The Weekly Brief: Mexico

March 13, 2017 edition— Three more tenders announced; the Ayín-Batsil farm out approved; and Acciona bets on wind while Iberdrola on sun.




Last Week in a Minute or Less



Renewables & Electricity. Acciona will build a new wind plant in Tamaulipas; Iberdrola got permission to construct a solar farm in Puebla; and GE wants to invest in electrical projects.


Natural Gas & Liquid Fuels. US natural gas imports into Mexico will climb by 25% and the first ethanol gas station in Tabasco is ready to go.


Oil & Gas Upstream. Pemex and BHP Billiton signed the Trion farm out contract; the CNH approved the Ayín-Batsil; and Sener announced three more tenders.


Money & Power. Fitch may lower Mexico’s sovereign rating; the hedge auctions were a total success; and Profeco fined 128 LP gas suppliers.


Déjà vu all over again. Last week’s readers were particularly interested in the prequalified big oil companies in Round 2.1 (Spanish); the inclusion of energy in NAFTA (Spanish); and Mexico’s threat to abandon NAFTA if the US proposes tariffs (English).



The Road to Reform


Sener announced three new oil biddings. The Energy Ministry announced that Round 2.4 will be published in June and awarded the first week of December 2017 (Spanish). Round 3.1 will be launched in August 2017 and awarded by February 2018 and Round 3.2 will be both published and awarded by 2018 (Spanish).


Pemex and BHP Billiton make history signing the Trion farm out… Pemex and BHP Billiton signed the deep-water farm out contract for the Trion Block, with 485 million barrels of 3P reserves (Spanish) (English) (Spanish). Trion is the first farm out agreement that Pemex has signed for exploration and production.


…and the CNH okayed another farm out for the Ayín-Batsil area. The National Hydrocarbons Commission (CNH) approved the auction for a new farm out for the Ayín-Batsil fields in shallow waters in which Pemex would be part of a 50-50 production-sharing agreement  (Spanish). The project will include exploration and extraction activities for 30 years.


The CRE pledges discounts in gasoline prices. The Energy Regulatory Commission (CRE) announced that between 300 and 500 gas stations now offer discounts and the number will keep growing significantly (Spanish). The CRE affirmed that these discounts will help consumers choose the gas stations offering the best product and prices.



Political Economy


Wilbur Ross trusts NAFTA renegotiation will benefit Mexico. US Commerce Secretary Wilbur Ross asserts that the NAFTA renegotiation will bring benefits to Mexico, not only obligations  (Spanish). Ross said the goal is to correct some flaws in the original agreement. Citibanamex believes NAFTA should be improved and updated (Spanish).


Profeco ticketed 128 LP gas distribution companies. The Federal Prosecutor for Consumers (Profeco) fined 128 LP gas distributors for not dispensing complete liters and kilos, or not displaying or respecting their prices, or selling cylinders that are unsafe (Spanish). Profeco field staff have verified 521 delivery trucks and 216 LP gas distribution plants.


Consultations with indigenous communities slow energy projects. Protection of communal rights cause project delays of one year and produce doubts about future investments and problems in the agreements between Pemex, CFE, and private companies (Spanish). The request for social impact studies add to the Energy Ministry’s backlog of 1,500 applications.


Fitch warns Mexico over growth and debt. The rating agency pointed to weak economic growth, higher public debt, and  uncertainty about the effect of US policies as pressure points that could cause a change in Mexico’s rating (English) (Spanish). Fitch revised Mexico’s foreign and local currency outlook to negative from stable in December 2016.



Market Trends


Electrical tariffs shoot up again. Industrial electrical tariffs increased between 13.3 and 17.2% in March, compared to February, the highest increase in a month since July 2016 (Spanish). The reason offered was the 92% increase in natural gas prices in the 12 months to February.


The hedge auctions were a hit… Mexico’s central bank placed US$1bn of new currency hedge instruments with six different maturities up to one year (English) (Spanish). The total demand for the instruments reached US$2.075bn and anticipation ahead of the offer pushed the peso up 0.3% to 19.4350 (English).


…and helped Mexico’s biggest companies. Fitch Ratings and Banxico-Ixe strategists say the central bank’s $20bn peso support plan can help large Mexican companies that earn in pesos and spend in dollars for equipment  or TV program rights (English). Large companies could buy the Banxico forward contracts and secure a lower dollar rate.


US natural gas imports into Mexico will climb 25%. According to Platts Analytics, natural gas imports from the US into Mexico could reach 5.4 Bcf/d by mid 2017 (English). The reason is the fall in domestic production and an increase in demand for natural gas (Spanish).



Strategy & Operations


First ethanol gas station in Tabasco set to launch. The first gas station in Tabasco dispensing biofuel obtained from sugar cane, selling at MXN14/liter will open on March 18. The goal of OxieFuel, the operating company, is to operate 35 ethanol gas stations in Tabasco in the next four years (Spanish).


Acciona takes off in Tamaulipas… The Spanish company began construction of its fifth wind park in Mexico, with a US$221m investment (Spanish). The 168MW-capacity wind farm, located close to Reynosa, will be working by the third quarter of 2017 and Acciona’s next project will be the 338MW Puerto Libertad solar complex (English).


…and Puebla will shine brighter with Iberdrola Renovables. The Spanish company, on its second try, passed the Environmental Impact hurdle to win permission to build the first solar plant in the Cuyoaco municipality, in Puebla (Spanish). The Environment and Natural Resources Ministry (Semarnat) had denied a permit to the 200MW project in October 2016.


GE wants a piece of the electricity auctions’ pie… General Electric is considering investing in projects of the winners of the electricity auctions,  trying to offer their clients more complete solutions with financing programs (Spanish). GE will continue providing the software and hardware needed in renewable energy generation development.


…and Aldesa wants a piece, too. The Spanish company is preparing 15 renewable electricity generation projects with a total cost of US$100m to participate in the next electricity auctions (Spanish). Aldesa won two 30MW projects in Yucatán with a required investment of US$116m.



Old School Social


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


The Pecom Petroleum Exhibition & Conference of Mexico is March 28-30 in Villahermosa, Tabasco.



Lateral Thinking


A salmonella outbreak may have caused the Aztecs’ demise. Recent DNA tests on the teeth of 29 bodies at an ancient Oaxacan burial ground analyzed bacterial genomes. Scientists concluded that a disease outbreak called cocoliztli, a severe strain of salmonella, caused the death of 80% of the Aztec population around 1545-50 (English).



Quote of the Week


“No se debe premiar a quien sirve a la patria, sino castigar a quien se sirve de ella.”


“We should not reward those who serve the nation, but punish those who make use of it.”


-Josefa Ortiz de Dominguez (1773-1829), was an insurgent fighting for independence against Spain.




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