March 16, 2020 edition—Sener’s plan in March; CFE’s natural gas auction; and Talos and Pemex’s disagreement.
Last Week in a Minute or Less
Electric Power & Renewables. Enel will power up Heineken; Sener’s renewables plan will be out by the end of March; and Hidalgo wants to be a renewable-powered state.
Natural Gas Mid-Downstream & LNG. Mexico’s natural gas imports reached a new high in 2019; and CFE opened up a natural gas auction in Baja California.
Liquid Fuels Mid-Downstream. Wascon Blue plans to build four biorefineries; Mexican gasoline’s price will not go down; and Oxxogas will expand further.
Oil & Gas Upstream. Talos Energy and Pemex keep disagreeing about Zama; oil rounds will earn Mexico MXN$19bn between 2021 and 2024; and the CNH changed the rules on natural gas use in exploration and extraction.
Government & NGO. Mexico wants to mediate between Russia and Saudi Arabia; Moody’s expects 0.9% growth from Mexico; and Mexico is confident about its oil hedge.
Déjà vu all over again. Last week’s readers were particularly interested in Puebla’s energy plan (El Financiero – Spanish); Braskem Idesa’s agreement with Pemex (Platts – English); and Mexican software for renewables (El Economista – Spanish).
Geopolitics & Trade
Mexico wants to mediate between Russia and Saudi Arabia. Mexico and other countries are planning to mediate between Russia and Saudi Arabia to put an end to the oil price war as Mexico has prior experience calming crude producer disputes (Reuters – English).
Mexico’s natural gas imports reached a new high in 2019. Mexico imported 5,540 million of cubic feet per day of natural gas in 2019, a 3.4% increase over 2018 imports (El Financiero – Spanish). In five years, natural gas imports have increased by almost 54% in the country.
COVID-19 may hit cross-border trade. Texas may soon feel economic impacts as COVID-19 spreads from cross-border trade to oil and gas exports (Texas Tribune – English). Some border companies are extremely concerned about the supply chain, as certain products cross the border several times before final production is completed.
UK and Mexico agreed to work on trade and climate change. UK and Mexican ministers met for the UK-Mexico High-Level Economic Talks, agreeing to promote future collaboration in trade and investment (Gov.uk – English). UK government investment in Mexico’s economy grew from £1m in 2013 to an estimated worth of £250m over the next four years.
Moody’s expects 0.9% growth from Mexico. Due to the effect of COVID-19, the international rating agency lowered Mexico’s growth outlook to 0.9% from the previous forecast of 1% (El Economista – Spanish). Moody’s expects the virus to affect global economic growth up until the second quarter of the year.
Inflation reached 3.70%, a new high, in seven months. Mexican consumer price increases reached 3.70% in February, getting further away from the central bank’s target rate (Reuters – English) and reaching the highest level since July 2019 (El Financiero – Spanish). Analysts expect Banxico to cut rates again to help Mexico’s economy.
Mexico is confident about its oil hedge. The Finance Minister said the US$1.4bn hedge program covered 2020 national oil income (Reuters – English) from a drop in oil prices, such as the one resulting from Russian and Saudi Arabian tensions. The government added US$10bn to its exchange hedges (El Economista – Spanish).
Legal & Regulatory
CFE opened up a natural gas auction in Baja California. CFEnergía will award a natural gas supply contract for the first time in Baja California Sur to generate power more efficiently (El Economista – Spanish). Power generation in the state is based on fuels that are more expensive and polluting than natural gas.
Oil rounds will earn Mexico MXN$19bn between 2021 and 2024. Mexico will receive MXN18.9bn between 2021 and 2024 as part of the payments agreed in the 112 oil contracts awarded in the oil rounds. According to the National Hydrocarbons Commission (CNH), in 2020, the amount could reach MXN3.7bn (El Economista – Spanish).
