June 17, 2019 edition—The Texas-Tuxpan pipeline’s conclusion; Siemens’ energy company; and Tabasco’s power.
Last Week in a Minute or Less
Renewables & Electricity. The Cenace called off the last power auction; Siemens will create a new energy competitor; and the Dos Bocas refinery will force Tabasco to go green.
Natural Gas & Liquid Fuels. The Texas-Tuxpan pipeline is finally done; Mexico’s fuel market will be up for grabs in 2020; and Profeco goes after gas stations.
Oil & Gas Upstream. The Energy Minister offered certainty; and Tamaulipas has big plans for Ébano and Pandura.
Money & Power. The US and Mexico terms of agreement were set; inflation finally caught a break; and HR Ratings is still waiting to decide.
Déjà vu all over again. Last week’s readers were particularly interested in the Sener’s plans for the CFE (El Economista – Spanish); Yucatan’s power ambition (El Financiero – Spanish); and Puebla’s solar parks (El Economista – Spanish).
These are the Mexico and the US terms of agreement. To avoid tariffs, Mexico agreed to deploy the national guard at its southern border, to make asylum seekers await resolution in Mexico, and to show results in 90 days (El Financiero – Spanish) (State-gov – English).
Canada’s House of Commons debated the new NAFTA. Members of Parliament started debating the USMCA implementation bill in the House of Commons (CTV News – English). Foreign Affairs Minister Chrystia Freeland began the debate by describing the benefits of the deal.
The tariff threat made Mexico less attractive for companies. Considering the trade war with China, certain companies considered Mexico as an alternative (Reuters – English). President Donald Trump’s threat to apply tariffs on Mexico hit the Mexican peso and created doubts on the ratification of the new NAFTA.
The Road to Reform
The Cenace called off the last power auction. The National Center of Energy Control cancelled the medium-term power auction announced on December 20 (El Financiero – Spanish). The auction was directed to existing power plants and power market participants.
The Energy Minister offered certainty… Energy Minister Rocío Nahle pledged the current government will not change the energy reform and will offer certainty to investors that bet on Mexico’s energy market (El Financiero – Spanish). The minister maintained the decision to stop upstream rounds, waiting for more investment and oil production.
…and the Finance Ministry asked for investment in the sector. In the upcoming weeks, the Finance Ministry will present an investment project in the energy sector involving Pemex, CFE, and the private sector (El Economista – Spanish). The Finance Ministry will decide what type of support is needed for the state-owned companies.
The CNH cancelled Pemex’s farmout in October. The National Hydrocarbons Commission (CNH) announced the cancellation of the state-owned company’s farmout planned for October in seven onshore areas (El Financiero – Spanish) (CNBC – English). The farmout has already been postponed twice.
The Sener and the Semarnat disagreed again. The Energy Minister said the Environmental Impact Manifest for the Dos Bocas refinery was completed and expected the Environmental and Natural Resources Ministry (Semarnat) to publish it. The Semarnat said it did not know when the document would be presented or about the discussion with the Energy Ministry (El Financiero – Spanish).
Profeco goes after gas stations. The consumer advocate institution (Profeco) found 320 gas stations that have closed since the fight against fuel robbery started and the government assumed they were supplied by stolen fuel (El Economista – Spanish). Profeco also reported five gas stations after they resisted the verification process (El Financiero – Spanish).
Inflation finally caught a break. In May, the annual inflation rate in Mexico dropped to 4.28%, from 4.41% in April (El Economista – Spanish) (Nasdaq – English). Fuel prices, certain farm products, and tourist services helped the national index of consumer prices.
The International Finance Corporation doubles down on Mexico. The private sector branch of the World Bank will invest US$800m to support Mexico’s long-term agenda (El Financiero – Spanish), double the usual level. This year’s investment will go to solar energy generation and 5G telecoms among other projects.
Mexico grew less than most G20 nations. The OECD said Mexico’s economy, together with Turkey, Italy, and South Africa, had the worst GDP performance in the first quarter of 2019 (El Economista – Spanish). Mexico also fell from 12 to 13 in the rankings of foreign direct investment destinations (El Economista – Spanish).
Mexico is pushing for a 1% budget surplus. Finance Minister Carlos Urzua said Mexico’s new goal is to reach a 1% primary budget surplus under President López Obrador’s administration (Reuters – English).
Mexico’s fuel market will be up for grabs in 2020. Oil company executives expect Mexico’s fuel market to be more competitive in 2020 as multiple midstream projects will start operations (Platts – English). In 2019 and 2020, ExxonMobil, Repsol, BP, Total, Shell, Valero, Marathon, and Windstar will expand their market thanks to new terminals.
AMLO and the rating agencies fought again… After Fitch’s sovereign debt downgrade and Pemex’s junk rating (Reuters – English), the Finance Minister described the rating decisions as “unfortunate” and said the government strongly disagrees with the rating agency’s approach (El Economista – Spanish).
… and HR Ratings is still waiting to decide. In order to change Mexico’s sovereign rating, HR Ratings will wait for the USMCA ratification, the presentation of Pemex’s Business Plan and the national Infrastructure Plan, and the economic results at the end of June (El Economista – Spanish).
Pemex’s bonds recovered after the US agreement. The state-owned company’s bonds recovered between 0.91% and 1.12% after Mexico and the US reached an agreement on immigration (El Financiero – Spanish), avoiding the threat of a 5% tariff on Mexican products. The bonds yield ended up at between 6.63% and 7.63%, depending on the due date.
Strategy & Operations
Tamaulipas will get energy investors. Tamaulipas will receive US$1bn in investments on the Ébano field and the Pandura project (El Financiero – Spanish). The president of the energy cluster will look for the partners of the energy cluster to participate in those projects.
The Dos Bocas refinery will force Tabasco to go green. As 50% of the power consumed in Tabasco come from Chiapas’ hydroelectric plants, Tabasco will need more power to satisfy the demand of the Dos Bocas refinery, the consumers, and the industry (El Financiero – Spanish).
The Texas-Tuxpan pipeline is finally done. IEnova and TC Energy (aka TransCanada) finished the construction of the Texas-Tuxpan pipeline (El Financiero – Spanish) (Argus Media – English). The US$2.5bn project can transport 2,600 million cubic feet of natural gas per day.
Schneider Electric cut the ribbon on a smart plant. The energy company opened the first smart plant in Nuevo León with an initial investment of US$37m (El Economista – Spanish). Schneider Electric expects the plant to increase its workforce between 20% and 30%.
Siemens’ energy spin off will stay active in Mexico. The German company will separate its energy division next year, creating a company with an investment of EUR30bn and 80,000 workers (Reforma – Spanish). The spinoff will support Mexico’s energy transition across the energy value chain from fossil fuels to renewable energies.
Old School Social
Events in the world beyond your screen—go see and be seen!
The Mexican Congress of Oil is scheduled for June 19-22 in León, Guanajuato.
The Mexico Oil & Gas Summit 2019 will be held July 17-18 at Sheraton María Isabel, in Mexico City.
Scorpion venom may kill staph and tuberculosis bacteria. Scientists in Stanford and in Mexico have found a scorpion in Eastern Mexico whose venom contains compounds that could help fight bacterial infections (News Stanford – English). Getting the venom out of the scorpions is hard as they can only be found in the rainy season.
Quote of the Week
“De los primeros pasos depende en toda la empresa el éxito final.”
“On the first steps depends the final success of all endeavors.”
– Vicente Riva Palacio (1814-1861), Mexican politician, novelist, and journalist.
We hope you have a productive week. Please send any news, comments, or venom uses to MexicoWeekly@energynarrative.com.
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