The Weekly Brief: Mexico


June 4, 2018 edition—Baja California on the line; Pemex pipeline protection; and NAFTA’s delay.




Last Week in a Minute or Less


Renewables & Electricity. The Don José solar park in Guanajuato is in operation; Baja California’s power line auction is here; and El Bajío created an energy cluster.


Natural Gas & Liquid Fuels. Pemex paid more to protect its pipelines; the army took Salamanca’s refinery to fight fuel robbery; and Pemex will fight to keep the fuel certification market.


Oil & Gas Upstream. Private operators are maintaining Mexico’s hydrocarbon reserves.


Money & Power. Canada is worried about NAFTA’s auto deal; the OECD predicted a strong Mexican GDP; and inflation cooled down slightly.


Déjà vu all over again. Last week’s readers were particularly interested in the progress of the first power auction (El Financiero – Spanish); Talos Energy’s drilling plans (OGJ – English); and Pemex’s open season (Reforma – Spanish).



NAFTA Negotiation


Canada is concerned with NAFTA’s negotiation… Canada’s Prime Minister Justin Trudeau raised concerns about a US probe into car and truck imports (Reuters – English). Trudeau said Canada would rather see a trade deal die (Bloomberg – English) than to accept certain hard-line demands.


…but Peña Nieto stayed optimistic. Mexico’s President Enrique Peña Nieto expressed optimism about the NAFTA talks while a source said the country made a new offer to reach a final deal (Reuters – English). Mexico showed some flexibility on the auto industry reconfiguration, but refused to meet US demands (Reuters – English).


BMW is ready to adapt to the new NAFTA. The BMW San Luis Potosí plant has the capacity to adapt to the new agreements in regional content being negotiated. BMW can obtain 65% of the pieces in the North American region, but are looking for 60 new suppliers by 2019 (El Financiero – Spanish).


Tariff and Congress deadlines loom over the NAFTA talks. Canada’s foreign minister Chrystia Freeland held talks in Washington to reach a NAFTA deal that Congress could pass this year and avoid metal tariffs (Bloomberg – English). Freeland met for more than two hours with US Trade Representative Robert Lighthizer.


Japan trusts Mexico to protect its interests in NAFTA talks. Japan’s foreign minister said his Mexican counterpart, Luis Videgaray, pledged to protect the interests of Japanese companies in the NAFTA renegotiation (Reuters – English). Japan’s Taro Kono was very grateful for the promise.



The Road to Reform


Pemex will fight to keep the fuel certification market. Sixteen private labs have been approved by the Energy Regulatory Commission (CRE) to evaluate fuel quality (La Jornada – Spanish). One of the labs plans to take half of Pemex’s market in two years.


Baja California’s power line auction is up. Nineteen companies have access to the data room for the Mexicali-Hermosillo transmission line, connecting the Baja California Peninsula with the national grid. Among the interested companies are Sinohydro, Engle, Nova, ABB, Siemens, Iberdrola, TC Energía Mexicana, and China Electric Power (CMIC – Spanish).


The army took Salamanca’s refinery by surprise. Federal forces implemented a surprise operation to review the work of Pemex operatives in the Salamanca refinery to fight fuel robbery (El Norte – Spanish). The army deployed 300 army policemen in Celaya to fight organized crime cells devoted to fuel theft (AM – Spanish).


Private operators are maintaining Mexico’s hydrocarbon reserves. Private operators are preventing Mexico’s proved and possible oil reserves from falling too sharply, according to the National Hydrocarbon Commission. Mexico’s 2P oil reserves decreased 4.4% in 2017 instead of 10% (Platts – English) thanks to maturing fields.



Political Economy


The campaigns discussed energy. Ricardo Anaya proposed increasing renewable energies from 35 to 40% (Reforma – Spanish), 5% above the established goal for 2024. José Antonio Meade established four axes: energy security and diversity, strengthening companies, environmental sustainability, and energy efficiency.


