March 11, 2019 edition—Yucatán renewables; Pemex partners’ blocks; and Banxico’s doubts.
Last Week in a Minute or Less
Renewables & Electricity. Hola Energía shines in Puebla; and Yucatán invests in renewables.
Natural Gas & Liquid Fuels. Dos Bocas is progressing with troubles; private companies brought 30% more gasoline; and 51,000 robbed fuel liters were secured.
Oil & Gas Upstream. Nahle asked to maintain round contracts and investments; the CNH defended farmouts and auctions; and DEA Deutsche Erdoel and Cheiron will invest in two onshore blocks.
Money & Power. AMLO promises no tax increases; US lawmakers joined Canada and Mexico against tariffs; and Banxico cut growth forecasts.
Déjà vu all over again. Last week’s readers were particularly interested in CFE’s renegotiation of contracts (El Financiero – Spanish); Mexico’s dependency on natural gas (Platts – English); and CFE’s new combined-cycle plants (Platts – English).
US lawmakers joined Canada and Mexico against tariffs. US lawmakers and business groups are pushing President Trump to lift metal tariffs on Mexico and Canada as a condition to enact the new NAFTA, aka USMCA (Bloomberg – English). There are warnings that the deal’s passage depends on the tariffs’ end.
Lighthizer pushed the auto union to approve the USMCA. US Trade Representative Robert Lighthizer went to Michigan to meet the United Auto Workers union leaders. The goal is to get the union’s support for the new North American free trade deal (Reuters – English).
Mexico may fight tariffs with tariffs. Mexico’s government threatened to add duties on new US products as a response to Trump’s steel and aluminum tariffs (Reuters – English). The Mexican Deputy Economy Minister is preparing a list that would be ready in two months.
The Road to Reform
Nahle asked to upstream winners to keep investing. Energy Minister Rocío Nahle asked the companies that won 107 contracts in the rounds to invest and maintain contracts (El Financiero – Spanish). The Energy Ministry has noticed transfers of contracts between private companies (El Financiero – Spanish).
The CNH defended farmouts and auctions. The National Hydrocarbons Commission (CNH) said the farmouts planned for 2019 are still in place (El Financiero – Spanish). The CNH warned that delaying new oil and gas auctions until 2021 will mean the loss of billions of dollars in revenue (Platts – Spanish).
The Energy Ministry is studying sustainable fracking. Energy Minister Rocío Nahle will only consider the use of fracking to develop hydrocarbon fields in the country if there are proposals that do not harm the environment (El Economista – Spanish). The goal is to find a safe technique.
The CRE’s nominees went through the system. The Senate approved President López Obrador’s nominations for four commissioners to join the Energy Regulatory Commission (El Economista – Spanish). AMLO did not accept the CRE head’s resignation (El Economista – Spanish).
The Attorney General secured 51,000 liters of fuel. Three people were detained for involvement in the robbery of two fuel tanks with 51,000 liters of fuel in Ciudad Guzmán, Jalisco (El Financiero – Spanish). The detainees could not explain where the fuel came from.
Dos Bocas is progressing but has issues. Pemex expects to start constructing the Dos Bocas refinery by the end of the year (Aristegui – Spanish). ASEA’s fine of almost MXN14m, imposed for breaking up 300 hectares of jungle, could increase (El Norte – Spanish).
AMLO accused ratings agencies of punishing Mexico’s neoliberalism. President López Obrador said ratings agencies punished Mexico for the “neo-liberal” policies implemented during the last 36 years (Reuters – English). S&P lowered the CFE’s outlook from stable to negative (El Universal – Spanish).
AMLO asked people to stop helping fuel robbers. President López Obrador asked people to stop protecting those involved in fuel robbery despite the bribes they offer (El Financiero – Spanish). The Finance Intelligence Unit recommended the Energy Regulatory Commission review 14 distribution permits given to companies involved with fuel robbery (Reforma – Spanish).
AMLO promises no tax increases. President López Obrador pledged that during his administration, there will be no tax increases, neither in gasoline prices, nor in power or gas tariffs (El Economista – Spanish). AMLO said the recent increases in fuel were due to “adjustments” that came from the previous administration.
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Private companies brought 30% more gasoline. Companies with permission to import gasoline imported 1,694,000 barrels in January, a 29.7% increase compared to December 2018 (El Financiero – Spanish). Private companies account for 8.3% of Mexico’s total gasoline imports.
HSBC expected the agencies’ downgrades. HSBC México expected the international agencies would lower their ratings for Mexico, and they have already been priced in by the market. HSBC is convinced Mexico and Pemex will maintain investment, but some clarification is needed (El Economista – Spanish).
Mexican peso holds on despite S&P’s negativity. The Mexican peso remained stable with the exchange rate at 19.2470 units (El Economista – Spanish). The stability was unexpected after the changes (from stable to negative) that Standard & Poor’s announced on Mexico’s, Pemex’s, and CFE’s credit outlook.
Banxico cut its growth forecasts. Mexico’s central bank lowered the Mexican growth forecast to between 1.1% and 2.1% for 2019 and between 1.7% and 2.7% for 2020 (Reuters – English). The reason is the risk of a sovereign ratings downgrade and inflationary pressures.
Analysts suspect the government won’t react to the new ratings. Analysts from J.P. Morgan and GMEC consider the government has not developed a change of strategy in the public sector to answer the rating agencies’ warnings (El Economista – Spanish). This passive strategy could endanger investment for Pemex and Mexico’s sovereign rating.
Strategy & Operations
Hola Energía shines in Puebla. Hola Energía plans to build a solar park in San Salvador El Seco, in Puebla, with an investment of US$380m (English). The goal is to generate 1.2m MWh per year.
DEA Deutsche Erdoel and Cheiron will bet on two onshore blocks. Two of Pemex partners will invest US$250m in two projects in the next four years to boost crude output (Reuters – English). DEA Deutsche Erdoel plans to drill 10 wells and finish 10 others.
Yucatán invests in renewables. The Yucatán government and the Peninsular Cluster of Renewable Energies will develop a work plan to consolidate wind and solar energy projects in the region with an investment of US$4.5bn (El Economista – Spanish). The investment could mean the development of 3,000MW.
Tabasco’s oil companies join forces to boost production. More than 50 companies from Tabasco partnered up to help Pemex and the federal government stabilize and increase national crude production (El Financiero – Spanish).
What will happen with the fields Pemex doesn’t want? Pemex will focus on shallow water fields and conventional onshore fields and will ignore deep water fields and shale fields. Those ignored fields contain 63 billion barrels of crude oil equivalent, or 55% of Mexico’s future resources (Pulso Energético – Spanish).
Old School Social
Events in the world beyond your screen—go see and be seen!
Solar Power Mexico will be held March 19-21 at Centro Banamex in Mexico City.
A Maya ritual cave was found under Chichén Itzá. Archaeologists have discovered more than 150 ritual objects, such as burners, vases, and decorated plates, in cave chambers (National Geographic – English) named Balamku (aka “Jaguar God”). The cave was discovered by farmers in 1966 and sealed for 50 years.
Quote of the Week
“La prensa es el freno para sujetar las demasías de los gobernantes y poderosos.”
“The press is the brake to stop the insolences of governors and powerful people.”
– Guillermo Prieto (1818-1897), Mexican novelist, writer, and poet.
We hope you have a productive week. Please send any news, comments, or Mayan rituals to MexicoWeekly@energynarrative.com.
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