March 8, 2020 edition—The Senate okayed the power law; the hydrocarbons import agreement died; and Acciona’s CERs.
Last Week in a Minute or Less
Electric Power & Renewables. The Senate passed the new power law; AMLO and Iberdrola will renegotiate contracts; and Acciona and Banco Santander negotiate wind farm carbon credits.
Natural Gas Mid-Downstream & LNG. Alipi Mena was named Cenagas’ head; and Moody’s pointed to Mexico’s lack of natural gas storage.
Liquid Fuels Mid-Downstream. Mexico’s fuel exports reached a new low; the Sener and the Economy Ministry killed the hydrocarbons import agreement; and Pemex and Braskem-Idesa signed a new deal.
Oil & Gas Upstream. Pemex gets US$32bn from AMLO.
Government & NGO. Banxico has high hopes for 2021; Canada will push Mexico to cut emissions; and Clouthier plans to strengthen the US value chain.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s diplomatic work in Texas (El Financiero – Spanish); CFE’s power offer (El Economista – Spanish); and ASF’s opinion on the new power law (Forbes – Spanish).
Geopolitics & Trade
Clouthier plans to strengthen the US value chain. Mexico’s Economy Minister Tatiana Clouthier said Mexico will take part in the strengthening of the North American value chain in a virtual meeting with the US Secretary of State Antony Blinken (El Economista – Spanish).
Mexican exports fall in January. Mexico’s exports fell by 2.6% in January to US$32.7bn, after four months of growth (El Economista – Spanish). Imports also went down by 5.9%, reaching US$33.9bn, while auto sales increased by 1.7% (US$10.3bn).
Canada will push Mexico to cut emissions. Canadian Environmental Minister Jonathan Wilkinson said that Mexico and four other countries (including China and India) should be pressured to cut polluting emissions (El Financiero – Spanish). Canada may consider a carbon tax on exports.
Mexico and the US disagree on energy issues. The deputy secretary of the US Western Hemisphere Affairs Bureau asked the Mexican government to keep a free investment environment (El Economista – Spanish). AMLO asked the US to respect Mexico’s decisions regarding energy sovereignty (El Financiero – Spanish).
Biden and AMLO will work on a good relationship. President López Obrador told President Joe Biden that it is important to maintain good relations between the neighboring nations (Reuters – English). President Biden promised US$4bn to promote development in Central America, which will include help for southern Mexico (Reuters – English).
Pemex gets US$32bn from AMLO. In 2021, the state-owned company will receive US$32.6bn from the government to pay for its long-term amortizations (El Financiero – Spanish). The full support will be given during 2021 through capital transfers.
Banxico has high hopes for 2021. Mexico’s central bank forecasts a 4.8% GDP growth in 2021 (El Financiero – Spanish). Banxico will hold dollar auctions for US$1.5bn with the US Federal Reserve (Reuters – English).
Pemex’s debt closed 2020 at US$113.2bn. The state-owned company received benefits of MXN124.2bn in the fourth quarter of 2020, thanks to tax benefits and less imports (El Economista – Spanish). President López Obrador said Pemex’s fiscal load will be reduced by MXN100bn (El Financiero – Spanish).
CFE’s rating is expected to suffer from the outage. According to analysts, the state-owned company’s rating is at risk of being lowered considering the expenses caused by the outage, which is estimated at MXN20bn (El Financiero – Spanish). The amount could be compensated by an increase in tariffs or subsidies that the CFE receives from the federal government.
Citibanamex is concerned with the new power law. The head of Citibanamex is concerned with the economic, commercial, environmental, and juridical implications that the new power law could have in the energy sector and for future investments (El Economista – Spanish).
Legal & Regulatory
The Senate passed the new power law. Mexico’s Senate approved the bill designed to strengthen the state-owned company with 68 votes in favor, 58 against, and without changes (Reuters – English) (Forbes – Spanish). The USMCA partners will wait for the legislative process to end to appeal it.
Hogan Lovells called the power reform an “expropriation.” According to Hogan Lovells, in international law, the term is used to refer to a change of regime in which the company invested that result in the company losing value (El Economista – Spanish). Lawyers argued it could be considered unconstitutional (El Financiero – Spanish).
