The Weekly Brief: Mexico


June 18, 2018 edition—Hydropower halted; border-crossing pipelines; and NAFTA’s impasse.




Last Week in a Minute or Less


Renewables & Electricity. Hydropower projects are awaiting the community’s approval in Puebla; solar roofs will attract MXN150bn; and associations asked the candidates to support renewables.


Natural Gas & Liquid Fuels. Thirteen companies are after gas storage; Impulsora Pipeline will connect Texas with Mexico; and Baja California will import fuel into a storage terminal.


Oil & Gas Upstream. The Round 3.3 tax regime has changed; and Petrobal gets ready for the Round 1.2 developments.


Money & Power. NAFTA hit an impasse; Mexico turned to Japan; and Banxico’s interest rate is expected to hit 8%.


Déjà vu all over again. Last week’s readers were particularly interested in Sener’s social impact evaluation (DOF – Spanish); Engie’s pipeline interconnection (Reforma – Spanish); and Guanajuato’s solar park (El Economista – Spanish).



NAFTA Negotiation


Trump tariffs rock the negotiation boat. Prime Minister Justin Trudeau said claiming Canada was a threat to national security as the reason to impose tariffs is “insulting” and “absurd” (Washington Post – English), and the tariffs could affect Canada’s real estate market (WSJ – English). US producers can still sell pork legs and shoulders to Mexico through an import quota despite Mexico’s retaliation (Reuters – English).


A NAFTA deal was close…and lost. Donald Trump’s trade adviser blamed Prime Minister Justin Trudeau for the failure to finalize a NAFTA renegotiation (Bloomberg – English) after months of negotiations. Larry Kudlow accused Justin Trudeau of stabbing Donald Trump in the back (El Economista – Spanish).


Mexico hopes for “flexibility” renegotiating NAFTA. Mexico’s Economy Minister Ildefonso Guajardo said the NAFTA renegotiation will find a solution with “sufficient flexibility” to narrow differences (Reuters – English). Guajardo said that negotiators will be “engaging strongly” in July to reach a feasible, workable, and beneficial agreement for the three nations.


Mexico turns to Japan as NAFTA’s future remains uncertain. Mexico’s Economy Minister Ildefonso Guajardo traveled to Japan, seeking to diversify exports and investment (Bloomberg – English) considering the impasse in NAFTA talks. Ildefonso Guajardo met Japanese officials and business leaders.



The Road to Reform


Hydropower projects are waiting in Puebla. Three hydropower projects in the Norte and Negra mountains in Puebla are halted due to the need for a public inquiry in the affected municipalities (El Economista – Spanish). Some projects were approved 10 years ago and represent a total of US$223.5m in investment.


Thirteen companies are after gas storage. Thirteen companies requested access to the data room (Reforma – Spanish) of the storage project that will be open for bidding this year (El Financiero – Spanish). The four fields that are up for grabs are located in Chiapas, Tabasco, Tamaulipas, and Veracruz (El Economista – Spanish).


Is the Round 3.3 tax regime the right one? The tax regime for Round 3.3 differed from the license contracts, calculating the state’s participation not over the contractual value, but over the percentage of the operating profit (Pulso Energético – Spanish). The big winners would be the companies that offer the nation the best participation values.


The ethanol content is still up for discussion. Nuevo León’s government and the Energy Regulatory Commission met to approve the use of ethanol in gasoline (El Economista – Spanish). The Mexican Center of Environmental Law recommended reversing the permission for higher ethanol levels in gasoline to improve air quality (El Financiero – Spanish).


The Senate postponed the ASEA reform. Reform for the Agency of Security, Energy, and Environment will have to wait for the next government after the Senate could not pass it (Zocalo – Spanish). The goal is to strengthen the regulator with authority similar to the CRE and CNH.



Political Economy


Pemex controlled a fire at Minatitlan refinery. The state-owned company said that the fire at the Minatitlan refinery was under control with no injuries and that the plant was operating normally (Reuters – English) (Proceso – Spanish). Pemex said the cause of the incident will be investigated.


Associations asked the candidates to back renewables. Private clean energy associations asked the presidential candidates to encourage the continuity in renewable energy investments, offering legal certainty to developers (El Economista – Spanish). The association urged a 5% increase in the clean energy generation goal for 2024 (El Financiero – Spanish).


