The Weekly Brief: Mexico

June 5, 2017 edition— Tamaulipas leads on wind; the Round 2.1 fight is among 26; and the NAFTA renegotiation may consider energy.





Last Week in a Minute or Less


Renewables & Electricity. Tamaulipas will attract US$1bn in wind energy project investments and 150 Mexico City homes will be powered with vegetable waste.


Natural Gas & Liquid Fuels. Eight companies will compete for Pemex’s pipelines; LP gas prices keep rising; and Pemex’s ethylene and propylene production fell in April.


Oil & Gas Upstream. Round 2.1 will have 26 bidders; the CNH approved license contracts for Round 2.4; and the first bill for fuel produced by a private company was issued.


Money & Power. The NAFTA renegotiation may include the energy sector; Banxico increased its GDP outlook; and the IDB believes in Mexico’s economy.


Déjà vu all over again. Last week’s readers were particularly interested in CFE’s push for 16 new pipelines (Spanish); the number of fields in the next Rounds (Spanish); and the launch of construction of the Texas-Tuxpan pipeline (Spanish).



The Road to Reform


The CNH backed up Pemex’s incursion into deep waters. The National Hydrocarbons Commission (CNH) approved Pemex’s first allotment since Round Zero, a deep water field, at Chachiquín (Spanish). Pemex expects output of 80,000 barrels per day of oil and 130 million cubic feet of gas per day when production peaks in 2024.


Round 2.1 will be fought out between 26 prequalified companies. A total of 26 bidders, including Mexican firms partnered with foreign companies, will compete for one of the 15 contracts offered in Round 2 (Spanish). The National Hydrocarbons Commission (CNH) will publish the final list of participants by June 14 (Spanish).


Eight top companies to vie in the Pemex open season. In Pemex’s open season for pipelines, 22 companies will participate, including eight listed companies prequalified by the Energy Regulatory Commission. BP, CFE, Chevron, Gulfport, Shell, Tesoro Corp, and Trafigura hold cash amounting to US$61.9bn for importing gasoline and improving the domestic offer (Spanish).


The CNH okayed Round 2.4 license contracts. The National Hydrocarbons Commission (CNH) approved the model for license contracts for Round 2.4, a round offering unconventional areas (Spanish). This format allows operators greater control of the projects, more freedom to take decisions, and more responsibility for execution.


History is made at the Hokchi-4 well. The National Hydrocarbons Commission (CNH) issued the first bill of sale for oil extracted by a contractor, output from the production proof of the Hokchi-4 well, operated by the Hokchi Energy consortium (Spanish). The crude sale for US$183,084 is the first from Round 1.2.



Political Economy


Fuel theft fought on all fronts. Pemex agreed to put in place technology to detect illegal taps (Spanish). Government Minister Miguel Ángel Osorio Chong announced the leaders of crude oil thieves will be chased down (Spanish). This year, losses from taps and repairs to pipelines will be passed on to consumers (Spanish).


Should energy be part of NAFTA? The Inter-American Dialogue argued that the NAFTA renegotiation which may include the energy sector will also likely include a review of the rules of origin (Spanish) (English). A leader of Mexico’s lower house of Congress affirmed that the renegotiation is an opportunity to strengthen Mexico’s energy sector (Spanish).


Meade believes in the exchange rate. The Finance Minister, José Antonio Meade, considers recent exchange rate movements to have been positive and proof of the solidity of Mexico’s economy (Spanish). The peso has strengthened to under 19 pesos to the dollar, but Meade insisted on being cautious.


Conago bets on infrastructure with 181 projects. The National Conference of Governors (Conago) will promote 181 infrastructure projects with an investment of MXN285.2bn (Spanish). Most of the projects will focus on transportation infrastructure, but 40 projects valued at MXN25.8bn will be directed to hydraulic works, border crossings, telecommunications, energy, and health.



Market Trends


Banxico raised its GDP outlook for 2017. Mexico’s central bank nudged its growth forecast upward for 2017, to between 1.5% and 2.5% from the previous projection of between 1.3% and 2.3% (Spanish). The hike follows the increase in the Finance Ministry outlook released on May 22.


The IDB trusts Mexico will become a thriving and developed nation. The Inter-American Development Bank (IDB) said Mexico is economically strong and can become a prosperous and developed nation (Spanish). Verónica Zavala Lombardi, IDB representative in Mexico, believes in the country’s potential, given new public policies, and urges Mexico to diversify its trade relations.


Pemex’s ethylene and propylene production dropped in April. The state-owned company’s output of ethylene fell by 7,188 mt, a 12.9% drop compared to March and a 12% fall compared with April 2016 (English). Pemex’s propylene production dropped to 1,046mt, 7.4% less than in March.


LP gas is a luxury in certain regions. LP gas prices keep increasing, although a reduction was expected due to seasonality. In certain regions, including Baja California, Quintana Roo, and Mexico City, LP gas prices are being held at  20% and even 40% higher than in December 2016 (Spanish).



Strategy & Operations


Wind money flies towards Tamaulipas… In the next two years, Tamaulipas will attract investments of over US$1bn for eight wind power projects (Spanish). Tamaulipas will also benefit from deep water extraction licenses and the Transcanada underwater pipeline connection to the Altamira port, with an investment of US$1.2bn.


…and the Tamaulipas business chambers responded with an energy cluster. The business chambers shaped the first stage of an energy cluster for the southern region of Tamaulipas (Spanish). The goal is to maximize the use of local resources and to foster the establishment of  energy and industry clusters.


Prickly pears and organic waste will power 150 Mexico City homes. Vegetable waste from Mexico City markets will be transformed into biogas and power in Latin America’s first organic waste treatment plant (Spanish). The Nopal-Verdura Supply and Marketing Center (CANV) in Milpa Alta will process 100 tons of organic residue per month.


Complaints about Pemex control of transportation increased. The Energy Regulatory Commission (CRE) received 12 complaints against the state-owned company for not allowing private tank trucks to load gasoline at storage terminals (Spanish). The energy reform ended the previous restriction that allowed fuel transportation exclusively to state-owned tank trucks.



Old School Social


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


The XXVIII Congreso Annual SNM/ 2017 LAS/ ANS Symposium is June 18-21 at the Gran Hotel Ciudad de México, Mexico City.


The CWC World LNG& Gas Series 15th Americas Summit is June 20-23 in Houston, Texas.



Lateral Thinking


A Mexican porpoise is close to joining the dinosaurs in extinction. Only 30 vaquita porpoises survived because 90% of their population has been decimated since 2011, mostly due to gillnet fishing (English). Mexico’s government has sent trained dolphins to locate vaquita porpoises and transport them to a marine sanctuary in the Sea of Cortez (English).



Quote of the Week


“Los sueños con los años también se van, las arrugas que tenemos es la tierra que nos jala.”


“Dreams, with years, also depart, the wrinkles we have are the ground that pulls us in.”


– Leonora Carrington (1917-2011), painter and writer of the Surrealist movement



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