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June 14, 2020 edition—Cenagas’ storage; CRE’s grid security; and Banverde’s solar funds.
Last Week in a Minute or Less
Electric Power & Renewables. The CRE is working on rules to secure the grid; Banverde will finance solar; and Rengen expects 2.2% growth in renewables.
Natural Gas Mid-Downstream & LNG. Cenagas focused on storage; and natural gas capacity allocations will be assessed in June.
Liquid Fuels Mid-Downstream. PRI fights the Hydrocarbons Law and the Sener fought back; a judge killed Pemex’s asymmetry regulation; and the fuel subsidy bounced back.
Oil & Gas Upstream. The Sener published comments on motor pump efficiency.
Government & NGO. Mexico will use US vaccines to restore activity at the border; the World Bank expects 5% growth from Mexico; and inflation slowed down in May.
Déjà vu all over again. Last week’s readers were particularly interested in Sempra’s possible LNG project (Natural Gas Intel – English); US natural gas imports (Milenio – Spanish); and Mexico’s elections effect on energy (Natural Gas Intel – English).
Geopolitics & Trade
Harris and AMLO will work on migration together. US Vice President Kamala Harris told President López Obrador that she saw him as a partner to fight migration as they agreed to deepen economic ties and invest to improve conditions in Central America (Reuters – English).
Mexico will use US vaccines to restore activity at the border. According to President López Obrador, 1 million doses of the Janssen COVID-19 vaccine that the US donated to Mexico will be distributed along the northern border among the 18-40 age group in 39 municipalities to restore economic activity and commerce (El País – English).
A GM union vote may be delayed. A key workers’ vote at a General Motors plant in Mexico that has attracted attention from the Biden administration over alleged rights violations is expected to be delayed past a deadline set by Mexican authorities (Reuters – English).
China may menace the end of steel tariffs. European leaders are expected to press President Joe Biden in meetings to end the steel and aluminum tariffs that President Trump imposed. However, the end of the tariffs will not solve the stiff competition from China (Politico – English).
Political Economy
BofA does not expect a big tax reform. According to the Bank of America, the loss of positions in the House of Representatives could reduce the possibility of a major fiscal reform (Forbes – Spanish). President López Obrador is expected to have a difficult time trying to change the constitution.
By the end of 2021, the economy is expected to be completely open. According to the Finance Ministry, with the vaccination process and the arrival of more doses, the total opening of all economic sectors is expected between September and December (El Financiero – Spanish).
Mexico’s per capita GDP fell 4.5%. The country’s annual per capita GDP was MXN135,546 in the first quarter of 2021, approximately 11,295 pesos per month on average per inhabitant. The 4.5% decline was the biggest fall since 2009 (El Economista – Spanish).
Inflation slowed down in May. After reaching 6.0% in April, inflation dropped to 5.89% in May, still above Mexico’s central bank’s goal (El Economista – Spanish). Energy prices helped with the slight reduction while food prices increased.
The World Bank expects 5% growth from Mexico. The World Bank increased its growth forecast for Mexico’s GDP to 5% in 2021, 1.3 percentage points above the January forecast (El Financiero – Spanish). The 2022 and 2023 outlooks are less optimistic with 3% and 2% rates, respectively.
AMLO named the Finance Minister as Banxico’s governor. President López Obrador suggested Arturo Herrera Gutiérrez, the current Finance Minister, as the new head of Mexico’s central bank (El Economista – Spanish) (Reuters – English). Rogelio Ramírez de la O would substitute for Herrera as the head of the Finance Ministry.
Legal & Regulatory
PRI fights the Hydrocarbons Law and the Sener fought back. The opposition party presented an unconstitutional action against the Hydrocarbons Law before the Supreme Court (El Financiero – Spanish). President López Obrador, the Sener, and the Energy Regulatory Commission (CRE) challenged one of the suspensions granted on May 10 by Judge Juan Pablo Gómez Fierro (Proceso – Spanish).
