The Weekly Brief: Mexico


March 19, 2018 edition—Pemex’s partners for marginal fields; the new gas pipeline NOM; and ENL’s new solar farm.




Last Week in a Minute or Less


Renewables & Electricity. France’s ENL will build a solar farm in Tepeyahualco.


Natural Gas & Liquid Fuels. The Guaymas-El Oro natural gas pipeline is on hold; ASEA published the NOM for gas pipelines; and fuel storage projects will propel Mexico’s capacity.


Oil & Gas Upstream. Pemex is looking for marginal partners; the Sener expects to award nine blocks from Round 3.1; and IFR is preparing to directionally drill in Mexico.


Money & Power. A revised NAFTA will strengthen North American energy; the OECD believes in Mexico’s growth; and Moody’s forecast 2.5% growth.


Déjà vu all over again. Last week’s readers were particularly interested in Tabasco’s new refinery (El Financiero – Spanish); Trump’s tariff-menacing NAFTA talks (Bloomberg – English); and Kushner and President Peña Nieto’s meeting (NYT – English).



NAFTA Negotiation


NAFTA talks will help North American energy. Mexico’s Deputy Energy Minister, Aldo Flores, believes the NAFTA negotiations (Platts – English) will strengthen oil and natural gas trade among Canada, Mexico, and the US. Pedro Joaquín Coldwell, Mexico’s Energy Minister, said North America’s energy trade would continue even if NAFTA ends (CNBC – English).


NAFTA has a future despite new US tariffs. Canada and Mexico said Trump’s tariffs will not change their NAFTA negotiating positions (Bloomberg – English). President Trump was planning to reframe trade talks (Bloomberg – English) with Canada and Mexico as a choice between US demands or steel and aluminum tariffs.


Canada’s Conference Board fears NAFTA’s end… According to the Conference Board of Canada, the dissolution of NAFTA would reduce employment in Canada by 85,000 in a year. NAFTA’s end would result in a 0.5% GDP reduction (Bloomberg – English), a lower exchange rate, and an easing in monetary policy.


…and Canada is working to secure a fast NAFTA deal. According to Canada’s Finance Minister, the uncertainty surrounding NAFTA has made some businesses cautious (Bloomberg – English). Canada and the US hope to make quick progress in the talks.



The Road to Reform


ASEA published the NOM for gas pipelines. The Security, Energy, and Environment Agency published the Official Mexican Standard (NOM) to transport natural gas, ethane, and associated gas via pipelines, which will come into effect on August 23 (El Economista – Spanish). The standard establishes the minimum requirements and technical specifications to be followed to design, construct, and operate pipelines.


Pemex is looking for partners at marginal fields… The state-owned company will need partners to boost oil and gas output in seven mature fields to 47,360 b/d and 526.35 MMcf/d by 2020 (Platts – English). These onshore fields in southern Mexico are composed of exploration areas and mature fields with 45 years of operation.


…and Pemex cut its work in shallow waters. Pemex reported its lowest level of development and exploration (El Financiero – Spanish) in offshore areas, even though 83% of national production comes from those areas. In 2016 and 2017, the lowest number of drilling equipment, drilled wells, and finished wells were registered.


The Sener expects to award nine blocks from Round 3.1. The Energy Minister, Pedro Joaquín Coldwell, said the goal for Round 3.1 is to award seven to nine blocks (Onexpo – Spanish). Coldwell expects to a total of 100 contracts from the oil rounds; 91 have been awarded thus far.


Pemex offers an open season in Tamaulipas. Pemex Logística launched an open season in the Madero area, in Tamaulipas, including four storage terminals (Reforma – Spanish). The state-owned company will announce the results by May 21.



Political Economy


Mexico will go into Germany’s market. More than 200 Mexican companies in the energy, food, construction, and services sector will go into the European market (Automation – English) and participate in the Industrial Fair of Hannover Messe (El Economista – Spanish). Mexico could supply the German market with offers on electrical materials, steel, electromechanical equipment, construction, and energy.


