July 19, 2020 edition—Taxtunú’s drilling; a new LP distributor; and New Fortress’ terminal work.
Last Week in a Minute or Less
Electric Power & Renewables.
Sonora will take advantage of its sun; AMLO plans a constitutional reform to back hydropower; and Cox Energy launched a US$32m capital raise.
Natural Gas Mid-Downstream & LNG. Mexico can’t get enough of US natural gas; New Fortress started working on a Mexican LNG terminal; and the market expects private refined products imports to suffer.
Liquid Fuels Mid-Downstream. AMLO went into the LPG business; and small distributors complain about LP gas prices and local governments.
Oil & Gas Upstream. The CNH okayed Taxtunú’s drilling.
Government & NGO. FocusEconomics expects Mexico’s GDP to reach 5.7%; the USMCA will boost Mexico’s growth by 6.5%; and inflation reached 5.88% in June.
Déjà vu all over again. Last week’s readers were particularly interested in Sempra’s ECA Phase 2 (Natural Gas Intel – English); natural gas prices (Natural Gas Intel – English); and Jalisco’s energy law (El Economista – Spanish).
Geopolitics & Trade
Baja California boosts vaccination to open the US border. The northern state leads in COVID-19 vaccination in Mexico as well as other border states to reactivate the economy and reopen the US border (El Financiero – Spanish). In Baja California, 79% of residents over 18 years old have been vaccinated.
The USMCA will boost Mexico’s growth by 6.5%. According to the Economy Ministry, the new NAFTA is expected to help Mexico’s economy to grow 6.5% in 2021 (El Financiero – Spanish). Part of the growth will be boosted by foreign trade.
The US and Mexico agreed to a repair course. Both nation’s governments announced a “repair course” after the US complaint of labor rights violations at the GM plant in Silao (El Financiero – Spanish) (Politico – English). This is the first course of the new NAFTA.
Energy changes may bring trouble under USMCA. The different regulatory changes made by the current government in the energy sector against the participation of private companies in the sector could bring trade arguments between the USMCA partners (Reforma – Spanish).
AMLO’s help boosted Pemex’s bonds. Even after the fireball accident, the state-owned company’s bonds remain strong thanks to the benefits offered by President López Obrador. The US$3.8bn in 10-year reference bonds went up this year (El Financiero – Spanish).
CEPAL has big hopes for Mexico’s GDP. The Economic Commission for Latin America and the Caribbean (CEPAL) forecast 5.8% GDP growth in 2021 (El Economista – Spanish). The Cepal expects the number of people in poverty to decrease to 48% in 2021.
Inflation reached 5.88% in June… Inflation reached 5.88% in June due to price increases in air transportation, LP gas, gasoline, and chicken (El Financiero – Spanish). Inflation has been outside of the goal set by Banxico for four months.
…and Herrera expects inflation to go back to normal. Finance Minister Arturo Herrera said the recent increase in inflation is due to temporary factors more than structural problems, and he trusts prices to go down (El Financiero – Spanish). As the vaccination efforts continue and the population starts moving and going back to work, prices are expected to decrease.
FocusEconomics expects Mexico’s GDP to reach 5.7%. According to FocusEconomics, the market expects Mexico’s GDP to grow by 5.7% (El Economista – Spanish). The new forecast is four points above the previous estimate thanks to speedy US growth and its impact on Mexico’s remittances and exports.
Legal & Regulatory
The CNH okayed Taxtunú’s drilling. The National Hydrocarbons Commission (CNH) approved the state-owned company’s plan to drill the field Taxtunú-1EXP (El Financiero – Spanish). The drilling will require investment of US$12.6m in the area located in Poza Rica, Veracruz.
AMLO went into the LPG business. President López Obrador announced the creation of a state company to sell LP gas at “fair” prices (AP News – English) (Infobae – Spanish). Cofece will investigate the LP gas market to decide if there are monopoly conditions.
AMLO plans a constitutional reform to back hydropower. President López Obrador announced the plan for a constitutional reform to guarantee power generation and supply for public interest and civil protection (El Financiero – Spanish). The goal is to boost hydropower generation’s use and avoid its underuse.
The Sener will not reach its clean energy goals. The Energy Ministry (Sener) said that the country will not reach the 35% clean sources generation goal for 2024, reached at the Paris Agreement in 2016 (Reforma – Spanish).
The market expects private refined products imports to suffer. ASEA and CRE are conducting random verification visits and are expected to continue their crackdown on private refined product imports to give Pemex more market share (Platts – English). One of the facilities that has been suspended is owned by IEnova and located in the state of Puebla.
Small distributors complain about LP gas prices and local governments. Small LP gas distributors applauded the government’s decision to create Gas Bienestar to benefit vulnerable populations (El Economista – Spanish). Some accused local governments of affecting LP gas distribution by not freeing land use permits.
Profeco pointed to the most expensive gas. According to the consumer watchdog Profeco, the company that sold the most expensive gas was Flama Gas in Azcapotzalco and the cheapest, ComVicSa’s gas station in Lera, Tamaulipas (El Financiero – Spanish).
Fuel prices are helping Mexico. Thanks to the increase in international crude prices, oil income for the public sector increased and is expected to continue all year long (El Financiero – Spanish). The Mexican crude price in 2021 has averaged US$60.47 per barrel, against the US$42.1 estimated in the 2021 budget.
Mexico can’t get enough of US natural gas. Natural gas demand in Mexico remained strong during the pandemic compared to total energy demand (Natural Gas Intel – English). IEA forecasts an estimated 10% increase in natural gas imports to Mexico from the US over the 2020-2024 period (Natural Gas Intel – English).
Strategy & Operations
Sonora will take advantage of its sun. Governor Alfonso Durazo said the state has already secured the 2,000 acres where the project will be built in Puerto Peñasco and the US$100m project is advancing (Platts – English) (PV Magazine – Spanish). The project will be co-owned by CFE and the state of Sonora.
CFE suffered blackouts in half the country in 2021. A storm in Sonora left 3.5% of CFE’s customers without power, hitting 40,590 clients (El Economista – Spanish). Other events have affected the two peninsulas, Yucatán and Baja California, Mexico City and Estado de México, and Monterrey.
New Fortress started up a Mexican LNG terminal. New Fortress Energy began commercial operations at a receiving terminal on Mexico’s Pacific Coast (Platts – English). The plant was designed to allow larger LNG vessels to transfer supplies into storage containers for more efficient delivery onshore.
Cox Energy launched a US$32m capital raise. Cox Energy America started the process to raise up to US$32m through a capital increase. The capital hike will help the company implement its strategic plan for the period 2020-2024, which covers the development and operation of solar photovoltaic (PV) projects (Renewables Now – English).
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!)
Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.
Mexico Assembly will be held in May, 2022 in Mexico City.
Canacintra’s green sector had an excellent first quarter. The green sector in Puebla improved its sales by 30% and increased job offers 20% in the first quarter of 2021 (El Economista – Spanish). The COVID-19 pandemic hit services as non-essential companies had to close temporarily.
Quote of the Week
“Patria, destello del amor divino,
Sagrada inspiración de mis cantares,
¡Ay! ¿Hasta cuándo dejará el destino
De llenar tu existencia de pesares?”
“Nation, sparkle of divine love,
Sacred inspiration of my songs,
Ay! Until when will destiny
Stop filling your existence with sorrows?”
– José Rosas Romero (1838-1883), Mexican writer of fables and poems.
We hope you have a productive week. Please send any news, comments, or green sector plans to MexicoWeekly@energynarrative.com.
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