technology, financing, services and human resources. Additionally, includes an international scale B2B exhibit. www.energymexico.mx.
After the gasoline price increase, inflation shot up 1.51%… The gasoline price hike pushed inflation to the highest increase in 18 years, a 1.51% jump in the first two weeks of January (English) (Spanish). Consumer prices rose to an annual rate of 4.78%, well above the 3% target of the central bank.
…but Meade assured that it’s temporary. Finance Minister José Antonio Meade acknowledged the increase in inflation due to the gasoline price hike and affirmed it will be temporary and will disappear over time (Spanish). Meade pointed out that once the relation with the United States is secured, uncertainty will be reduced.
Cold weather and the dollar make natural gas prices jump… The price of imported natural gas rose 57% in January, 57.44 pesos per gigajoule (Gj), compared to 36.7 pesos per Gj in the same month in 2016 (Spanish). The price increased due to low temperatures worldwide and the cut in production.
…and the same goes for LP gas. The Mont Belvieu reference prices hit historical highs in peso terms due to the cold weather and the strength of the dollar (Spanish). The president of the gas suppliers’ association explained that the 16% increase is leveling the market from the fall in prices last year.
Strategy & Operations
Mexico will take a walk on the DC side. Siemens presented the project for Mexico’s first “energy highway” with High Voltage Direct Current (HVDC) transmission lines to carry electricity from the southern region (English) (Spanish). The 600-km highway connecting Oaxaca to Mexico City will transport 3,000 megawatts via HVDC and will be ready by 2020.
Wind energy will fly 350% higher in 2030. The changes in the electricity market and the tenders will allow a 350% increase in wind energy by 2030 (Spanish). According to the Energy Ministry (Sener), 6,633.1MW of wind energy will be added between 2016 and 2020 and an additional 5,366.9MW will come onstream from 2024 to 2027.
Nuevo León will brag about a new energy hub. White Eagle Trading LLC and the Deputy Minister of Energy of Nuevo León will develop an energy Hub in three or four years (Spanish). The goal is to achieve transparency in natural gas prices and ease management of volume and securing supply.
Sonora bets on electric cars. Sonora will develop lithium mines to supply producers of batteries for electric cars such as Tesla and Lucid Motors (Spanish). Goldman Sachs says global lithium production today amounts to less than 30,000 tons annually, while production is expected to reach 300,000 tons by 2025.
Old School Social
Events in the world beyond your screen – go see and be seen!
The ExpoManufactura 2017 is February 7-9 in Monterrey, Mexico.
The Mexico Energy Forum is February 15 at the Sheraton María Isabel, Mexico City.
Mexico WindPower 2017 is the most important exhibition and congress for the country’s wind power industry and the only event organized by GWEC and AMDEE together with E.J.Krause de México.
A spoon to heat food on the way. Mexican students from the National Polytechnic Institute have created a thermoelectric spoon that heats up your food with each spoonful (English). Equipped with three 9-volt batteries inside, the spoon will allow people to eat their food on the go, without needing to use a microwave.
Quote of the Week
“Atenderé únicamente a la virtud y al mérito, y buscaré mi principal apoyo en los hombres de orden y progreso.”
“I will tend to virtue and merit only, and I will seek my main support in men of order and progress.”
– Ignacio Comonfort (1812-1863), Mexican politician and soldier.
We hope you have a productive week. Please send any news, comments, or new heating techniques to MexicoWeekly@energynarrative.com.
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