Sener’s renewables plan will be out by the end of March… By the end of March, the Energy Ministry will publish the sectorial plan for renewables with the energy policy goals (El Economista – Spanish). At Mexico WindPower 2020, wind energy representatives again asked the government to reactivate long-term power auctions.
…and AMLO had a meeting to check on it. President López Obrador had a meeting with the Energy Minister, the head of Pemex, and the director of CFE to structure the way the energy sector investment plan will be made public (El Financiero – Spanish).
The CNH changed the rules on natural gas use in exploration and extraction. The National Hydrocarbons Commission modified certain technical dispositions on the exploitation of natural gas in exploration and extraction activities (DOF – Spanish). The annexes with the formats and instructions to present the exploitation program were also modified.
CFE placed a US$900m bond. The state-owned company placed a US$900m bond in the Taiwan and Luxemburg markets, the second international bond placement during the AMLO administration (El Financiero – Spanish). The bond was placed at a 30-year maturity.
Despite global prices, Mexico’s gasoline price will not go down. The fall in international oil prices will not help Mexican consumers, but the government will collect more on the special tax on fuels (Forbes – Spanish). The goal of the government is to maintain fixed prices.
Moody’s warns Pemex and Mexico over low oil prices… Due to the fall in oil prices, the international rating agency warned Mexico that its sovereign rating may be at risk (Forbes – Spanish). The fall in oil prices could also bring a cut in Pemex’s rating and higher interest rates for the state-owned company’s funding (Forbes – Spanish).
…and so did S&P. The international rating agency said that Mexico’s rating is at risk of changing into a “negative” outlook if low oil prices continue and the effect of COVID-19 is felt in Mexico’s economy (El Economista – Spanish).
Strategy & Operations
Enel will power up Heineken. Heineken México and Enel signed a 10-year contract to power the Meoqui plant with wind and solar energy (Forbes – Spanish). The decision brings Heineken a step closer to reaching the company’s goal of making 66% of its operations run on renewables.
Oxxogas will expand further. Femsa plans a 10% growth of its gas stations (El Financiero – Spanish). The company pointed to delays in the CRE’s permits as one of the reasons for the slow opening of gas stations in 2019.
Talos Energy and Pemex keep disagreeing about Zama. The US company said that it is not necessary for Pemex to drill another well to evaluate the Zama field (Forbes – Spanish). Talos Energy wants to be the operator of the field because the company has the capacity and continues working on drillings (El Financiero – Spanish).
Wascon Blue plans to build four biorefineries. The company plans the construction of four modular refineries to produce gasoline through subproducts that result from gas and oil production (El Financiero – Spanish). Each refinery will require an investment of US$180m.
Puebla’s industrial parks have renewables in sight. The National Chamber of Industrial Transformation (Canacintra) in Puebla said that although the companies in Puebla are interested in renewables to reduce their electricity costs by 50%, the process would take approximately two years (El Economista – Spanish).
Hidalgo wants to be a renewable-powered state. Hidalgo is working to become the state that produces more renewable energy and electric and hybrid vehicles (El Economista – Spanish). The state’s government met with United Arab Emirates and Qatar representatives to seek investment for renewable projects.
Old School Social
Events in the world beyond your screen—go see and be seen (but stay six feet apart)!
Mexico Assembly will be held April 1-2 at the Hyatt Regency in Mexico City.
The Mexican Energy Forum is scheduled for April 29-30 in Mexico City.
Pemex destroyed a mangrove forest in Dos Bocas. Pemex went against the Security, Energy, and Environment Agency’s rules and took down a mangrove forest to build Dos Bocas (El Economista – Spanish). The mangrove is protected by environmentalists because it captures more carbon dioxide than other plant life.
Quote of the Week
“Una libertad absolutamente irracional es ininteligible.”
“Absolute and irrational freedom is incomprehensible.”
– Antonio Caso (1883-1946), Mexican philosopher.
We hope you have a productive week. Please send any news, comments, or mangrove conservation plans to MexicoWeekly@energynarrative.com.
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