Alipi Mena was named Cenagas’ head. David Abraham Alipi Mena will lead the National Center of Natural Gas Control (Cenagas) (El Financiero – Spanish). Since May 2019, Alipi Mena worked as deputy director of Administrative Services to Pemex’s Exploration and Production.
Energy infrastructure awaits with 68 new projects. The private sector noted there are 68 energy investment projects waiting, representing an investment of MXN550bn (CMIC – Spanish). Among the 200 infrastructure projects presented last year, 68 are ready to start.
Mexico’s fuel exports reached a new low. Mexico’s foreign fuel trade reached US$41.6bn in 2020, its lowest level in 16 years (El Economista – Spanish). The head of Pemex’s commercial arm said Mexico does not see the need to reduce its oil exports because demand and pricing remain firm (Reuters – English).
The Sener and the Economy Ministry killed the hydrocarbons import agreement. The Energy and Economy Ministries published the end of the agreement issued in December 2020 regarding hydrocarbons imports and exports (El Financiero – Spanish). President López Obrador plans to stop purchasing gasolines by 2023 (El Economista – Spanish).
Pemex and Fitch ended their relationship. The state-owned company said it has ended the contract with the international rating agency Fitch Ratings (Reuters – English) (Forbes – Spanish). The decision was made less than a week after Fitch published a 2020 fourth quarter result that underwhelmed investors.
Moody’s pointed to Mexico’s lack of natural gas storage and Pemex’s needs. Moody’s is concerned with Mexico’s lack of natural gas storage, as the international rating agency considered that it aggravates power supply shortages in the country (Reuters – English). Moody’s expects Pemex to need US$14.7bn in support this year (Reuters – English).
Strategy & Operations
Acciona and Banco Santander negotiate wind farm carbon credits. Acciona signed an agreement with Banco Santander to offset 145,000 tons of carbon dioxide with green credits associated with the Oaxaca wind farm (Renewables Now – English). The Certified Emissions Reduction certificates will transfer from the wind farm through the credit trading platform ClimateTrade.
A Pemex pipeline caught on fire. An illegal tap caused a fire in Teoloyucan, in Estado de México (El Financiero – Spanish). The illegal tap did not represent a major risk, and people living within 500 meters of the pipeline were moved as a cautionary measure.
Coahuila’s coal-powered plants are working at half capacity. The two coal-powered plants located in the Northern state were working at 50% capacity due to the lack of coal “of design” (Reforma – Spanish). The plants were relieving the lack of power in the country during the natural gas shortage.
Pemex and Braskem-Idesa signed a new deal. The state-owned company renegotiated the ethane supply contract with Braskem-Idesa, saving Pemex MXN13.7bn (El Financiero – Spanish). The sanctions against Pemex (200% per barrel not supplied) were eliminated.
AMLO and Iberdrola will renegotiate contracts. President López Obrador will renegotiate contracts with Iberdrola and another 10 companies regarding power supply (El Financiero – Spanish). AMLO estimated that the state-owned company had to pay almost MXN300bn for those agreements.
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 Assembly is rescheduled for May 26-27, 2021, at Hyatt Regency, in Mexico City.
The Mexican Petroleum Congress is rescheduled for June 23-26, 2021, in Monterrey.
Bill Gates recommends that Mexico focus on education rather than oil. The Microsoft founder urged President López Obrador to invest in education rather than fossil fuels (Mexico News Daily – English). Gates pointed to the education system as the primary key to developing the country and the intelligence of its people.
Quote of the Week
“Si intentaren pisar nuestro suelo, en la mar sepultemos sus vidas, y en las olas, de sangre teñidas, luzca opaco el reflejo del sol.”
“If they tried to step on our soil, in the sea we will end their lives, and in the waves, tainted with blood, the sun’s reflection shines opaque.”
– Guillermo Prieto (1818-1897), Mexican novelist, poet, and chronicler.
We hope you have a productive week. Please send any news, comments, or oil alternatives to MexicoWeekly@energynarrative.com.
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