July 31, 2017 edition— Cenagas will rerun border pipelines open season; Round 2.4 includes 30 offshore blocks; and inflation stabilized.
Last Week in a Minute or Less
Renewables & Electricity. Power sales increased in eight states and Acciona’s infrastructure division named a new director.
Natural Gas & Liquid Fuels. Cenagas will repeat the border pipelines open season; Pemex’s pipelines in northeastern states will be auctioned in 2017; and Mexico imported 81% of the natural gas it consumed.
Oil & Gas Upstream. Round 2.4 will include 30 offshore blocks, but shale is out, and a vast hydrocarbons reserve may have been found.
Money & Power. Inflation stabilized; Baker McKenzie analyzed USTR’s NAFTA renegotiation objectives; and Fitch could improve Mexico’s sovereign rating.
Déjà vu all over again. Last week’s readers were particularly interested in the delay of Round 2.4 (Spanish); the Pemex and Tesoro alliance for pipeline transportation (English); and USTR’s NAFTA renegotiation objectives (English).
The Road to Reform
Round 2.4 will contain 30 blocks… Round 2.4 will include 30 deep water blocks in four areas: Cinturón Plegado Perdido, Cordilleras Mexicanas, Cuenca del Salina, and Plataforma de Yucatán (Spanish). If all blocks are allocated, investments could reach US$135bn during the projects’ 40-50 year lifetimes.
…but shale is out of the round. After announcing that shale exploration and exploitation fields would be included in Round 2.4, the government decided to leave them out of the upcoming auction (Spanish). The CEO of Shell in Mexico said the exclusion of shale resources is a good strategy to assure focus on deep-water fields.
Cenagas will rerun the border pipelines open season. The National Center of Natural Gas Control (CENAGAS) will repeat the open season for the border pipelines on August 10 (Spanish). The US Energy Information Administration (EIA) said that interest runs high in cross-border interconnections on CENAGAS transmission pipelines (English).
More Pemex pipelines up for bid in 2017. After the recent liberalization of prices in the second strip, the second open season for Pemex’s pipelines is slated for early September (Spanish). The price ceiling in effect in Chihuahua, Coahuila, Nuevo León, the Gómez Palacio municipality in Durango, and Tamaulipas was lifted on June 15.
The Yucatan Platform could have a pre-salt surprise. A technical review of marine subsoil near the Yucatán peninsula found signs of a “pre-salt” hydrocarbon structure in a region to be tendered soon (Spanish). Area 30 totals 4,440.9km2 and is 250km offshore from Mérida. Some suggested the reserves could exceed those of Brazil’s pre-salt.
NAFTA could turn North America into a self-sufficient energy giant. The NAFTA renegotiation could make North America an energy giant the size of the Middle East, according to experts (Spanish). US congressmen Will Hurd (R-Tx) pointed to the need to reduce regulation to facilitate strengthening North American energy integration.
Baker McKenzie study analyzes USTR’s NAFTA objectives. A Baker McKenzie analysis of the USTR’s “objectives” for the renegotiation of NAFTA concludes that the government is focusing on conventional trade issues, and not immigration and tax (English) (Spanish). The consultancy foresees a negotiation focused on rules of origin, arbitration mechanisms, and relaxing foreign investment restrictions.
Mexico’s inflation turned the corner. Mexico’s annual inflation rate fell in July for the first time since January, settling at 6.28% and suggesting a stabilization (English) (Spanish). Inflation remained well over the Bank of Mexico target of 3%.
Pemex placed US$5bn on international markets. The state-owned company placed US$5bn of long-term bonds in the international market to secure liquidity and improve the profile of its debt repayments (Spanish). Demand totaled US$15bn with yields of 5.75% and 6.9% for 10-year and 30-year bonds, respectively.
S&P also changed Pemex’s outlook. The rating agency modified the credit outlook for Pemex from negative to stable after announcing an identical improvement in the outlook for Mexico’s sovereign credit (English) (Spanish). The rating agency considers Pemex strategic for government finances and believes the government would back Pemex in an adverse financial scenario.
Fitch could also follow suit. After the Standard & Poor’s change in Mexico’s credit outlook, Fitch could make similar modifications, according to economists with BBVA Bancomer and Barclays (Spanish). The decision could be backed by a conviction that the risks of the NAFTA renegotiation are reduced.
Oil production and Fed rates remained stable. The US Energy Information Administration forecast an increase in US crude oil production in 2018, reaching an average of 9.9 million barrels per day (English). The Federal Reserve maintained interest rates unchanged and said it will start winding down its bonds holdings “relatively soon” (English) (Spanish).
Mexico imported 81% of its natural gas. In April 2017, Mexico imported 81% of domestic natural gas consumption due to Pemex’s low production levels (Spanish). Domestic consumption reached 5,810 million cubic feet per day (MMscfd) and imports amounted to 4,683 MMscfd.
Strategy & Operations
Acciona named a new infrastructure director. Sergio Ramírez, a Mexican engineer, will be the new director of Acciona Infraestructuras in Mexico (Spanish). Ramírez has 20 years of experience in the public and private sectors developing infrastructure projects, including design, bidding, finance, construction, and operation.
Power sales skyrocketed. In the first half of 2017, sales of electricity grew by 26.4%, reaching MXN$175bn (Spanish). Eight states concentrated 50% of the total value of power sales, led by Estado de Mexico with 9.5%, Mexico City with 8.5%, and Nuevo León with 7.8%.
Grupo Idesa will build two new polyethylene plants. The Novidesa subsidiary will expand its participation in the construction industry by building two new plants to produce polyethylene panels in the next three years (Spanish). Polyethylene is used increasingly in the construction of hospitals, hotels, and shopping malls.
Cydsa will soon open Latin America’s first underground LP gas storage center. Cydsa is looking to lead sustainable development of industrial parks for hydrocarbon storage (Spanish). In two months, the underground saline cavern in Veracruz state will begin operations as the first underground LP gas storage facility in Latin America, costing US$120m.
Illegal taps cost lives. On July 2, nine people died in a fight between rival gangs of fuel thieves, called huachicoleros, and 15 people have died in military operations in the state to end fuel theft this year (English). Potential investors can be deterred by theft, smuggling, and drug violence.
Old School Social
Events in the world beyond your screen – go see and be seen!
The US-Mex Natural Gas Forum is August 14-16 at the Hyatt Regency Riverwalk, San Antonio, Texas.
The Expo Energía is August 15-17 at the Centro de Convenciones Puebla, in Puebla.
Google can help control dengue. Google search data and clinical data combined in an analytical tool can accurately track dengue fever, shown by tests in Brazil, Mexico, Singapore, and Thailand (English). The tool, called ARGO (AutoRegression with Google search queries), could reduce the spread of the mosquito-borne virus that infects 390 million people every year.
Quote of the Week
“Nadie hace bien lo que no sabe; por consiguiente, nunca se hará República con gente ignorante, sea cual fuere el plan que se adopte.”
“Nobody does well what he does not know; consequently, a Republic can never be built with ignorant people, no matter what plan is adopted.”
-Francisco Villa (1878-1923), commander of the North Division in the Mexican Revolution
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