The OECD suggested further reforms for Mexico… The Organization for Economic Co-operation and Development (OECD) recommended that Mexico’s next president continue the structural reforms (El Financiero – Spanish). The OECD encouraged Mexico to strengthen institutions and implement a national anticorruption system.


…and the OECD is hopeful about Mexico’s growth. The Organization for Economic Co-operation and Development (OECD) increased its 2018 growth forecast to 2.5% (El Economista – Spanish), up from a previous 2.2% prediction. The OECD raised the 2019 forecast to 2.8%.


Better salaries could keep inflation up. Salaries increased by 5.6% in February, the highest rise in the same month since 2002, slightly above the 5.34% inflation (El Financiero – Spanish). According to analysts, this salary trend could slow down the drop in inflation and impact Mexico’s central bank.



Market Trends


Moody’s forecast 2.5% growth for Mexico. The international rating agency predicted the Mexican economy will grow between 2% and 2.5% in 2019 (El Economista – Spanish), even if the NAFTA negotiation is postponed until that year. Mexico’s macroeconomic performance will be unchanged despite the negotiations.


Gasoline prices increased 3.8% in February. Between January and February, fuel prices increased between 2.8% and 3.8% (El Economista – Spanish). Compared to February prices in the previous year, fuel increased between 8.7% and 6.8% for regular and premium gasoline, respectively.


Mexico’s market caught a break by escaping Trump’s tariffs. The stock market rose thanks to Mexico’s exclusion from US tariffs on steel and aluminum imports. The peso gained over 0.4% (Reuters – English) to trade at 18.6295 per dollar.


Ainda Energía & Infraestructura placed an energy and infrastructure CKD. Ainda Energía & Infraestructura placed a certificate for development investment (CKD) in the local market to finance energy and infrastructure projects in Mexico, gathering a total of MXN4.4bn (El Economista – Spanish). The company will invest mainly in hydrocarbons, power, hydraulic projects, and transportation infrastructure.



Strategy & Operations


Semarnat okayed ENL’s solar farm in Tepeyahualco. The Environment and Natural Resources Ministry handed down the environmental impact permit for the French company to construct the Pachamama II solar park. ENL will invest MXN7.7bn to generate 330MW (El Economista – Spanish) in the Tepeyahualco municipality.


Guaymas-El Oro natural gas pipeline waits to resume operations. IEnova’s Guaymas-El Oro natural gas pipeline in Northwestern Mexico remains out of operation indefinitely (Platts – English). The Ciudad Obregon Seventh District Court refused a legal motion from Mexico’s Energy Ministry to lift a temporary injunction against repairing the damaged pipeline.


Mexico’s refineries, storage, and retail markets are attracting attention. The Energy Ministry said business groups are interested in building refineries in Mexico, analyzing areas in Campeche, Tabasco, Veracruz, and Tamaulipas (El Financiero – Spanish). Mexico’s fuel storage capacity will grow 163% with 43 projects (El Financiero – Spanish). BP plans to get 15% of Mexico’s retail gasoline market (Platts – English).


IFR is getting directional drilling ready for Mexico. International Frontier Resources (IFR) plans rig mobilization and drilling operations for its TEC-10 well in the Tecolutla field (OGJ – English), near Poza Rica, Veracruz. The IFR participates in a 50-50 joint venture, Tonalli Energia, with Group IDESA.



Old School Social


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


The VII World Forum on Energy Regulation is scheduled for March 20-23 at the Cancun International Convention in Cancun, Mexico.


The North American Digital Commodities Summit will be held March 26 at Crowne Plaza Times Square in New York.



Lateral Thinking


Monarch butterflies are declining…again. The number of monarch butterflies wintering in Mexico declined for a second year, covering about 2.48 hectares this winter (US News – English). In 2017, the butterflies covered 2.91 hectares (14.7% larger area). In March 2016, a wind storm devastated the core of the butterfly reserve.



Quote of the Week


“No puede haber dictador sin su ejército.”


“One cannot be a dictator without his army.”


-Francisco “Pancho” Villa (1878-1923), Mexican Revolutionary general.



We hope you have a productive week. Please send any news, comments, or locations of monarch butterfly sanctuaries to


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