July 13, 2020 edition—CFE lost big; the decision over Zama; and Pemex’s storage advantage.
Last Week in a Minute or Less
Electric Power & Renewables. CFE lost a lawsuit before the London Court of International Arbitration; the Supreme Court also granted a suspension of Sener’s rules to Tamaulipas; and Siemens created Siemens Energy for the Latin American market.
Natural Gas Mid-Downstream & LNG. Mexico’s natural gas imports keep rising with summer temperatures.
Liquid Fuels Mid-Downstream. Pemex will take advantage of its storage.
Oil & Gas Upstream. Pemex plans to delay payments; a decision will be reached at Zama; and Pemex announced a swap for bonds worth US$22.4bn.
Government & NGO. The new NAFTA will attract investments in energy; Citi has a grim forecast for Mexico’s economy; and AMLO and Trump finally met.
Déjà vu all over again. Last week’s readers were particularly interested in Energía Costa Azul’s plans (Platts – English); Mirage Energy’s pipeline project (Express News – English); and the USMCA’s labor rules (El Economista – Spanish).
Geopolitics & Trade
Mexico defined the panelists for USMCA. The Economy Ministry published the names of the panelists managing labor controversies and disputes that could surge under the new NAFTA (Forbes – Spanish). The Economy Ministry expects the benefits of the USMCA to be noticed in the second half of the year (El Financiero – Spanish).
The new NAFTA will attract investments in energy. According to analysts, the USMCA would be a new shield for foreign investment in energy in Mexico (Forbes – Spanish). Although the new agreement recognizes Mexico’s authority over the energy sector, all contracts and rounds where the private sector collaborates will follow the USMCA’s rules.
AMLO and Trump finally met… President Trump and President López Obrador discussed the COVID-19 crisis, the Seade candidacy for the WTO, and migration (El Financiero – Spanish) (Reuters – English). Both leaders noted “the great cooperation that has been had between Mexico and the US” regarding migration.
…and Trudeau may visit Mexico soon. President López Obrador invited Prime Minister Trudeau to visit Mexico during a phone call and “he agreed to visit Mexico as soon as possible” (Reuters – English). Trudeau was not able to join President Trump and AMLO in Washington.
The USMCA’s success will depend on legal certainty. The Business Coordinator Board (CCE) warned that investment opportunities brought by the new NAFTA will happen only if there is legal certainty (El Financiero – Spanish). The CCE said the risk is the lack of clarity to adequately guarantee investment and the functioning of industry value chains.
CFE lost big in the first quarter. The state-owned company’s net loss increased 858% in the first quarter of 2020 (El Financiero – Spanish). CFE explained the numbers were due to the fall of the Mexican peso against the dollar, with a devaluation of 29%.
S&P expects Mexico’s economy to fall harder. The international rating agency expects the Mexican economy to contract by 8.5%, one of the slowest recoveries among emerging markets (El Financiero – Spanish). S&P previously forecast a 6.7% fall.
Gasoline prices boost June inflation. According to a Reuters survey, inflation in June is expected to surpass the Mexican central bank’s 3% goal due to the increase in gasoline prices (Forbes – Spanish). Specialists expect inflation to reach 3.2%.
Citi has a grim forecast for Mexico’s economy. Citi reduced its forecast for Mexico’s GDP from -9% to -11.2%, considering the political decisions made to face the COVID-19 pandemic (Forbes – Spanish). Citi expects a recovery in the shape of a wide U.
Legal & Regulatory
A judge decided five private projects will pay the new tariffs… A judge denied the temporary halt in the increase of transmission tariffs on five projects, as the goal of the increase is to “ensure the transmission public service is provided under good conditions and generating competition among companies” (El Financiero – Spanish).
…but Grupo México got away with it. A subsidiary of Grupo México, Eólica El Retiro, received a temporary suspension of the transmission tariffs increase (El Financiero – Spanish). The wind park will not have to pay the new tariffs as long as the writ of amparo lasts.
The Sener published the Energy Program 2020-2024… The Energy Ministry published the Energy Program for 2020-2024 with the goal to offer universal access to energy, an energy transition throughout the 21st century, and an increase in efficiency and sustainability in production and use of energy resources in the national territory (DOF – Spanish).
