June 19, 2017 edition— Siemens’ alliance with Pemex and CFE; Round 2.1 ready with Pemex’s alliances; and shale tender to be announced in July.
Last Week in a Minute or Less
Renewables & Electricity. GE is interested in the Oaxaca-Mexico City line; Siemens will modernize Pemex and CFE; and Mexico will increase its clean energy capacity by 165%.
Natural Gas & Liquid Fuels. CFE prepares fuel storage; Repsol considers going into Mexico’s gas station market; and Querétaro should focus on natural gas distribution.
Oil & Gas Upstream. The shale tender will be announced in July; Pemex multiplied its alliances for Round 2.1; and Mexico is studying this year’s oil hedge.
Money & Power. Inflation ratcheted up; Germany supported Mexico on NAFTA; and Pemex was fined by Mexico’s antitrust authority.
Déjà vu all over again. Last week’s readers were particularly interested in the biggest transmission line tender (Spanish); Eosol’s solar farm in Durango (Spanish); and Pemex’s association with Sierra O&G Exploración y Producción and China Offshore Oil Corporation (Spanish).
The Road to Reform
Shale tender will see the light in July. In July, the federal government will announce the tender for developing shale oil and gas fields and the changes in the design of blocks subsequent to Round 2.4 (Spanish). The Energy Ministry confirmed Mexico holds the sixth largest reserves of shale gas in the world.
CRE pushed Querétaro to set up natural gas. The Energy Regulatory Commission (CRE) said a priority for Querétaro is to transition to natural gas distribution in urban areas and promote LP gas use in rural areas (Spanish). The CRE proposed construction of a filling station to supply gas in mountainous regions.
CFE gets ready for fuel storage. The state-owned company’s subsidiary, CFE Energía, will offer 1.1 million barrels of storage capacity formerly for fuel oil in an initial stage in Baja California and Sonora (Spanish). This is 500,000 barrels less than originally planned and could be intended to protect the value of the assets (English).
Siemens will bring Pemex and CFE up to date. The German company and CFE signed an agreement to modernize the national grid by incorporating new digital technologies (English). Siemens also signed a memorandum of Understanding and Cooperation with Pemex as part of its business plan to save MXN29bn (English) (Spanish).
Pemex in alliances to fight for Round 2.1. The state-owned company will reactivate its alliances with Chevron and Inpex to compete for deep-water fields and has also partnered with Ecopetrol and SEA Deutsche Erdoel (Spanish). In the June 19 tender, contenders include 16 consortia and 20 individual bidders (Spanish).
Political Economy
Germany backed up Mexico on NAFTA. German Chancellor Angela Merkel expressed her support for President Peña Nieto in seeking a successful renegotiation of NAFTA with Donald Trump (English) (Spanish). Both Mexico and Germany enjoy trade surpluses with the United States estimated at US$60bn annually and are defenders of exporting manufactured goods.
Pemex will cut 2,785 temporary jobs. Pemex Exploración y Producción (PEP) will get by without 2,785 temporary workers in order to lower costs in line with the reduced investment budget (Spanish). Payments for the temporary posts total MXN285.5m and the deepest cuts will hit the drilling and services sector.
Mexico’s antitrust authority fined Pemex. Mexico’s antitrust commission (Cofece) fined Pemex’s Industrial Transformation unit US$20.3m for engaging in possible monopolistic practices in diesel fuels and failing to comply with the 2014 energy reform requirement to promote a competitive fuels market (English) (Spanish). Pemex can challenge the Cofece decision 15 days after being notified.
CFE reduces losses. The state-owned company cut by 20% energy losses during the last four years (Spanish). S&P Global Ratings confirmed CFE’s ratings in foreign currency as BBB+ and A for local currency and said it is probable CFE will let the private sector make most of the investments in power generation (Spanish).
Market Trends
Mexico is considering its annual oil hedging. Mexico is working on its oil hedges by asking Wall Street banks for price quotes to consider options for securing prices for next year (English) (Spanish). Last year, the federal government earned US$2.7bn in payouts from the oil hedging program.
Banxico hit the jackpot with forex hedges. Mexico’s central bank sold all US$200m on offer in its auction to renew forex hedges, with demand over five times the offer (Spanish). The exchange rate on the forwards was 18.27 pesos per dollar and the peso registered an appreciation of 0.11%.
Inflation reached 2009 levels. Inflation in May rose to 6.16%, the highest level since April 2009 (Spanish). Mexico’s central bank said the peso has been undervalued; the currency rallied following the ruling party victory in the State of Mexico governor’s race, and a stronger peso can compensate for inflation (English).
Mexico’s clean energy will skyrocket. The Energy Minister pledged investments to increase by 165% domestic clean energy capacity, increasing solar capacity by 54% and multiplying wind power 4.6 times more (Spanish). The Sener said that today 20% of all electricity comes from renewable fuels (Spanish).
Strategy & Operations
Repsol considers entering Mexico’s gas station market. The Spanish company is studying Mexico’s fuel market with a view to installing gas stations in the country (Spanish). While Repsol did not comment, the Energy Regulatory Commission pointed out that some commissioners met with Repsol in February 2017.
Pemex will raise the stakes in Nuevo León. Pemex is considering 22 logistics projects nationwide, including pipelines, storage terminals, and railways in Nuevo León (Spanish). The projects are part of what is needed to meet Mexico’s US$15bn deficit in petroleum logistics, and Pemex will not be the only developer of the works.
Tamaulipas does not exploit its energy potential. The state will receive US$70bn in investments in its energy sector. Approximately 59% of the land area of Tamaulipas potentially holds energy resources and has not been developed due to the legal restrictions that existed before the energy reform (Spanish).
The Oaxaca-Mexico City line caught GE’s eyes. General Electric wants in on the first tender of a high-voltage direct current transmission grid (Spanish). The Oaxaca-Mexico City line will have a transmission capacity of 3,000 MW through a 1,200km circuit and is projected to cost US$1.2bn.
The Salina Cruz refinery suffered flooding and a fire. Pemex’s refinery in Salina Cruz, Oaxaca, was flooded by tropical storm “Calvin” (Spanish). After resuming operations, a storage tank of 500,000 liters of crude oil caught fire from a short circuit produced by the flooding, and seven workers were injured (Spanish).
Old School Social
Events in the world beyond your screen – go see and be seen!
The CWC World LNG& Gas Series 15th Americas Summit is June 20-23 in Houston, Texas.
The Yacimientos No Convencionales de Lutitas (Shale de Petroleo y Gas) Forum is June 20 at Club de Industriales Polanco, in Mexico City.
A breakfast with José Antonio González Anaya, Pemex CEO, is June 29 at the Spanish Chamber of Commerce, in Mexico City.
The Mexico Oil & Gas Summit is July 18-19 at the Sheraton María Isabel Hotel, in Mexico City.
Lateral Thinking
Aztec ball court found behind Mexico City’s cathedral. Archeologists found an Aztec ball court and a temple consecrated to Ehécatl, the wind god, behind the capital’s cathedral (English). A part of the ruins was revealed seven years ago at the construction site of a hotel on Calle Guatemala in the historic downtown district.
Quote of the Week
“El ave canta, aunque la rama cruja, porque conoce lo que son sus alas.”
“The bird sings, even when the branch creaks, because it knows what its wings can do.”
-Salvador Díaz Mirón (1853-1928), Mexican poet, journalist, and professor
We hope you have a productive week. Please send any news, comments, or new six-hundred-year-old temples to MexicoWeekly@energynarrative.com.
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