January 9, 2017 edition— Gasoline prices jumped 20%; Round 2.1 postponed; and record oil imports from the US.
Last Week in a Minute or Less
Renewables & Electricity. It’s cheaper to install solar panels; the Finance Ministry covered MXN161bn of CFE liabilities; and Cofemer offers home solar panels as a business option.
Natural Gas & Liquid Fuels. Mexico’s fuel imports skyrocket; Yucatán will have a new gas pipeline; and Gulf invests in its infrastructure.
Oil & Gas Upstream. Round 2.1 was postponed and the natural gas pipeline open season was extended until June.
Money & Power. Mexico’s inflation may reach 5%; gasoline consumers protest rising gasoline prices; and Mexico modified its bond issuance.
Déjà vu all over again. Last edition’s readers were particularly interested in CRE’s payment schemes (Spanish); the opening of information on Pemex’s fields (Spanish); and China and Mexico’s ties after Trump’s win (English).
The Road to Reform
The Finance Ministry says 2017 gasoline prices will be 20% more expensive… With the liberalization, gasoline prices will rise in January by 20% compared to December prices, according to the Finance Ministry (English) (Spanish). The Energy Regulatory Commission (CRE) will publish the Magna, Premium, and diesel prices for 90 regions (Spanish).
…and gasoline consumers took to the streets. Citizens from at least ten states, including Estado de México, Mexico City, and Nuevo León, protested the rise in gasoline prices (Spanish). Grupo G500 will close 400 gas stations in different regions due to insecurity because of violent attacks by protesters (Spanish).
Gasoline prices will vary by region. Monterrey will have cheaper gasoline prices than Mexico City and Guadalajara, thanks to its proximity to the northern border (Spanish). The five phases of price liberalization will begin March 30 in Sonora and Baja California and conclude on November 30 in Campeche, Quintana Roo, and Yucatán.
Round 2.1 was postponed to June. The National Hydrocarbons Commission (CNH) postponed the tender of 15 shallow-water fields from March 22 to June 19, and the deadlines for accessing information and paying inscriptions will be put off for three months (Spanish). The goal is to increase competition and investment in the auction (English).
The natural gas pipeline open season extended until June. The National Center of Natural Gas Control (Cenegas) expanded the open season of the National System of Natural Gas Transportation and Storage (SISTRANGAS). The open season will end in June instead of March since only six companies had registered to date (English).
Mexico will leverage border security to negotiate trade. In talks with President-elect Donald Trump, Mexico plans to use border security to negotiate for maintaining trade and investment (English). Mexico could offer to strengthen its northern border or provide a role for the US in securing the southern border.
The Finance Ministry blamed international trends for higher gasoline prices. The Finance Ministry stated that the gasoline price hike is explained by international oil costs and is not caused by Mexico’s energy reform (Spanish). The government published an international comparison showing Mexico’s new gasoline price is moderate relative to other countries.
Videgaray is back…as Mexico’s Foreign Minister. Luis Videgaray, the former Finance Minister who played a key role in Donald Trump’s visit to Mexico, has been named Foreign Minister (English) (Spanish). Videgaray assured he will speed up the dialogue with the new government of the United States since Trump’s first day in office.
CFE got a MXN161bn gift from the Finance Ministry. The Finance Ministry handed over MXN161bn to the CFE to cover pensions and retirements in the coming years (Spanish). The amount is equal to CFE’s savings in liabilities achieved by changes in the collective contract, raising retirement ages to 65 for men and 60 for women.
Banxico’s reserves sank to their lowest level since 2013. The international reserves of the Bank of Mexico totaled US$176.5bn at year-end, the lowest level since 2013, falling by US$194m during the year (Spanish). The International Monetary Fund (IMF) said reserves help buffer the country against external shocks.
