March 15, 2020 edition—Bio-coal power plant; Valero’s imports; and natural gas self-sufficiency.
Last Week in a Minute or Less
Electric Power & Renewables. Mexico City and the Sener will bet big on a bio-coal power plant; Naturgy will sell bonds in Mexico; and Moody’s said the CFE’s credit rating may be at risk.
Natural Gas Mid-Downstream & LNG. Mexico’s natural gas imports will continue; and a former Pemex head said Mexico’s natural gas self-sufficiency is a fantasy.
Liquid Fuels Mid-Downstream. Valero plans to reroute Mexico’s imports; and Pemex’s fuel oil production is up in refineries.
Oil & Gas Upstream. Pemex is falling behind in energy transition but made a discovery in Tabasco.
Government & NGO. The OECD expects better things from Mexico’s GDP; Banxico and the Finance Ministry have high hopes for Mexico’s economy; and inflation went up in February.
Déjà vu all over again. Last week’s readers were particularly interested in Citibanamex’s concerns over the power law (El Economista – Spanish); the Iberdrola contract (El Financiero – Spanish); and Pemex’s agreement with Braskem-Idesa (El Financiero – Spanish).
Geopolitics & Trade
Mexico depends on the US market. Although it was one of the goals of the Economy Ministry, Mexico has not diversified its exports, with 81.2% of foreign sales going to the US market in 2020 (El Economista – Spanish). Mexico’s economic growth depends on US demand.
Mexico and China will discuss vaccine sharing after the US said no. Mexico turned to China to cover the vaccine shortfall with an order for 22 million doses, after US President Joe Biden ruled out sharing vaccines with Mexico in the short term (Reuters – English).
The ICC plans a negotiation over the new power law. The International Chamber of Commerce (ICC) asked the government and companies to establish a negotiation over the new power law. That would be cheaper and more effective than court confrontations (El Economista – Spanish).
Biden officials visited the US-Mexico border. The Homeland Security Secretary led a visit by Biden administration officials to the US-Mexico border to consider a growing number of border crossings (Reuters – English). Border agents detained nearly 100,000 migrants at the border in February (Reuters – English).
Moody’s said the CFE’s credit rating may be at risk. The international rating agency warned that if the state-owned company does not invest in its productive capital, CFE’s credit rating could go down in the medium term (El Financiero – Spanish).
Inflation went up in February. Mexico’s inflation increased in February, reaching 3.76%, its highest level since October 2020 (Reuters – English) (El Economista – Spanish). Inflation remains in the range set by Banxico of 3%, plus or minus a percentage point.
The OECD expects better things from Mexico’s GDP. The Organization for Economic Co-operation and Development (OECD) improved the economic growth forecasts in 2021 to 4.5%, compared with the 3.6% reduction in December (El Financiero – Spanish). For 2022, the forecast was lowered by 0.4 points to 3%.
Banxico and the Finance Ministry have high hopes for Mexico’s economy. The Finance Ministry is expected to revise Mexico’s GDP forecast up for 2021 (Reuters – English). Banxico increased Mexico’s GDP forecast to 4.8% from 3.3% (Proceso – Spanish).
Pemex is falling behind in energy transition. According to experts, the state-owned company is going in the opposite direction of fellow Latin American national oil companies, failing to embrace the energy transition and natural gas (Natural Gas Intel – English). Pemex is reverting to a past business model.
Legal & Regulatory
A judge stopped the power law and AMLO answered. A judge ordered a halt to the reform of the power law (El Financiero – Spanish), and the ICC celebrated it (El Financiero – Spanish). President López Obrador said it would send the cancellation to the Supreme Court (El Financiero – Spanish).
Experts argued the new power law menaces legal certainty. According to specialists in energy law, the changes proposed by the new power law violate the constitutional articles 14 and 16, which state that nobody can be deprived of acquired rights without a trial (El Economista – Spanish).
The new power law was published. The new power law was published in the Official Gazette of the Federation (DOF – Spanish). The DOF also included the resolutions regarding the fuel imports rules suspension (DOF – Spanish) and the final decision on the legal battle between the Cofece and the Sener over the power rules (DOF – Spanish).
