The Weekly Brief: Mexico

June 26, 2017 edition— Eni won Round 2.1; Iberdrola has the Oaxaca-Mexico City line in sight; and Tabasco will use algae as fuel.






Last Week in a Minute or Less



Renewables & Electricity. Algae will power up Tabasco; Iberdrola will bet on the Oaxaca-Mexico City line; and the Nuevo León energy cluster will back energy suppliers.


Natural Gas & Liquid Fuels. Natural gas prices were freed in the north; gasoline will contain more ethanol; and Mexico’s natural gas production keeps falling behind demand.


Oil & Gas Upstream. Eni won the Round 2.1 battle; the jet fuel storage market is open for private companies; and the Salina Cruz fire affected propylene production.


Money & Power. Mexico’s government allegedly used spyware on journalists; Fibra E can help the federal government; and North American agriculture ministers start the NAFTA renegotiation.


Déjà vu all over again. Last week’s readers were particularly interested in the 165% increase in clean energy generation (Spanish); the shale gas and oil tender (Spanish); and the fine imposed on Pemex for anti-competitive practices (English).



The Road to Reform


The CRE authorized more ethanol in gasoline… The Energy Regulatory Commission (CRE) approved an increase in the maximum ethanol content in gasoline to 10% from 6% to harmonize with US fuels and ease fuel imports (Spanish) (Spanish). Environmental  advocates opposed the new rule, claiming that gasoline oxygenated with ethanol worsens air quality.


…and freed up natural gas prices. The Energy Regulatory Commission (CRE) put an end to the ceiling on natural gas prices in first-hand sales in the north of Mexico. With prices set by market conditions, the goal is to create incentives for natural gas supply alternatives and to encourage natural gas production by Pemex (Spanish).


Eni claimed the Round 2.1. throne. The Italian company was the biggest winner, taking three of the shallow-water blocks in a Round characterized by bigger and richer blocks (Spanish) (English) (Spanish). The consortia of Pemex with Deutsche Erdoel and with Ecopetrol obtained one block each and the Total-Shell partnership got one block (English) (English) (English).


Jet fuel storage is open to private companies. Mexico’s government will yield part of its storage capacity to allow private companies to participate in the market for fueling airlines. The Energy Regulatory Commission (CRE) is developing an open season for the market which produces profits estimated at MXN550m per year (Spanish).



Political Economy


Tillerson canceled his Mexico trip to face the Qatar crisis. US Secretary of State Rex Tillerson will focus on resolving the crisis resulting from the isolation of Qatar orchestrated by Saudi Arabia (English). As Tillerson’s substitute, Deputy Secretary of State John Sullivan attended the Organization of American States meeting in Cancún, Mexico.


Mexico’s government allegedly spied on journalists and activists. Activists, lawyers, and journalists in Mexico were targeted by spyware owned by the Mexican government to investigate criminals and terrorists (English) (English). In response, activists, journalists, and lawyers filed a complaint to the attorney general’s office following the New York Times report (English).


North American agriculture ministers start negotiating NAFTA. The farming ministers of Mexico, the US, and Canada met in Savannah, Georgia, to discuss the NAFTA renegotiation in agricultural trade that totals US$82bn annually (Spanish). Ministers confirmed they have “relatively few” differences on agricultural trade, although they share some “irritants” (English).


Mexico will go slow in 2018 budget cuts. The Finance Minister, José Antonio Meade, explained the 2018 budget will experience a lower “adjustment” than in previous years (English). Meade said Mexico will meet the deficit target of 2.5% of GDP by the end of 2018.



Market Trends


Fibra E could be an alternative to federal spending. Analysts state that Fibra E trusts could be used to cover parts of the federal budget deficit (Spanish). Some 50 federal highways could be monetized and create resources to compensate for this year’s 26% cut in the budget for infrastructure improvement.


Oil dropped to this year’s minimum. Mexican crude oil sank to its lowest price of the year – US$39.79 per barrel – due to the oversupply of crude in international markets (Spanish). US oil prices also fell below US$44 per barrel, casting doubt on the ability of OPEC production cuts to boost prices (Spanish).


Mexico’s natural gas production falls as demand keeps growing. Natural gas consumption increased by 0.03% annually while domestic production decreased by 11.7%, propelling imports to 59.3% of domestic demand. The interconnections with the highest annual increases in imports are Camargo in Tamaulipas, Agua Prieta in Sonora, and Ciudad Mier in Tamaulipas (Spanish).


The Salina Cruz fire hit propylene production and gasoline imports… The recent fire at the Salina Cruz refinery suspended for a week propylene production, reducing the propylene stock (English). Pemex must import additional gasoline due to the interruption of production and Pemex continues to evaluate the extent of damage from the fire (English).


…and fires complicate Pemex’s quest for partners. Pemex is looking for partners to collaborate in running its refineries, to modernize plants at Tula, Salamanca, and Salina Cruz, and to build a new coker plant at Tula (English) (Spanish). In four months, the state-owned company has suffered fires at two of its refineries.



Strategy & Operations


Iberdrola takes an interest in the Oaxaca-Mexico City line. The Spanish company will bid for the high-voltage direct current transmission grid and is looking for a technology firm as a partner (Spanish) (Spanish). CFE has already secured rights-of-way for 94% of the route of the Oaxaca-Mexico City transmission line (Spanish).


Tabasco looks to the sea for fuel. A pilot biofuel plant fed by algae farming is under construction in Cunduacán, Tabasco, and the goal is to build two more plants (Spanish). The first plant will produce 7,705 liters of biofuel per year with an investment of MXN83.8m.


The Nuevo León energy cluster will focus on energy suppliers. In its second year, the Energy Cluster of Nuevo León will help to develop suppliers for the energy sector, both in the hydrocarbons segment and the power sector (Spanish). The cluster will also provide regulatory support for energy companies.


MCCI claims IUSA got CFE contracts by feigning competition. According to Mexicans Against Corruption and Impunity (MCCI), Grupo IUSA obtained CFE contracts worth MXN12bn by pretending to be a different company, Controles y Medidores Especializados (Spanish). The administrator of Controles y Medidores Especializados identified on notarial documents is the brother-in-law of the Grupo IUSA CEO.



Old School Social


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


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


Mexico’s first wave-power project is under construction. Eco Wave Power Mexico, an Eco Wave Power subsidiary, started construction of its first wave energy project in Mexico, at Tepalcates Beach in Manzanillo (English). The National Energy Control Center in Mexico gave approval for an initial capacity of 25MW.



Quote of the Week


“El crimen más grande que puede cometerse contra cualquier ciudadano es negarle una educación que lo emancipe de la miseria y la excomunión.”


“The biggest crime that can be committed against any citizen is to deny him an education that frees him from misery and exclusion.”


-Ignacio Ramírez (1818-1879), called El Nigromante, journalist, lawyer, poet, and writer



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