A judge kills Pemex’s asymmetry regulation. Judge Juan Pablo Gómez Fierro handed a “definite” suspension against the reforms to Article 13 in the Hydrocarbons Law (El Financiero – Spanish). The modifications pushed by Morena favor Pemex over the other competitors in the hydrocarbons market.
The CRE is working on rules to secure the grid. The Energy Regulatory Commission (CRE) published the new rules for security specifications and technical characteristics that the general grid must follow (DOF – Spanish) (El Economista – Spanish). Interested parties have 60 days to present their comments.
The Sener published the comments on motor pump efficiency. The Energy Ministry published the comments on a proposed standard for the energy efficiency of deepwater submersible motor pumps, including limits, test methods, and markings (DOF – Spanish).
Cenagas focused on storage. Mexico’s National Center of Natural Gas Control (Cenagas) launched its annual public consultation process to assess natural gas demand in Mexico (Natural Gas Intel – English). The consultation process is designed to measure actual and future gas demand in Mexico.
NGOs asked national policy to include renewables. According to several NGOs, including ICM, CIDE, and AgoraEnergieWende, the national policy should include the development of renewable energies. The head of the ICM criticized the current energy policy favoring fossil fuels (El Financiero – Spanish).
Market Trends
The fuel subsidy bounced back. The Finance Ministry increased the subsidy for gasoline and diesel (El Financiero – Spanish). Premium gasoline’s support went from 3.42% to 10.21%, and regular gasoline’s subsidy will go from 33.52% to 38.93%.
New pipeline projects will boost natural gas exports to Mexico. Several recently completed pipeline projects in Texas and Mexico will boost natural gas transportation capacity to Mexico from the Waha Hub, a natural gas trading hub in the Permian Basin (Houston Chronicle – English).
Natural gas capacity allocations will be assessed in June. At the end of June, numerous capacity contracts to transport more than 900MMcf/d of natural gas on the national Sistrangas pipeline system will conclude (Natural Gas Intel – English). There is demand for capacity that is not being met.
Strategy & Operations
Companies and families bet on distributed self-generation. Power generation in Mexico of less than 0.5MW installed close to the area of demand, without the use of the grid, multiplied more than 8,000-fold in a decade (El Economista – Spanish). Self-generation has provided certainty while facing the changes in the energy reform.
Pemex is not fighting climate change. México Evalúa said the state-owned company is one of the five oil companies with the most severe risks considering ESG indicators (El Financiero – Spanish). The indicators transform the traditional concept of social responsibility.
Banverde will finance solar. Banverde, the financial fund devoted to solar generation, has structured a loan of US$57m to finance the purchase of small-scale solar projects in Mexico to broaden its 8% installed capacity in the country over the next three years (Renovables Now – Spanish) (El Economista – Spanish).
Rengen expects 2.2% growth in renewables. The Mexican company expects a growth of almost 4MW, a 2.2% growth in its renewable power generation installations (El Economista – Spanish). Rengen has 26 power projects in the country with an estimated value of US$350m.
Old School Social Goes Viral
(Editor’s note: For the duration of the COVID-19 outbreak, this section will refocus on announcements of event delays or cancellations, events that are moved online, and scheduled webinars and public conference calls. Stay safe!)
The Mexican Petroleum Congress is rescheduled for June 23-26, 2021, in Monterrey.
Lateral Thinking
Deer Park was paid with scientific trusts. President López Obrador said the purchase of the Texan refinery was made thanks to resources obtained by recovering control of trusts from the National Board of Science and Technology (El Financiero – Spanish). The trusts saved MXN60bn for the country.
Quote of the Week
“Con estos acontecimientos comprendo que los que deseábamos un cambio, nada debíamos esperar de arriba.”
“With these events I understand that those of us who were expecting a change, we should expect nothing from above.”
– Francisco I. Madero (1873-1913), Mexican revolutionary, writer, and statesman.
We hope you have a productive week. Please send any news, comments, or trusts’ funds to MexicoWeekly@energynarrative.com.
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