March 18, 2019 edition—Yucatan solar; farmouts in 2020; and rounds may restart.
Last Week in a Minute or Less
Renewables & Electricity. Amdee asked the government for certainty; the Huexca thermoelectric plant won’t be stopped; and Yucatán bets on its sun.
Natural Gas & Liquid Fuels. CRE’s changes hit investments; the new refinery’s timeline was questioned; and fuel shortages boost private imports.
Oil & Gas Upstream. Pemex could delay farmouts until 2020; and AMLO may reconsider restarting rounds.
Money & Power. The US is working on lifting tariffs; Mexico’s inflation reached a new low; and AMLO made peace with the ratings agencies.
Déjà vu all over again. Last week’s readers were particularly interested in AMLO’s refusal of the CRE head’s resignation (El Economista – Spanish); the CRE’s nominees (El Economista – Spanish); and Nahle’s plea to invest (El Financiero – Spanish).
US TV commercials back NAFTA’s ratification… A partnership of US companies, trade associations, and lobbyists presented a series of TV commercials and advertisements to boost a fast passage of the new NAFTA (BnnBloomberg – English).
…and certain Democrats will demand changes. The Congressional Progressive Caucus expects President Trump to reopen the new NAFTA to address the group’s concerns (English). Certain Democrats have entered their concerns on labor and environmental standards, and a special concern surrounds the pharma provisions.
The US is finally working to lift tariffs. US Trade Representative Robert Lighthizer said the US is working to design a plan to end the Mexican and Canadian steel and aluminum tariffs while maintaining the gains that domestic producers have obtained from the duties (Reuters – English) (El Economista – Spanish).
The Road to Reform
AMLO may reconsider restarting upstream rounds. According to a senior government official, Mexico could restart hydrocarbon exploration and production rounds in six months (Platts – English). President López Obrador will meet with oil companies to evaluate their investment and production promises and make a decision. Canceling the rounds could leave Mexico producing 1.8 million barrels per day in 2030.
Pemex could delay farmouts until 2020. Energy Secretary Rocío Nahle said the state-owned company could postpone the farmouts scheduled for October until 2020 (El Economista – Spanish). Nahle said Pemex has to drill 116 wells and, as it progresses in its plan, the farmouts schedule would be decided.
CRE’s changes hit investments. Experts warned that the lack of quorum in the Energy Regulatory Commission stopped investments. Just in gasoline stations, investments totaling MXN4.6bn have been halted, without considering the delayed LP, natural gas, and power permits stopped (El Financiero – Spanish).
Reports of the new refinery’s demise were greatly exaggerated. The Energy Minister said the new oil refinery will cost between US$6bn and US$8bn (Reuters – English) and will be working in three years (El Financiero – Spanish). The deputy finance minister announced a delay in the construction (Reuters – English) and AMLO ruled it out (El Financiero – Spanish).
Amdee asked the government for certainty. After the power auctions were canceled, the Mexican Association of Wind Energy (Amdee) said that new mechanisms should be established. They are still discussing new schemes with the National Center of Energy Control and the Energy Regulatory Commission (El Economista – Spanish).
Urzua argued Pemex will need a “significant” push. Finance Minister Carlos Urzua said the government was expected to announce “significant” new measures to boost Pemex to avoid the threat of a credit downgrade (Reuters – English). Pemex requires an investment plan of US$17bn to finance exploration and production projects (El Financiero – Spanish).
Mexico’s inflation reached a new two-year low. Thanks to agricultural products, Mexican annual inflation fell to 3.94% in February (Reuters – English), the lowest rate in more than two years. Banxico maintained its interest rate at 8.25% last month, the highest in a decade.
The Huexca thermoelectric plant won’t be stopped. The head of the state-owned company, Manuel Barlett Díaz, said the writ of amparos presented by the FPDTA will not halt the construction of the thermoelectric plant in Huexca, Morelos. President López Obrador argued that the pleas had no basis (El Financiero – Spanish).
AMLO makes peace with the ratings agencies. President López Obrador said the government respects the ratings agencies’ decisions and will not limit their scope, after a senator of his party suggested doing so (Reuters – English). A member of Mexico’s central bank, Jonathan Heath, assured Mexico is “a long way” from losing its investment grade credit rating (Reuters – English).
Salary increases may keep Banxico’s rates up. The increase in salaries in the first months of 2019 could affect Mexico’s central bank’s decision to evaluate a possible interest rate cut. Negotiations between unions and companies resulted in a 6% increase in salaries in February, the highest in the same month since 2002 (El Financiero – Spanish).
The IEPS is back. The Finance Ministry lowered the special tax on gasoline (El Economista – Spanish) and some expect a slow reduction in fuel prices (El Economista – Spanish). The change in the mechanism to set the gasoline subsidy could have an impact on the government’s income (El Financiero – Spanish).
The Dos Bocas misunderstanding hit the Mexican stock market. The opposing messages of President López Obrador and his administration regarding the Dos Bocas refinery brought uncertainty to Mexico’s stock market. The CPI dropped by 0.32%, and the FTSE index decreased by 0.24% (El Financiero – Spanish).
Pemex bonds seem to be trustworthy. Awaiting an economic plan from the government, bonds for the state-owned company have appreciated, and Morgan Stanley has recommended their purchase (El Financiero – Spanish). President López Obrador is considering the possibility of issuing Pemex bonds in the Mexican stock market (El Financiero – Spanish).
Strategy & Operations
Companies want a higher ceiling for renewables. GreenLux said the fossil fuel shortages and the increase in power costs boost the need to increase the limits of renewable energy self-generation (Zocalo – Spanish). The 600-kilowatt limit is not enough for certain industries.
Fuel shortages boost private imports. BP, Repsol, and Total plan to rely less on Pemex’s supply. BP plans to develop 10 terminals in five years and import fuel directly from Ohio, Texas, and the state of Washington (Platts – English).
Natural gas stations are in sight of investors. Mexican and foreign companies plan to invest close to US$65m in the installation of natural gas fueling stations, contributing to the growth of the infrastructure (El Financiero – Spanish). The goal is to have 100 stations opened in 2019, tripling the current infrastructure.
Yucatán bets on its sun. The National Chamber of the Restaurant Industry in Yucatán plans to invest in solar energy to reduce the effects of high power tariffs (El Financiero – Spanish). The chamber agreed with the state’s government to get low interest loans for members to invest in solar energy.
Old School Social
Events in the world beyond your screen—go see and be seen!
Solar Power Mexico is scheduled for March 19-21 at Centro Banamex in Mexico City.
Mexico WindPower will be held March 20-21 at Centro Cultural Banamex in Mexico City. Mexico WindPower is the premier wind energy event in Mexico, with eight consecutive years showcasing the latest in innovations and technology for leading national and international decision-makers.
Mexico Energy Assembly is scheduled for April 3-4 at St Regis Mexico in Mexico City.
A third-grade girl created a solar water heater. An eight-year-old indigenous girl from Chiapas built a solar-powered water heater using recyclable materials. Her goal was so that “people won’t have to chop down trees to heat their water anymore” (WLRN – English).
Quote of the Week
“El liberalismo es falso, para la libertad es verdadera.”
“Liberalism is false, but freedom is true.”
– Antonio Caso Andrado (1883-1946), Mexican philosopher.
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