July 29, 2019 edition—Repsol’s drillship; WEPEC’s gasoline; and Yucatán’s solar park.
Last Week in a Minute or Less
Renewables & Electricity. The Sener boosted 42 solar projects; APEC pushed for power auctions; and Yucatán can count on a new solar park.
Natural Gas & Liquid Fuels. CFE and IEnova continue their fight over other pipelines; WEPEC is sending more gasoline to Mexico; and there is no going back for the Dos Bocas project.
Oil & Gas Upstream. Repsol got the Maersk Valiant for its Mexico blocks.
Money & Power. US business organizations want the USMCA to be ratified; Mexico reached migration enforcement ahead of schedule; and S&P warned Mexico of the effect of recession.
Déjà vu all over again. Last week’s readers were particularly interested in the US opinion of AMLO’s policies (El Economista – Spanish); renewables under the new administration (El Economista – Spanish); and the Mérida IV plant (El Financiero – Spanish).
The Mexico-US Energy Business Board met again. Representatives of the private sector of both countries met in the sixth meeting of the Mexico-US Energy Business Board. The Board’s goal is to exchange information and better industry practices to make recommendations to both governments (El Economista – Spanish).
Mexico hit the US migration enforcement targets ahead of schedule… Mexican Foreign Minister Marcelo Ebrard said Mexico has fulfilled the US request to reduce migration from Central America (Reuters – English) by 36% in 45 days (El Financiero – Spanish). In doing so, Mexico avoided the “safe third country” negotiations with the US (Reuters – English).
…but posed some concerns. Ebrard pointed to five main concerns that Mexico has: the amount of weapons crossing the border from the US to Mexico, the recovery of El Chapo’s assets, the tomato agreement, the deportation of Mexicans from the US, and the role of the US in boosting Central America’s development (El Financiero – Spanish).
The USTR needs to answer Democrats’ concerns. The head of the US House Ways and Means Committee urged US Trade Representative Robert Lighthizer to provide “comprehensive and constructive” responses to Democrats’ proposals (Reuters – English) in order to obtain their support for the USMCA.
US business organizations asked for USMCA ratification. Approximately 600 business organizations urged Congress to ratify the new NAFTA. The organizations said the agreement is key for their economic future, as it could preserve trade ties between the US, Canada, and Mexico (El Economista – Spanish).
The Road to Reform
Mexico announced the Dos Bocas winners… Mexico’s government unveiled the winners of the contracts to build the new oil refinery (Reuters – English) (El Economista – Spanish): Fluor Enterprises, ICA Fluor, Samsung Engineering and DBNR, Kellogg Brown and Root and Constructora Hostotipaquillo.
…and there is no going back for the Dos Bocas project. The Energy Minister said the government will not backtrack on the decision to build the Dos Bocas refinery (Reuters – English). Investors and rating agencies oppose the project as it would divert Pemex funds away from exploration and production.
The Sener boosted 42 solar projects. The Mexican Association of Solar Energy (Asolmex) said the Energy Ministry completed 42 resolutions on social impact evaluations for solar plants (El Economista – Spanish). This is a big and necessary step toward completing the projects.
CFE and IEnova continue their fight over other pipelines. IEnova announced that the state-owned company began international arbitration regarding the Guaymas-El Oro gas pipeline project (Reuters – English). (El Economista – Spanish). The Energy Minister said it is in Mexico’s interest to maintain pipeline building companies in the country (El Financiero – Spanish).
APEC pushed for power auctions. APEC’s Asia Pacific Energy Research Center advised Mexico to restart power auctions to boost the development of renewables and to recover international attention (El Financiero – Spanish).
Pemex’s mysterious donations continue… President López Obrador assured donations with public resources were canceled; however, according to Pemex, donations continue (Forbes – Spanish). Pemex’s donations were destined to social organizations and states under the category of “social investment,” requiring the okay from the general director.
