June 7, 2020 edition—CFE’s 12% national content; Sempra’s second LNG project; and Mexico’s unexpected growth.
Last Week in a Minute or Less
Electric Power & Renewables. CFE will ask for 12% national content for investment projects; a new solar park may run between Puebla and Tlaxcala; and CFE’s national content decision could create more than 30,000 new jobs.
Natural Gas Mid-Downstream & LNG. US natural gas imports in Mexico jumped 33% in March; Sempra considers a second LNG project; and Mexico’s natural gas prices dropped in April.
Liquid Fuels Mid-Downstream. Judges canceled Pemex’s new advantages; Cofece is after the LP gas market; and Moody’s did not approve of Pemex’s new purchase.
Oil & Gas Upstream. Energy analysts are studying the Mexican elections.
Government & NGO. Banxico expects 7% growth; Mexico’s remittances jumped in April; and the OECD improved Mexico’s growth forecast.
Déjà vu all over again. Last week’s readers were particularly interested in Pemex’s risks with the new refinery (Forbes – Spanish); Mexico’s natural gas prices (Natural Gas Intel – English); and Pemex’s new refinery (Argus Media – English).
Geopolitics & Trade
Textile factories will have to follow USMCA rules. Textile factories will have to recognize work as a human right, promote decent jobs in all of their labor relations, respect union rights and the right to collective bargaining, and promote labor justice at work (El Financiero – Spanish) (Quartz – English).
Harris will visit Guatemala and Mexico to discuss migration and the economy. Vice President Kamala Harris will visit Guatemala and Mexico to discuss economic development, climate and food insecurity, women’s issues, and migration from the region (Reuters – English).
Mexico’s remittances jumped in April. Remittances to Mexico increased almost 40% in April, the highest rise in nearly two decades, reaching US$4.05bn (Reuters – English). Analysts from bank Banorte estimated that remittances could be up 10% at year’s end.
The OECD improved Mexico’s growth forecast. The Organization for Economic Cooperation and Development (OECD) improved Mexico’s growth outlook to 5% from 4.5% in 2021, thanks to Mexico’s exports to the US (El Financiero – Spanish). For 2022, the OECD improved the GDP growth forecast by 0.2%, reaching 3.2%.
Banxico expects 7% growth. Mexico’s central bank expects inflation to reach 4.8% this year and the GDP to be between 5% and 7% (El Economista – Spanish). In 2022, the GDP is expected to reach 3%, down from the previous 3.3% forecast.
Mexico’s economy recovered in the first quarter. Between January and March, Mexico’s GDP grew 0.8%, resulting in three quarters of growth (12.5%, 3.2%, and 0.8%) (El Economista – Spanish). Restaurants, pubs, and hotels only grew 0.33% and showed an annual contraction of 33.5%.
Legal & Regulatory
Judges canceled Pemex’s new advantages. Two judges handed temporary suspensions to the modifications made to Article 12 of the Hydrocarbons Law, eliminating asymmetric price regulation for the state-owned company (El Economista – Spanish). The decision protects all companies affected by the changes in the law.
Cofece is after the LP gas market. The Mexican antitrust watchdog is looking into the market distribution of LP gas in Mexico to confirm if there are conditions for effective competition (El Financiero – Spanish). The Cofece will have between 15 and 45 days to conduct the inquiry.
Energy analysts are studying the Mexican elections. Experts said that these elections could define the rules of the game for the remainder of the administration for the private and public energy sector (Natural Gas Intel – English). Mexico held local, legislative, and state elections on June 6.
CFE will ask for 12% national content for investment projects. The Economy Ministry and the state-owned company agreed to establish a minimum national content of 12% to execute priority investment projects, with a desired 25% (El Economista – Spanish). The projects will be the development of six combined cycle plants in Baja California and Yucatán.
Foreign investment in power fell 10.5% in the first quarter… During the first quarter, Mexico attracted US$499.4m in direct foreign investment to generate, transport, and distribute power, a 10.5% fall compared to the same period in 2020 (El Financiero – Spanish). It is the lowest amount received in the first quarter since President López Obrador started his administration.
…and natural gas pipelines suffered too. Mexico showed a negative balance of US$144.5m in direct foreign investment in natural gas pipelines during the first quarter (El Economista – Spanish). Companies disinvested in the business in this quarter and in 2020.
US natural gas imports in Mexico jumped 33% in March. Natural gas imports from the US to Mexico increased 33%, reaching 183,051 million cubic feet in March (Milenio – Spanish). The average price of imports fell 89% from 26.95 dollars per 1,000 cubic feet to 2.93 dollars, after the February storm.
Mexico’s natural gas prices dropped down in April. Mexico’s natural gas prices fell to US$3.37/MMBtu in April, the lowest average monthly price this year (Natural Gas Intel – English). The prices, however, were more than $1 higher compared with April 2020, when the Energy Regulatory Commission reported prices of $2.13/MMBtu.
Strategy & Operations
Moody’s did not approve of Pemex’s new purchase. Moody’s downgraded the senior rating for the Deer Park refinery to Baa3 from Baa2 with the possibility of a new downgrade (El Financiero – Spanish). The decision was due to the time it will take Pemex to recover profits from the deal.
A new solar park may run between Puebla and Tlaxcala. Energías Renovables Venta III and Iberdrola plan to develop a solar park between Puebla and Tlaxcala with an investment of MXN6.3bn (El Economista – Spanish). The project would have a capacity to generate 590.615 MW.
CFE’s national content decision could create more than 30,000 new jobs. The decision to establish a 12% national content for investment projects could generate approximately 17,475 direct jobs and 12,890 indirect jobs, a total of 30,365 new positions (PV Magazine – Spanish).
Sempra considers a second LNG project. Sempra Energy may develop a second LNG project in Mexico at Topolobampo in Sinaloa (Natural Gas Intel – English). The project, called Vista Pacifico, would import natural gas from US shale basins for re-export as LNG.
Pemex needs refinery’s expertise transfer. Analysts say that absorbing the technology and expertise of the Deer Park refinery is the key to the success of Pemex’s deal to acquire the refinery. The Shell managers now running the Deer Park refining operations are being transferred with the new ownership (Reuters – English).
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.
Mexico has a new sinkhole. On May 30, the earth swallowed 1.5 acres of farmland due to a sinkhole caused either by soil erosion beneath it or a sudden loss of water (Inverse – English). Sinkholes can occur naturally, or they might appear due to human developments.
Quote of the Week
“Una fuerte convicción forma a los héroes como a los fanáticos.”
“A strong conviction makes both heroes and fanatics.”
– Lucas Alamán (1792-1853), Mexican conservative politician, historian, and writer.
We hope you have a productive week. Please send any news, comments, or natural surprises to MexicoWeekly@energynarrative.com.
Tell your friends and colleagues about the Weekly Brief! They can sign up for a free one-month trial here.[/vc_column_text][/vc_column][/vc_row]