Last Week in a Minute or less
Renewables & Electricity. CFE aims for MXN10bn in transmission investment, Mexico will increase renewable energy R&D investment 4x, and the energy providers’ registry is growing slowly.
Natural Gas & Liquid Fuels. Mexico makes the most of US natural gas, IEnova and Transcanada won the South Texas-Tuxpan bid, and the CRE is creating a tool to monitor the natural gas market.
Oil & Gas Upstream. The migration from contracts to licenses are delayed, Trafigura may become Mexico’s first private diesel producer, and OPEC refused to change oil production.
Money & Power. Mexico’s central bank is waiting for the Fed’s decision, the World Bank lowered to 2.5% Mexico’s GDP for 2016, and Pemex’s short-term debt skyrocketed.
Déjà vu all over again. Last week’s readers were particularly interested in Pemex’s six models for alliances with private oil companies (Spanish), CFE’s investment of US$131.6bn in its infrastructure (Spanish), and CRE’s ultimatum for Pemex to produce ultra low sulfur diesel (Spanish).
The Road to Reform
CFE aims to raise MXN10bn in transmission investment. The state-owned company plans to raise MXN10bn offering its electrical grid to investors (Spanish). Following the new rules for associations with limited participation, the deal may be completed by the second half of this year.
Energy provider registry is growing very slowly. Only 53 companies have registered as national providers for the electrical and hydrocarbon industry on the Economy Ministry’s webpage. In order to offer their products and services, 17 companies signed up in the registry for the Electrical Industry and 36 in the Hydrocarbon registry (Spanish).
After a year, upstream contracts have still not migrated. Migrating from contracts to licenses or production was part of the energy reform, but has been delayed for at least a year. The companies that won 15 exploration and production contracts in Poza Rica-Altamira and Chicontepec oil fields have not been paid for their services in the last 12 months (Spanish).
The CRE, the new gasoline quality police. The Energy Regulatory Commission (CRE) is now mandated to supervise the quality of the fuels consumed throughout the country, not only in the Metropolitan Area (Spanish). The commission will be in charge of the domestic and imported fuels of Pemex’s and private producers in the future.
Onexpo asked for a tax cut. The National Organization of Fuel Vendors asked the authorities to review the tax scheme for fuel import. Taxes applied to fuels, such as the IEPS and VAT, represent 50% of the final price paid by consumers, while in the US they amount to 20% of the cost (Spanish).
Pemex’s short-term debt skyrocketed. In the last four months, according to the Finance Ministry, the short-term debt of the state-owned company increased by MXN20.9bn (Spanish). Pemex’s short term debt reached MXN27.9bn in April, up from the MXN7bn debt it held at the end of 2015.
Pemex ended negotiations in a strong position. After reviewing the 53 drilling contracts, the state-owned company announced that drilling operators such as Grupo R, Oro Negro, and Perforadora Latina can now pay their bonds. Moreover, Pemex will pay a daily tariff 29% lower for 20 drilling rigs (Spanish).
Pemex continued racking up fines. The Federal Commission of Economic Competition (Cofece) imposed twenty fines on Pemex, reaching MXN795.8m for conditioning distribution of gasoline on contracting union delivery services. Half the fines have not been paid and the other half were appealed before the Supreme Court (Spanish).
Banxico trusts the peso will level off. Mexico’s central bank trusts the local currency would level off once uncertainty is dispelled about the Federal Reserve’s action on interest rates (Spanish) (English). Banxico continues to watch US monetary policy, adjusting its own monetary policy if necessary (English).
Pemex’s debt to suppliers is now an administrative issue. The state-owned company’s CEO said that the debt to suppliers has been almost resolved and it is more a problem with documents, than a lack of resources. A new payment of MXN30bn to suppliers is expected in the next days (Spanish).
Once again OPEC refused to change oil production. OPEC maintained its policy of uncontrolled production, with no ceiling on output (Spanish). The members decided to wait for the reaction of the international market and shared their optimism that oil prices are and will keep on improving (English).
