The Weekly Brief: Mexico


July 20, 2020 edition—CFE cancels four plants; Pemex refineries’ production; and Jalisco’s solar.




Last Week in a Minute or Less


Electric Power & Renewables. The CFE launched a geothermal tender; CFE canceled bidding for four power plants; and Jalisco relies more on solar roofs.


Natural Gas Mid-Downstream & LNG. US-Mexico natural gas pipeline exports are hanging in there.


Liquid Fuels Mid-Downstream. US fuel prefers going overland to Mexico; Pemex expects 1.2 million barrels per day from its refineries in 2020; and Cofece accused the CRE of delaying permits.


Oil & Gas Upstream. Oil companies are hopeful with AMLO’s US tour.


Government & NGO. Mexico must follow the USMCA energy rules; Citibanamex expects Mexico’s GDP to fall 16.5% in the second quarter; and German companies are cutting their investment plans.


Déjà vu all over again. Last week’s readers were particularly interested in the Energy Ministry’s 2020-2024 program (DOF – Spanish); Siemens’ new company (El Economista – Spanish); and the private sector’s opinion about the program (El Financiero – Spanish).



Geopolitics & Trade


German companies are cutting their investment plans. According to the Mexico-German Chamber of Industry and Commerce survey, the effect of the COVID-19 pandemic on the economy and the changes in energy sector investment rules worry German businessmen, and 76% of them plan to reduce their investments (El Financiero – Spanish).


The USMCA will fight child labor. The head of the Work and Social Provision (STPS) assured that the farming sector child labor problem will be attended to in the context of the new NAFTA (El Financiero – Spanish). The government plans different social policy actions to end it.


Former US and Canadian ambassadors expect better signs from Mexico. Roberta S. Jacobson, US ambassador to Mexico between 2016 and 2018, said clear signs are needed to prove direct foreign investment is welcome in Mexico (El Financiero – Spanish). The former Canadian ambassador between 2015 and 2019, Pierre Alarie, said the political setting is very important to provide certainty to investors.


Mexico must follow the USMCA energy rules. Canadian companies warned their government that Mexico could be breaking the USMCA rules on energy by not upholding energy contracts (El Economista – Spanish) (PV-Tech – English) (Reuters – English). Investors are frustrated with President López Obrador’s energy policy as the economy is trying to recover from the impact of the COVID-19 pandemic.



Political Economy


The IMEF has bad news for Mexico’s economy. The Mexican Institute of Finance Executives (IMEF) expects the Mexican economy to contract by 9.5% (El Financiero – Spanish). The IMEF expects 2.8% growth for 2021.


Citibanamex expects Mexico’s GDP to fall 16.5% in the second quarter. The bank forecasts a 16.5% GDP contraction in the second quarter of the year (El Financiero – Spanish). Citibanamex analysts expect 2025 to be the year when the economy will reach the levels before the COVID-19 crisis.


Cepal expects a 9% contraction in 2020. The Economic Commission for Latin America and the Caribbean (ECLAC) expects Mexico’s economy to contract by 9% in 2020 due to the effect of the COVID-19 pandemic (El Financiero – Spanish). The ECLAC warned that the region could face a lost decade.


BBVA forecasts Mexico’s debt to hit 60% of GDP. According to the bank, Mexico’s debt in relation with GDP could reach 59%, almost 15 points above the level in 2019 (Forbes – Spanish). BBVA expects the government to notify Congress of an increase in the placed debt.


AMLO accused Pemex workers of stealing fuel. President López Obrador said fuel robbery in the Salamanca refinery was not only performed by organized crime, but also by Pemex workers (El Financiero – Spanish). AMLO assured that maintenance work in the Salamanca refinery is going well.



Legal & Regulatory


Nahle bragged about Mexico’s power grid reliability. Energy Minister Rocío Nahle defended power grid reliability over sustainability in power generation (El Economista – Spanish). Nahle assured that Mexico will reach the goal of 35% clean generation by 2024.