The 180-day countdown for the new power law has started. The Energy Ministry, the Energy Regulatory Commission, and the National Center of Energy Control will have 180 days to develop the needed changes to agreements, resolutions, rules, manuals, and regulatory instruments to follow the new law (El Economista – Spanish).
Nuevo León’s industry will fight the new power law… Businessmen of the transformation industry in Nuevo León rejected the new power law and plan to issue writs of amparo to protect themselves against its effects (Proceso – Spanish). Nuevo León’s Caintra said the new law will menace the environment.
…and so will AMDEE and Asolmex. Representatives of the Mexican Association of Wind Energy (AMDEE) and the Mexican Association of Solar Energy (Asolmex) will use legal mechanisms to protect their rights (Forbes – Spanish). The CCE warned that the new measures will hit investments (El Economista – Spanish), and Fitch warned that the new measures will hit renewable projects (Forbes – Spanish).
Pemex’s fuel oil production is up in refineries. The state-owned company increase its refineries’ activities in January, focusing on fuel oil production (El Economista – Spanish). Fuel oil production reached 231,000 daily barrels, 31.8% of total elaborated fuels, while gasoline reached 221,000 barrels per day, 30.4%.
Mexico’s natural gas imports will continue. According to the CSIS, the next four years present an excellent opportunity to reinforce the trade relationship between the two countries (Natural Gas Intel – English). Natural gas pipeline flows from the US to Mexico in February dropped due to the Texas storm (Natural Gas Intel – English).
Gasoline and LP gas prices hit inflation. The National Institute of Statistics and Geography (Inegi) said gasoline and LP gas prices increased inflation for the second consecutive month (El Economista – Spanish).
A former Pemex head said Mexico’s self-sufficiency is a fantasy. Adrián Lajous, the state-owned company’s director from 1994 to 1999, said natural gas self-sufficiency is not a possible short-term reality, but rather a fantasy (Forbes – Spanish). Mexico imports 70% of the natural gas demand and 60% of its gasoline.
Strategy & Operations
CFE will spend much more on fuels. The new power law will cost the state-owned company MXN60bn more in fuels as the demand for fuels for power generation will increase by 32% (El Economista – Spanish). The new law will prioritize CFE’s thermoelectric plants with a 30% efficiency over more efficient plants.
AMLO celebrates Pemex’s oil discovery. President López Obrador announced a “really big” oil discovery in Tabasco (El Economista – Spanish). The discovery was made in the Dzimpona-1EXP well and more information will be provided on March 18, in the oil expropriation celebration.
Valero plans to reroute Mexico’s imports. Valero is considering rerouting its fuel imports while doubling its storage capacity, as the company finalizes the construction of a network of terminals in the country by 2022 (Platts – English). Valero plans to import all the fuel it distributes in Mexico through the Altamira and Veracruz import terminals.
Mexico City and the Sener will bet big on a bio-coal power plant. The head of Mexico City’s government announced the construction of two projects: a solar power plant, the biggest inside a city, and a vegetal coal pellet production plant, which will operate after the first quarter of 2022 (El Financiero – Spanish).
Naturgy will sell bonds in Mexico. The energy company will launch bonds in the local debt market on March 24 (El Economista – Spanish). The goal is to collect at least MXN5bn through the Mexican Stock Exchange to pay certain debts and fund corporate goals.
Illegal LP gas taps soared in 2020. Illegal taps on LP gas pipelines increased to over 20,000 last year, representing a loss of US$1.4bn, according to the president of the LP gas industry association Amexgas (Mexico News Daily – English). Approximately 60% of all illegal taps were located in the last three years.
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.
Women in the energy sector lay out the challenges. According to the Women’s Renewable Energy Network (Redmeree), the challenges include increased inclusion in CEO positions for women and the need to show that women have the abilities and capacities to lead and complete projects (El Economista – Spanish).
Quote of the Week
“Una libertad absolutamente irracional es ininteligible.”
“An absolutely irrational freedom is unintelligible.”
– Antonio Caso (1883-1946), Mexican philosopher and rector of the former Universidad Nacional de México (UNAM).
We hope you have a productive week. Please send any news, comments, or women’s challenges in the energy sector to MexicoWeekly@energynarrative.com.
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