… and its leaders are being scrutinized. The Mexican attorney general’s office arrested Pemex’s former head of security during the previous administration for allegations of fuel theft (Reuters – English). Prosecutors accused the leader of the Mexican oil workers union of corruption (Reuters – English) and he asked if there is an order to capture him (El Economista – English).
AMLO considers lowering gasoline and power prices. President López Obrador pledged that during his administration neither the price of gasoline nor power tariffs would increase, and they could be reduced once the power and oil sectors are rescued (El Economista – Spanish).
Inflation fell to its lowest level since January 2017. Inflation fell to 3.84% in the first half of July (El Financiero – Spanish), the lowest level in two and a half years. Inflation has remained within Banxico’s target range for the last six weeks.
Pemex will need more crude to refine. During this administration, the state-owned company will not have enough fuel to reach its refining goals, so it will have to import the shortfall of 52,000 barrels per day on average for each year (El Economista – Spanish).
Moody’s said Pemex’s plan changes nothing. The plan announced by the state-owned company did not convince Moody’s, and the risk for a downgrade persists (Reuters – English). Pemex is on the verge of losing its investment grade rating.
S&P warns Mexico of the dangers of recession. The international rating agency could review Mexico’s sovereign bonds and state oil company Pemex if the country’s economy goes into recession and growth estimates for 2020 fall (Reuters – English). Mexico’s economy contracted 0.2% in the first quarter of 2019.
The market prepares for Mexico’s oil hedge. Trading in crude oil options increased as market participants prepared for Mexico’s oil hedges, in which the country buys US$1bn in contracts to protect its oil revenues (Reuters – English) (El Economista – Spanish).
The IMF lowered Mexico’s outlook and AMLO attacked it. The International Monetary Fund (IMF) reduced Mexico’s economy growth forecast from 1.6% to 0.9% (Reuters – English) (Animal Político – Spanish). President López Obrador criticized the IMF record of pushing neoliberalism in Mexico and insisted on his forecast of a 2% expansion.
Strategy & Operations
Private companies are winning the diesel market… Private companies supplied 16% of the national demand for diesel by the end of 2018, a significant increase from the 4.9% participation in 2017 (El Economista – Spanish). Approximately 25% of the gas stations operating in the country no longer have the Pemex brand.
…although Pemex’s plan may rain on their parade. Experts said the plan announced by Pemex is a complete change of direction, affecting fuel import companies and the private companies involved in the energy sector (Spanish). The plan does not include a natural gas production plan.
Repsol signed up the Maersk Valiant for its Mexico blocks. Repsol Exploracion Mexico contracted the drillship Maersk Valiant to work on Blocks 10 and 29 offshore Mexico (English). The programs will start in March 2020.
WEPEC is sending more gasoline to Mexico. China’s West Pacific Petrochemical Corp (WEPEC) will export 900,000 barrels of gasoline to Mexico in July (English). The three 300,000-barrel cargoes will be WEPEC’s biggest monthly shipment to the country. WEPEC began sending gasoline to Mexico in the second half of 2018.
Yucatán can count on a new solar park. The solar park project in Peto is operating, even before its inauguration, adding 30MW to the grid (El Financiero – Spanish). The project adds to the wind park in Tizimín and Dzilam de Bravo and the solar plant in Progreso, amounting to 210MW in total.
Old School Social
Events in the world beyond your screen—go see and be seen!
The Green Expo is scheduled for September 3–5 at the World Trade Center in Mexico City.
Scientists have a difficult time working at the US-Mexico border. Scientists working on borderland ecosystems are facing challenges as Border Patrol officers are limiting travel and what natural materials can cross the border (PRI – English). Scientists are suffering harassment and intimidation, being questioned about their presence in the area.
Quote of the Week
“Procuraré merecer el apoyo de la opinión pública y el patriotismo de todos los buenos ciudadanos.”
“I will try to deserve the support of public opinion and the patriotism of all the good citizens.”
– Sebastián Lerdo de Tejada (1823-1889), Mexican painter.
We hope you have a productive week. Please send any news, comments, or frontier experiences to MexicoWeekly@energynarrative.com.
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