Inflation cooled down slightly. Due to higher gasoline and cooking gas prices offsetting electricity subsidies, Mexico’s inflation reached 4.46% in early May (Reuters – English) (El Economista – Spanish), higher than a Reuters poll forecast of 4.40%. Inflation fell from the 4.69% rate seen in the first half of April.


The OECD forecast a strong Mexican GDP. The OECD forecast Mexico’s GDP will expand 2.5% this year (El Economista – Spanish), above the 2.2% predicted in November. Next year’s forecast was increased from 2.3% to 2.8%.


Pemex paid more to keep an eye on its pipelines. In the first quarter, the state-owned company invested 42% more in the security and installation of its pipelines (Reforma – Spanish) compared to the same period in 2017. Nonetheless, Pemex reported a 36% increase in illegal taps.



Market Trends


Mexican investors looked away… In the first quarter, Mexican investors transferred US$7.7bn abroad (El Economista – Spanish), breaking the positive streak. The amount exceeded the annual exit of all of 2017, which was US$5.5bn.


…but dollars came in. The Mexican market registered the entrance of US$7.08bn in investments in the first quarter (El Economista – Spanish). The amount completed a positive flux of foreign capital for the third consecutive quarter, according to Mexico’s central bank.


Mexico’s oil reserves fell. The National Hydrocarbons Commission (CNH) said 3P reserves fell from 25,900 to 25,500 million barrels (El Economista – Spanish), adding up all the hydrocarbons reserves. In crude, the fall in the 3P reserves was from 20,000 to 19,400 million barrels, and in gas a slight increase in 3P reserves was registered, from 29 to 30 trillion cubic feet.


High fuel prices will help Mexico’s budget. By the end of 2018, Mexico could enjoy a 10.4% surplus in oil income (Excelsior – Spanish) thanks to oil prices. The oil surplus compensated what the government could not collect with the special tax on fuel (El Economista – Spanish).



Strategy & Operations


Fullgas cut the ribbon on its first gas station in Chetumal. Fullgas opened the first gas station in Chetumal to continue expanding its presence in Estado de México, Yucatán, Campeche, Honduras, and Guatemala (El Economista – Spanish). The firm introduced a FullPower additive developed in Houston, Texas.


Guanajuato shines brighter. The Don José solar park in the San Luis de La Paz municipality is on line. Enel Green Power’s park is the biggest in the state, generating power for almost 500,000 families (El Economista – Spanish).


El Bajío landed an energy cluster. Querétaro and Aguascalientes signed an agreement to collaborate to create a regional energy cluster, which will include Guanajuato and San Luis Potosí (El Financiero – Spanish). The goal will be to promote the development of the sector in the four states.


The LP gas industry loses big due to fuel robbery. The Mexican Association of LP Gas Distributors and Conexas Companies said Tlaxcala, Puebla, and Veracruz suffer a monthly loss of MXN40m due to illegal taps of Pemex’s pipelines (El Economista – Spanish). The volume of fuel thefts has increased from 5% to 15%.



Old School Social


Events in the world beyond your screen—go see and be seen!


The 4th Mexico Gas Summit is scheduled for June 7-8 at the St. Anthony Hotel in San Antonio, Texas.


The Global Petroleum Show 2018 will be held June 12-14 at the Calgary Stampede Roundup Centre in Calgary.


The 14th Annual Mexican Energy & Infrastructure Finance Forum is scheduled for June 21-22 at the St. Regis in Mexico City.



Lateral Thinking


Scientists evaluate Mexico City’s new airport. The Union of Scientists Committed to Society (UCCS) is analyzing Mexico City’s massive new airport and found it could exacerbate the city’s water crisis, inhibiting natural drainage (Next City – English). The UCCS analyzes government-issued environmental impact studies in the path of federal infrastructure projects.



Quote of the Week


“Los sueños con los años también se van, las arrugas que tenemos es la tierra que nos jala.”


“Dreams also disappear with the years, the wrinkles we have are the ground pulling us down.”



-Leonora Carrington (1917-2011), English-born Mexican artist and novelist.


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