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July 9, 2018 edition—Fuel on rails; Thermion’s renewable promise; and NAFTA discussed.
Last Week in a Minute or Less
Renewables & Electricity. Thermion will produce 1,000MW in Mexico; and a meat processing plant will be powered up by natural gas.
Natural Gas & Liquid Fuels. The CRE approved the first Pacific hydrocarbons terminal; hydrocarbons crossed the Baja California border; and the Nueva Era pipeline is working.
Oil & Gas Upstream. Platts expects Mexico’s rounds to continue at a slow pace; and the CNH said petroleum discoveries are up.
Money & Power. Trump discussed NAFTA with Trudeau and AMLO; the peso strengthened after the elections; and AMLO will deal first with Pompeo and pensions.
Déjà vu all over again. Last week’s readers were particularly interested in fuel availability (Excelsior – Spanish); the plant powered by waste (El Economista – Spanish); and Sierra Oil & Gas’ sale (Bloomberg – English).
NAFTA Negotiation
Canada and US carmakers partnered up to fight auto tariffs… Canada’s trade minister met with General Motors and Fiat Chrysler Automobiles officials in Detroit to discuss US auto tariffs (Reuters – English). Canada’s biggest exporter, the auto industry, contributes US$60.1bn a year to the economy.
…and Mexico is expected to hit back on auto tariffs. A top economic adviser for AMLO said Mexico would retaliate against US businesses if the US insists on duties on Mexico’s auto exports (Reuters – English). López Obrador’s designee economy minister said Mexico’s new administration should push back against US “protectionist” moves.
Trump discussed NAFTA with Trudeau and AMLO. US President Trump spoke with Justin Trudeau to discuss trade (Reuters – English) and Canada’s reciprocal countermeasures to US steel and aluminum tariffs. Mexico’s President-elect López Obrador talked about NAFTA with President Trump and about a separate agreement between the US and Mexico (El Financiero – Spanish).
Trump might postpone NAFTA until after the midterms. President Donald Trump said he wants to wait until after the election to reach a new NAFTA deal without specifying if he meant the US midterms in November or the Mexican presidential elections (Bloomberg – English). The White House did not immediately clarify Trump’s comments.
The Road to Reform
The CRE okayed the first Pacific hydrocarbons terminal. The Energy Regulatory Commission approved Porter FG Mexico’s permits to store fuels in Manzanillo, Colima. The company will build the infrastructure needed to store and distribute hydrocarbons in the Pacific region (El Financiero – Spanish).
The energy reform has produced 107 oil contracts. After three years, 73 companies from 20 nations are developing hydrocarbons exploration and extraction works in Mexico, having signed 107 contracts. The estimated investments are expected to reach US$160bn and potentially generate 900,000 jobs (El Financiero – Spanish).
The CNH is happy with the new petroleum discoveries. The National Hydrocarbons Commission (CNH) pointed out that petroleum discoveries have increased and the tendency is expected to continue with the development of recently awarded projects. Regarding natural gas resources, in 2017, 994,000 million cubic feet were discovered, 272% more than in 2016 (Excelsior – Spanish).
Platts expects rounds to continue, just slower. The Geopolitical chief of S&P Global Platts said the oil rounds will continue at a slower pace without significant impacts to energy production until 2025 (El Economista – Spanish) (Platts – English). A possible increase in local content requirements is also expected.
Political Economy
AMLO and Peña will work on NAFTA together. President-elect Andrés Manuel López Obrador will work with the Peña Nieto administration in the NAFTA renegotiation (El Financiero – Spanish). AMLO said the current team renegotiating NAFTA is doing a good job.
Banxico must consider “imported inflation.” The index measuring foreign purchase prices increased by 3.38% in April, a high not seen since 2012 (El Financiero – Spanish). Imported gasoline is the main factor producing a major price movement.
AMLO will be busy with Pompeo and pensions. US Secretary of State Mike Pompeo will visit Mexico and meet with AMLO (Reuters – English). AMLO and President Peña Nieto will agree on an economic package for 2019 with an increase in pensions (El Economista – Spanish) (Reuters – English).
Experts recommend prepared technicians for Pemex and Sener. Experts advised AMLO to choose technical personnel to develop the Energy Ministry, Pemex, and CFE agendas (El Financiero – Spanish). Alejandro Ibarra warned that Norma Rocío Nahle García, the Energy Ministry candidate, is an environment expert more than an energy expert.
Market Trends
Moody’s and Fitch kept Mexico’s grade, with warnings. Moody’s and Fitch will maintain Mexico’s grade if the country’s macroeconomic policies remain credible (El Economista – Spanish). Fitch said AMLO’s victory could indicate energy policy changes (El Economista – Spanish), while Moody’s does not expect policies impacting private bank business to be approved soon (El Economista – Spanish).
Pemex’s olefin production skyrocketed in May. The state-owned company had its highest olefins outlook in 19 months thanks to the additional feedstock (Platts – English). Pemex produced 62,445mt of ethylene, propylene, and crude butadiene in May, up 23.1% compared with May 2017.
The peso remained strong after the elections. The Mexican peso reached its highest level in five weeks, taking advantage of a weak dollar (El Economista – Spanish). The local market reacted with complete calm after one of AMLO’s advisers said a NAFTA agreement was possible before his government takes charge in December (Reuters – English).
Mexico’s country risk is down after the elections. Mexico’s EMBI+ went down to 207 points, its lowest level since May (El Financiero – Spanish), according to JPMorgan. The reason is reduced uncertainty after the election results and moderation in AMLO’s positions.
Strategy & Operations
Hydrocarbons crossed the Baja California border. The first hydrocarbons cargo of 300,000 gallons from Texas crossed the border on rails to supply Baja California stations. The cargo could save 35% in the cost of transportation (El Economista – Spanish) and could cut the final price for border users.
The Nueva Era pipeline is open for business. The Nueva Era pipeline system that will deliver US natural gas in Monterrey has started commercial service. Howard’s Impulsora Pipeline has an agreement with CFE to deliver gas from its Eagle Ford Gathering System in Texas (Platts – English).
Thermion bets on Mexico. Thermion Energy believes Mexico’s renewable energy sector will keep growing. By 2021, Thermion will reach a production of 1,000MW with an investment of US$1.4bn (El Economista – Spanish) and a capacity to power up the state of Tabasco for a year.
Puebla’s ranchers turn to natural gas for power. The meat processor plant of the Granjas Carroll de México (GCM) will start operating a natural gas plant in November. The plant, which cost US$132m, will provide 13MW to the meat processor (El Economista – Spanish).
Old School Social
Events in the world beyond your screen—go see and be seen!
The Mexico Oil & Gas Summit will be held July 18-19 at the Sheraton María Isabel in Mexico City.
The Energy Congress ANIQ 2018 is scheduled for July 19 at the Club de Industriales in Mexico City.
Expo Energía is scheduled for August 14-16 in Puebla, Mexico.
Lateral Thinking
Tabasco is looking into manatee deaths. The Environmental Protection Agency is monitoring the water quality, the animals, and their food (El Financiero – Spanish) to detect and solve the possible causes of male manatee deaths in Tabasco. Environmental inspectors have handled eight cases as well as the death of a female manatee.
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 his head.”
-José Rubén Romero (1890-1952), Mexican writer and diplomat.
We hope you have a productive week. Please send any news, comments, or clues for mysterious deaths to MexicoWeekly@energynarrative.com.
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