Oil companies are hopeful with AMLO’s US tour. After the White House dinner with President Trump and President López Obrador, Shell and Sempra are positive that a resolution for their regulatory concerns will be agreed upon (El Economista – Spanish).


Cofece accused the CRE of delaying permits. The Federal Commission of Economic Competence (Cofece) warned that after January 2019, the Energy Regulatory Commission tripled the time it takes to hand out permits (El Financiero – Spanish) (El Economista – Spanish). Gasoline permits went from taking 21 days to be approved to 75 days.


The CFE will make coal power plants work harder. The state-owned company will increase the use of coal-powered plants. The goal will be to provide reliability to the system (El Financiero – Spanish). CFE produces 9.4% of the energy by using coal as a generation source.



Market Trends


US-Mexico natural gas pipeline exports are hanging in there. Despite the COVID-19 effect on natural gas demand and production, pipeline natural gas exports from the US to Mexico continue to be strong (Natural Gas Intel – English). Mexico is expected to remain dependent on US natural gas exports.


US fuel skipped the water route to Mexico. US Gulf Coast exports to Mexico preferred truck and rail routes over waterborne routes due to port delays, storage issues, and increased inspections (Argus Media – English). Of the 197,000 b/d of diesel exported from the US Gulf Coast to Mexico in April, waterborne volumes accounted for 28%.


CFE will buy 2 million metric tons of coal. The state-owned company announced the purchase of 2 million metric tons of coal from Mexican producers to be used in power plants (The Economic Times – English). The CFE will buy the coal between July and December 2021.


Pemex is offering big gasoline discounts. The state oil company is offering 29% discounts on its retail regular gasoline sales “to concentrate the market and cut the importers out of the game,” according to an anonymous oil group (BN Americas – English). Premium gasoline discounts between January and June were 16% and 22% for diesel.



Strategy & Operations


Pemex forecasts a sad future in sales. The state-owned company expects a reduction of 61% in its income during the second quarter due to lower fuel demand as a consequence of the COVID-19 lockdown (El Financiero – Spanish).


Jalisco relies more on solar roofs. The Mexican Association of the Solar Industry (AMIF) said that in 2019, the state had a 106.7% increase in its installed capacity of distributed generation through solar roofs (PV Magazine – Spanish). At a national level, solar roofs’ installed capacity increased 19%.


Solar and wind companies in Mexico fight COVID-19. The Mexican Wind and Solar Energy Associations have contributed to the fight against the COVID-19 pandemic, benefiting more than 82,000 families in Mexico (El Economista – Spanish). The clean energy sector has continued generating power for Mexican families, hospitals, and supermarkets.


Pemex expects 1,200,000 barrels per day from its refineries in 2020. The state-owned company plans to increase the amount of crude processed in its six refineries this year (El Financiero – Spanish). Pemex expects the six refineries to process 1.2 million barrels per day, almost double what refineries processed in May.


CFE canceled bidding for four power plants. On July 15, the state-owned company canceled the bidding processes to build and expand the first four power plants of this administration: the combined cycle plants of Salamanca (Guanajuato) and Villa de Reyes (San Luis Potosí); a dual thermoelectric in La Paz; and the expansion of the geothermal plant Los Humeros in Perote (El Economista – Spanish).



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.



Lateral Thinking


An 8-year-old girl invented a solar heater. Xóchitl Guadalupe Cruz developed a solar-powered water heater for low-income communities in Chiapas (Borgen Magazine – English). The heater was created out of bottles and plastic and has a capacity of 10 liters.



Quote of the Week


“Ya el sol oculta su radiosa frente;

melancólico brilla en occidente;

su tímido esplendor.”


“Already the sun hides its radiant forehead;

melancholic shines in the West;

its timid brightness.”




– Jose Rosas Moreno (1838-1883), Mexican writer.



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