The CRE is getting ready for an open natural gas market. The Energy Regulatory Commission is creating a tool to monitor market transactions to be ready by the end of 2016 (Spanish). This would allow market participants to know how much natural gas was produced or imported, and what discounts applied to sales.
Illegal electrical connections shoot up. The number of illegal users increased by 43,953 consumers in one year, reaching 462,360 irregular users by the end of May (Spanish). In 2015, CFE began an Expansion and Updating Program of the General Distribution Grid to formalize irregular users, but it did not have the expected effect.
WB lowers Mexico’s GDP for 2016. The World Bank lowered the growth prospect for Mexico this year to 2.5% from 2.8%, due to the sluggish global economy and the fall in oil prices (Spanish) (English). In 2017, Mexico is expected to grow 2.8%, instead of 3%, as previously announced.
Mexico makes the most of US natural gas. The US exports natural gas to Mexico at the lowest price it charges to all North American clients. In March, Mexico paid US$1.88 per million cubic feet imported and increased by 40.4% the volume of gas imported in the first four months of the year (Spanish).
Mexico offers a better electrical industrial tariff than some US states. Twenty-four states in the US offered in March a higher rate to industrial consumers than the average in Mexico at 6.82 US cents per kilowatt-hour (Spanish). Border states offer a lower tariff than CFE, such as the Texas tariff which is 5.28 cents.
Strategy & Operations
Ienova and TransCanada won the South Texas-Tuxpan pipeline bid. Ienova and TransCanada, through their subsidiary Infraestructura Marina del Golfo (IMG), bid US$2.1bn and won the tender to build the South Texas-Tuxpan pipeline (Spanish). If the budget is accepted, CFE will save 31%; the project cost was estimated at US$3.1bn.
Renewable energy will get a big push. Mexico will increase four-fold the investment in research and development in clean energy technologies in the next five years. According to the commitment taken on in the United Nations Conference about Climate Change, the investment will reach US$310m in 2020 (Spanish).
Energy reform will spark off ITs: Indra. According to the Spanish software company, the needs of Mexico’s energy industry represent an excellent opportunity for IT businesses (Spanish). Indra executives said expansion of the electrical grid, the pipeline system, and the winners of Round 1 will need IT and Internet of things.
Mexico’s pipeline system will expand into the horizon. The Energy Secretary, Pedro Joaquín Coldwell, said that Mexico will expand its pipeline system in coming years to reach 10,000km, which would represent investments of US$16bn (Spanish). Since 2012, Mexico increased by 480% the amount invested in pipelines.
Trafigura may become Mexico’s first private producer of fuel. In the Burgos region, the Dutch trading company and its anonymous partners plan to open a fractionation plant by the end of 2017 (English). The plant will process Pemex’s heavy naphtha into diesel and light naphtha, according to an unnamed Pemex official.
Old School Social
Events in the world beyond your screen – go see and be seen!
The Expo Eléctrica Internacional is June 14-18 at the Centro Cultural Banamex in Mexico City.
The Congreso Anual Conjunto de Asociaciones del Sector Energético is June 16-18 in Acapulco.
The Foro de Platts y Thomson Reuters is June 22 at the Sheraton María Isabel Hotel in Mexico City.
The Mexican Energy Forum is July 12-14 in Mexico City.
The Vigésimanovena Reunión Internacional de Verano de Potencia, Aplicaciones Industriales y Exposición Industrial is July 17-23 at the Mundo Imperial Acapulco Diamante, Expo-Forum, Acapulco.
Mexico and Scotland to join forces against pollution. Representatives from Mexico’s Energy Ministry, the National University (UNAM) and the Scottish Carbon Capture & Storage met to discuss research collaborations and capacity building (English). The scientists will contribute to the development of technologies designed to capture carbon dioxide from industrial and power plants.
Quote of the Week
“Nada se resiste al esfuerzo unido de un gran número de brazos.”
“Nothing resists the joint force of locking together a great number of arms.”
- Lucas Alamán (1792-1853), historian, politician, and intellectual
We hope you have a productive week. Please send any news, comments, or technologies to fight pollution to MexicoWeekly@energynarrative.com.