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June 28, 2020 edition—IEnova’s power storage; Borr Drilling’s plans; and Sonora’s sun.
Last Week in a Minute or Less
Electric Power & Renewables. CFE launched MXN48bn in bidding; IEnova will store power in Mexicali; and Next Energy will start construction on Baja California’s solar park.
Natural Gas Mid-Downstream & LNG. Natural gas will reduce Mexico’s North-South disparity; other states may consider Baja California’s natural gas solution; and CFEi lost two spots in NGI’s Natural Gas Marketer Survey.
Liquid Fuels Mid-Downstream. Most of Sener’s budget goes to dirty energies.
Oil & Gas Upstream. Borr Drilling will be in Mexico until the end of 2022.
Government & NGO. The US and Mexico work on their relationship through institutions; Mexico is among the 10 countries with record FDI; and the Citibanamex survey expects a 5.8% growth.
Déjà vu all over again. Last week’s readers were particularly interested in the need for natural gas in the South (Luces del Siglo – Spanish); New Fortress’ LNG permits (BN Americas – English); and the proposed constitutional amendments in the power sector (Platts – English).
Geopolitics & Trade
Mexico moved the GM contract vote deadline. Mexican authorities extended the deadline for the union at a General Motors plant to repeat a disputed contract vote that has drawn US scrutiny (Reuters – English). The union in Silao will have to hold the vote before August 20.
The US and Mexico work on their relationship through institutions… Institutions maintain a functional and mutually beneficial relationship promoting dialogue, rules to manage the interactions, and specific programs or organizations that provide stability to the relationship (The Hill – English). The US and Mexico will hold a high-level economic dialogue meeting in September.
…and government cooperation. The two governments agreed to hold a Cabinet-level dialogue to discuss security (The Hill – English). The US will invest US$130m in technical assistance to support Mexico’s implementation of labor reforms to strengthen labor rights and democracy.
Political Economy
Mexico is among the 10 countries with record FDI. Mexico was the ninth country worldwide with the highest number of foreign investments during 2020, an improvement from the previous 14th place in 2019 (El Financiero – Spanish). FDI flows were reduced by 35% at a global level.
Citibanamex’s survey expects 5.8% growth… According to the Citibanamex survey, Mexico’s GDP growth in 2021 will reach 5.8%, up from the previous estimate of 5.5% (El Economista – Spanish). For 2022, the forecast increased from 2.8% to 2.9%.
…and Focus Economics forecasted a 5.3% growth. Focus Economics analysts increased its GDP growth forecast to 5.3%, above the previous prediction of 5% (El Economista – Spanish). The prediction is based on the opinion of 43 specialists.
Moody’s warned CFE over renewables. According to the international rating agency, the attitude of the state-owned company toward renewable energies could affect its rating in the long term (Forbes – Spanish). CFE’s plan to transition to clean energies includes the modernization of eight hydropower generation plants.
Legal & Regulatory
The Cofece is against the Energy Industry Law reform… According to the Mexican antitrust watchdog, the reform to the Energy Industry Law could make Mexico fail to fulfill the goals established to increase the use of clean energies to generate power (El Financiero – Spanish). Mexico will not reach 35% of clean energy for 2024.
…and so is the Canacintra. The National Chamber of the Transformation Industry (Canacintra) asked President López Obrador to abandon the reform proposal as it creates uncertainty among investors (El Economista – Spanish).
Most of Sener’s budget goes to dirty energies. According to energy experts from the Latin American and the Caribbean Climate Finance Group, 90% of the Energy Ministry’s budget is devoted to promoting fossil fuel energies (El Economista – Spanish).
The CFE is not expanding nuclear energy. The director of the state-owned company said nuclear energy projects require a long period for construction and it is necessary to evaluate the type of power generation needed in the country (Forbes – Spanish).
CFE launched MXN48bn in biddings. The state-owned company will offer 47 projects to strengthen transmission and distribution grids, with an investment of MXN48.5bn between 2021 and 2025 (El Financiero – Spanish). The projects will respond to the increase in power demand in different sectors.
Market Trends
Other states may consider Baja California’s natural gas solution. The New Fortress project in Baja California could be an example of logistical innovation for Yucatán, Guerrero, Chiapas, and even Oaxaca (Natural Gas Intel – Energy). With the project, Baja California will have access to reliable natural gas supply.
Natural gas will reduce Mexico’s North-South disparity. According to the Baker Institute for Public Policy, natural gas could help reduce the economic gap between its industrialized north and developing south (Natural Gas Intel – English). The Interoceanic Corridor will include the expansion and modernization of road, railway, natural gas, and power infrastructure.
CFEi lost two spots in NGI’s Natural Gas Marketer Survey. CFE International (CFEi) dropped to number 15 for the 1Q2021 Top North American Natural Gas Marketers rankings at 3.31 Bcf/d, versus 12th at 3.32Bcf/d in 4Q2020 (Natural Gas Intel – English).
Heat pushed up natural gas prices. High temperatures and uncertainty generated natural gas prices that are more common in July due to the increase in demand (El Financiero – Spanish). The Henry Hub reference price reached $3.20 per million BTU.
Strategy & Operations
AMLO wants a solar plant in Sonora. President López Obrador asked the Sonora governor to evaluate the construction of a solar energy generation park in the state (Forbes – Spanish). The park would be owned by a new public company of Sonora with federal funds.
Next Energy will start construction of Baja California’s solar park. Next Energy of Mexico will plan and construct a solar plant that will power up Ensenada, Tijuana, and Rosarito (PV Magazine – Spanish). The plant will save MXN3.7bn when it starts working.
Borr Drilling will be in Mexico until the end of 2022. Borr Drilling expects five of its drilling rigs to remain in employment in offshore Mexico until the end of 2022. Borr will acquire an incremental 2% stake in the JVs performing drilling services from the Mexican partner, giving Borr a 51% ownership position (Offshore Mag – English).
IEnova will store power in Mexicali. The Sempra subsidiary will install a bank of power storage batteries that will start operations by 2023 with 100MW installed and could reach 500MW in Mexicali, Baja California (El Economista – Spanish). The goal is to receive and export California’s power.
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!)
Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.
Mexico Assembly will be held on May 22 in Mexico City.
Lateral Thinking
CFE accused Enel of being part of the energy “black market.” The state-owned company accused the Italian company of participating in the black market under the self-supply scheme (Forbes – Spanish). The head of the CFE accused the company of partnering up with companies to avoid paying the cost of power transmission.
Quote of the Week
“No exigimos del arte que nos diga la verdad, porque su finalidad responde a otros propósitos humanos que se realizan en el ejercicio libre de la imaginación.”
“We do not ask that art tell us the truth, because its goal responds to other human purposes that can be carried out in the free exercise of imagination.”
– Samuel Ramos (1897-1959), Mexican philosopher and writer.
We hope you have a productive week. Please send any news, comments, or energy black market info to MexicoWeekly@energynarrative.com.
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