…and Nuevo León’s energy cluster discussed it. The Nuevo León energy cluster discussed the new energy program for 2020-2024 with businessmen and experts and criticized the focus on strengthening Pemex and CFE’s operations, excluding private companies (El Financiero – Spanish).
The Supreme Court also granted a suspension of Sener’s rules to Tamaulipas. The government of Tamaulipas challenged the new Sener rules before the Supreme Court, which has granted a suspension until a final decision is made (El Financiero – Spanish). Up until now, Tamaulipas is the only state that has gone to the Supreme Court to resolve this issue.
Mexico natural gas imports keep rising with summer temperatures… Mexico’s gas imports from the US are expected to reach a record increase due to increasing summer temperatures and an imminent opening in new downstream demand (Platts – English). In June, exports reached record highs at over 6 Bcf/d.
…and the Wahalajara completion will help. The EIA forecasts US gas exports to increase with the completion of the southern segment of the Wahalajara system, the Villa de Reyes-Aguascalientes-Guadalajara (VAG) pipeline (OGJ – English). The Wahalajara system connects the Waha hub in Texas with Guadalajara.
Industrial tariffs went down by 2.2%. Power tariffs that the state-owned company will apply to the industrial sector in July will be between 2.1% and 2.2% lower than the tariffs registered in June for the states of Nuevo León and Tamaulipas (El Norte – Spanish).
Fixed investment dropped 28.93%. Fixed investment in Mexico fell 28.93% in April compared with the previous month, the biggest fall since data collection began in 1993 (El Financiero – Spanish). Construction investment has fallen 30.86% in April.
Pemex announced a swap for bonds worth US$22.4bn. The state-owned company will offer a swap for US$22.4bn due between 2027 and 2060 (Reuters – English) (El Economista – Spanish). Pemex is the oil company with the highest debt in the world.
Strategy & Operations
CFE lost a lawsuit before the London Court of International Arbitration. The state-owned company will have to pay US$260m to a consortium of companies affected by the termination of the Chicoasén II project after losing a lawsuit before the London Court of International Arbitration (The Yucatán Times – English) (El Economista – Spanish).
Pemex will take advantage of its storage. After July 1, gasoline and diesel distributors must have a minimum amount of fuel storage, and have to buy capacity from the state-owned company. Pemex will charge 3.5 cents per liter, obtaining MXN12bn per year (El Economista – Spanish).
Siemens created Siemens Energy for the Latin American market… The German company created a division devoted to energy systems transformation (El Economista – Spanish) (El Financiero – Spanish). Siemens Energy will focus on the Mexican, Central American, and Caribbean markets.
…and Siemens’ Mexico has a new CEO. Alejandro Preinfalk will be the CEO for Siemens in Mexico, Central America, and the Caribbean (PV Magazine – Spanish). Preinfalk took over the new position during a town hall meeting.
Pemex plans to delay payments. The state-owned company is asking contractors if certain payments could be postponed until 2021 (El Financiero – Spanish). Three contractors have been asked to delay a US$115m debt, but the total amount to be paid to contractors could add up to billions of dollars.
The government wants a decision to be reached on Zama. The Energy Ministry said it had instructed Pemex and the private consortium led by Talos Energy to reach an agreement over the future development of Zama (Reuters – English). The unification of Zama is the first time in Mexico such a joint development is being negotiated.
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 2nd Edition of The Madrid Energy Virtual Conference will be held September 28-October 2.
MIREC Week has been postponed from June 2-4 to October 8-10 at Centro Citibanamex.
Solar Power Mexico was postponed from March 24-26 to November 18-20 at Centro Citibanamex.
The Mexican Energy Forum is rescheduled for November 17-18 in Mexico City.
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.
A 12,000-year-old mine was found in underwater caves. Researchers have found what is considered to be the oldest-known mine in America, a subterranean ochre mine dating back to 12,000 years ago (Science Alert – English). The pigment may have been valued for its use in ancient rituals.
Quote of the Week
“El político tiene el corazón en el estómago y el filósofo en la cabeza.”
“The politician has the heart in the stomach and the philosopher in the head.”
– Jose Rubén Romero (1890-1952), writer and diplomat.
We hope you have a productive week. Please send any news, comments, or underwater surprises to MexicoWeekly@energynarrative.com.
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