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March 22, 2020 edition—The constitutional reform; CFE’s six combined-cycle plants; and the 2021 oil bonus.
Last Week in a Minute or Less
Electric Power & Renewables. AMLO threatens to change the constitution for the power law; Concamin said power self-supply represents 14% of the GDP; and Siemens Energy believes energy needs to be updated.
Natural Gas Mid-Downstream & LNG. Monterrey is ready for Mexico’s natural gas pricing index; CFE launched a bid for six combined-cycle plants; and completed US natural gas projects will boost exports.
Liquid Fuels Mid-Downstream. Morena will fight writs of amparo against CFE and Pemex; and the Finance Ministry expects a bonus by the end of 2021.
Oil & Gas Upstream. Pemex’s recent oil discovery may not be as good as promised.
Government & NGO. The USMCA may be used to negotiate the new power law; Banxico expects US stimulus to lift the Mexican economy; and the IMEF and FocusEconomics are hopeful for Mexico’s economy.
Déjà vu all over again. Last week’s readers were particularly interested in the fantasy of energy self-sufficiency (Forbes – Spanish); Valero’s plans (Platts – English); and the US and Mexico’s natural gas trade (Natural Gas Intel – English).
Geopolitics & Trade
Canada is concerned with Mexico’s new power law. Prime Minister Justin Trudeau expressed concern for the new power law and how it could affect Canadian investments in the clean energy sector (El Financiero – Spanish).
Auto lobbyists will discuss the USMCA with the White House. Lobbyists are looking to soften the USMCA with the new administration (The Truth About Cars – English). Industry groups are accusing the US of having a different interpretation than other nations of what was agreed upon.
The USMCA may be used to negotiate the new power law. The first step could be to go through “consultation and negotiation,” which may include mediation to solve the tension. If the negotiations do not succeed, arbitration could follow as US investments in Mexico are protected against violations (JDSUPRA – English).
Political Economy
Mexico may consider a tax reform after 2021 midterm elections. The Finance Minister said Mexico will evaluate the need for a tax reform this year (Reuters – English). Herrera said the tax issue would be taken up after midterm elections in June.
Banxico expects US stimulus to lift the Mexican economy. US President Joe Biden’s stimulus package will boost Mexico’s economy and exports (Reuters – English). Banxico will analyze the impact of a recent spike in U.S. Treasury bond yields at its next monetary policy meeting.
Concamin says power self-supply represents 14% of the GDP. According to the Confederation of Industry Chambers of Mexico (Concamin), if the new power law goes ahead, economic activities that produce 14% of the GDP will suffer an immediate impact, as their self-supply permits could be canceled (El Economista – Spanish).
The IMEF and FocusEconomics are hopeful for Mexico’s economy. The Mexican Institute of Finance Executives (IMEF) expects 4% growth (El Financiero – Spanish). FocusEconomics predicts a 4.3% GDP growth in 2021, a rate that shows a third monthly correction (El Economista – Spanish).
The Finance Ministry expects a bonus by the end of 2021. The increase in oil prices and Mexican oil production may bring MXN300bn in additional income to the Finance Ministry (El Financiero – Spanish). The Finance Ministry estimated MXN936bn of oil incomes for the year, considering US$42.1 per barrel and a production average of 1.857 million barrels per day.
Legal & Regulatory
AMLO sent a letter to the judge who stopped the power reform. President López Obrador sent a letter to the Supreme Court president, complaining about the decision to halt the new power law (El Economista – Spanish). AMLO asked the Supreme Court to investigate the judge (La Jornada – Spanish).
The Sener refuted the power law halt. The Energy Ministry impugned the federal judge’s decision to stop the new power law (Forbes – Spanish). Companies have presented 30 writs of amparo against the new power law (El Economista – Spanish).
AMLO threatens to change the constitution for the power law. President López Obrador said he would send an initiative to reform the constitution if the new law is deemed unconstitutional (Kelo – English) (Forbes – Spanish). AMLO said that some companies were eager to reach a deal with the government in exchange for “discounts.”
Morena will fight writs of amparo against CFE and Pemex. A lawmaker wrote a proposal to avoid writs of amparo being used to stop the operations of Pemex and CFE (El Economista – Spanish). According to the lawmaker, there is an effort to obstruct the new measures in favor of the CFE and Pemex in court.
Market Trends
Banobras went after green bonds. Banobras will issue debt to collect MXN10bn to continue financing sustainable investments (El Economista – Spanish). The sale was March 19 in four tranches with 3- to 5-year maturity.
Pemex’s oil discovery may not be as good as promised. Observers thought it may be premature to speak about success regarding Pemex’s discovery (Platts – English). Mexican presidents have traditionally made big announcements during the March 18 celebration, most of them regarding oil discoveries.
Completed US natural gas projects will increase exports. The Permian Highway pipeline entered service in early January, adding 2.1Bcf/d of additional natural gas capacity from the Waha Hub (EIA – English). The pipeline has additional connections to Mexico.
Wind turbine imports fell 29%. Mexico’s wind turbine imports fell by 29% in 2020 to US$314m (Opportimes – Spanish). The use of wind turbines is increasing worldwide due to the cut in costs.
Strategy & Operations
Blackstone had a bad experience in Mexico. Blackstone and investors who bet on the gas-powered plant Frontera are facing bankruptcy, the victims of a succession of problems including the Mexico power market collapse in 2020 and February’s cold snap (Reuters – English).
Monterrey is ready for Mexico’s natural gas pricing index. According to the NGI’s survey, Monterrey would be the best place for a domestic pricing index to form (Natural Gas Intel – English). Deliveries into the Monterrey area have increased by more than 30% in the past three years, rising to 772,468 Dth.
CFE launched a bid for six combined-cycle plants. The state-owned company published an international tender to build six combined-cycle natural gas-powered plants with a combined installed capacity of 4,322MW (Natural Gas Intel – English) (PV-Magazine – Spanish).
Siemens Energy believes energy needs to be updated. The head of Siemens Energy México assured that the modernization of the energy transmission infrastructure and the economy need the same updating perspective (El Financiero – Spanish). Siemens Energy Guanajuato marked its 40th anniversary, celebrating industry modernization in the state (Revista Q – Spanish).
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.
Lateral Thinking
GWEC does not understand Mexico’s wind policy. According to the Global Wind Energy Council (GWEC), the changes in energy go against decarbonization worldwide (EVWind – English). Experts consider it to be a contradiction that most countries are investing in renewable energy and Mexico plans to go back to the 1950s.
Quote of the Week
“La democracia es el equilibrio de poderes.”
“Democracy is the balance of powers.”
– Jesús Silva Herzog (1892-1985), Mexican economist and historian.
We hope you have a productive week. Please send any news, comments, or wind projects to MexicoWeekly@energynarrative.com.
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