Odebrecht came up in the election campaign. The PAN presented two demands to the Attorney General against presidential candidates AMLO and José Antonio Meade, accused of illegal funding and covering up of the Odebrecht cases (El Universal – Spanish). Braskem, the Odebrecht subsidiary, refuted a “preferential price” in the supply offered to Pemex (Jornada – Spanish).


Inflation reached a new low in May. Mexico’s annual inflation dropped to a 17-month low in May (Reuters – English) thanks to a fall in food price pressures (El Economista – Spanish). Inflation dropped to 4.51% from 4.55% in April, but still above the 4.43% forecast by Reuters.



Market Trends


The administration will end with 100% 3P reserves recovered. Pemex will drill at least 50 exploratory wells (El Economista – Spanish) by the end of 2018, adding 1,100 million barrels of crude oil equivalent to the total reserves (3P) of the country. Pemex will add 3.6% less than the 1,194 million barrels incorporated in 2017 (El Financiero – Spanish).


Banxico is expected to raise the interest rate to 8%. Sura Asset Management México forecast Mexico’s central bank will increase the interest rate to at least 8% from its current 7.5% level (El Economista – Spanish). The exchange market expects Banxico’s raise due to the changes in the exchange rate (El Financiero – Spanish).


LP gas prices started rising again. LP gas prices increased by 4.9% in May (El Economista – Spanish). The increase contrasts with the prices in March and April, but places the rise in prices at 21% in a year.


Heat propels power demand. The National Center of Energy Control (Cenace) said that due to high temperatures in the country, electricity demand last week was the highest in four years (El Economista – Spanish), at 46,813MW. The Cenace interrupted power to avoid risks to the national power system.



Strategy & Operations


The CFE goes into the gasoline business. The state-owned company started to develop a storage terminal for refined products in Rosarito, Baja California (El Financiero – Spanish). The business was agreed with the Andeavor corporation, which will build and operate the storage units with an investment close to US$100m.


Engie supplies natural gas in El Bajío. Engie started the distribution of natural gas in the Bajío region, including 22 municipalities in the states of Aguascalientes, Guanajuato, Jalisco, San Luis Potosí, and Zacatecas (El Economista – Spanish). The creation of the Energy Cluster of the Bajío progressed with an agreement between state energy commissions (El Economista – Spanish).


Baja California will import fuel into a storage terminal. The Baja California railroad company is building a hydrocarbons storage terminal to import fuel from the US with an investment of US$25m. The goal is to start operations before the end of 2018 (El Economista – Spanish).


Impulsora Pipeline will connect Texas with Mexico. Impulsora Pipeline started to inject natural gas in the Nueva Era pipeline to carry fuel from Texas to the CFE combined cycle plants in Escobedo (El Financiero – Spanish). Commissioning trials started in May and the project is expected to be operational by the end of June.


Petrobal gets ready to develop its Round 1.2 fields. The oil company of Grupo Bal is preparing US$2bn to develop two fields awarded in Round 1.2. The fields are expected to produce between 70,000 and 80,000 barrels of crude per day (Expansión – Spanish) once the first phase is finished.


Solar roofs will attract MXN150bn. Asolmex estimated the installation of solar panels in home and business roofs has a potential of 6,000MW capacity (El Economista – Spanish) with investments of MXN150bn in the next six years. Atlas Desarrollos and Enlight installed the first solar roof development in Monterrey (El Economista – Spanish).



Old School Social


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


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


The Mexico Oil & Gas Summit will be held July 18-19 at the Sheraton María Isabel in Mexico City.



Lateral Thinking


Nuns are saving axolotl from extinction. A salamander unique to Mexico, the axolotl, has almost disappeared from its freshwater habitat due to pollution and overfishing (BBC – English). Scientists and an order of nuns are participating in a project to protect the axolotl.



Quote of the Week


“El ave canta, aunque la rama cruja, porque conoce lo que son sus alas.”


“The bird sings, although the branch creaks, because it knows what its wings are.”


-Salvador Díaz Mirón (1853-1928), Mexican poet.


We hope you have a productive week. Please send any news, comments, or special salamanders to


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]