Pemex said protests could endanger fuel supplies. The state-owned company said that the growing protests and blockades of storage and delivery terminals could affect gasoline and diesel supplies (Spanish). Pemex pointed out that blockades can put at risk the normal operation of airports, especially in the border states of Chihuahua and Baja California (Spanish).
Mexico’s oil imports hit a record high, making U.S. refiners happy. US Gulf Coast-based refiners are enjoying Mexico’s increasing demand for imports which could reach a million barrels per day in 2017 (English). Mexico’s dependence is due to its inability to increase refining output to cover domestic demand.
The Post-Christmas crunch worsens: industrial power rates rose… CFE announced a new increase of between 3.7% and 4.5% in industrial tariffs in January compared to rates last December (Spanish). High consumption residential clients (DAC) will also suffer a 2.6% rise in January compared to the December rate.
…and so did LP gas. LP gas prices registered a 21% increase compared to December 2016, and a 25% hike since January 2016 (Spanish). The Energy Regulatory Commission (CRE) has not published LP gas prices on its portal and does not have the resources to regulate this market to avoid abuses.
Mexico’s inflation may skyrocket to 5% in 2017. Moody’s Analytics and Grupo Financiero Banorte estimated that Mexico’s inflation could shoot to between 4.7% and 5% due to exchange depreciation and gasoline prices (Spanish). In December, Mexico’s inflation accelerated, rising to 3.46% through mid-December, its highest level in two years (English).
Mexico modified its first quarter 2017 bond issuance. Mexico’s government adjusted its bond issuance for the first quarter, increasing long-term debt and reducing short-term instruments. Issues of 20- and 30-year bonds will grow by MXN500m and MXN2bn, respectively, while 3- and 5-year bonds will be reduced by MXN1bn (English) (Spanish).
Strategy & Operations
Five gas station operators will fight Pemex for the market. Gulf, Hidrosina, La Gas, Oxxo Gas, and Petro-7 will compete to gain control of the gasoline market from the state-owned company (Spanish). The gas stations are offering a variety of payment methods, special promotions, loyalty programs, and easier billing procedures.
Cofemer allows companies to make money from residential solar panels. The Federal Commission of Regulatory Improvement (Cofemer) will open the market to companies looking to install solar panels in homes to sell power to CFE (Spanish). As in other countries, direct payment for generated energy is being considered.
Gulf México bets US$110m on its infrastructure. The company will invest US$110m to build infrastructure for importing fuel by the fourth quarter of 2017 (Spanish). The goal is to install and operate at least 2,000 gas stations under the Gulf brand to be ready for open competition in 2018.
Yucatán will enjoy a gas pipeline. The pipeline to be built in Yucatán will require an investment of MXN700m to run from Puerto Progreso to Cancún (Spanish). Construction of the gas pipeline will take place between 2017 and 2018 and will bring opportunities in construction, engineering, transportation, and storage services.
Solar energy will grow brighter. Installation costs for solar panels have fallen 60%, leading Mexico’s solar energy companies to expect 30% growth for 2016 and 2017 (Spanish). The sector expects to surpass 21,000 contracts by the end of 2016, a significant increase compared to the 4,800 contracts administered in 2013.
Ford backtracks on investing in Mexico. After Donald Trump’s threats, Ford Motor Company cancelled investments in Mexico totaling US$1.6bn (English) (Spanish). The amount was going to be allocated to its new facilities in San Luis Potosí and instead US$700m will be invested in Ford’s plant at Flat Rock, Michigan.
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/
Environmentalists won’t have to worry about cows’ gases again. Atmospheric scientists are conducting a study in four areas in Mexico testing supplements for cow feed with plants which kill bacteria with tannins (English). The tannins alter the fermentation of methanogens, which produce methane, without affecting cows’ digestion and even makes them more productive.
Quote of the Week
“Para ser libre, no basta quererlo, sino que es necesario también saberlo ser.”
“To be free, it is not enough to want it, it is necessary to know how to be free.”
– Venustiano Carranza (1859-1920), Mexican politician, military, and businessman
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