The Weekly Brief: Mexico

March 27, 2017 edition— Rounds 2.2 and 2.3 offer hope for natural gas; wind energy strengthens; and Iberdrola won Topolobampo III.





Last Week in a Minute or Less


Renewables & Electricity. CFE’s subsidiaries bet big in the electricity market; Canada may advise Nuevo León on renewable energy; and Yucatán and Tamaulipas develop wind energy.


Natural Gas & Liquid Fuels. Pemex and CFE account for 75% of all natural gas demand; LP gas liberalization will hit prices; and Yucatán will have a fuel corridor in 2017.


Oil & Gas Upstream. Rounds 2.2 and 2.3 are rich in natural gas, but current gas production dropped.


Money & Power. Mexico’s debt is expected to decrease; tensions rise regarding NAFTA renegotiations; and the oil expropriation anniversary fuels protests.


Déjà vu all over again. Last week’s readers were particularly interested in the Pacific Alliance’s support of Mexico during the US trade talks (English); the do-over for pipelines and storage auctions (Spanish); and CFE’s offer of storage space (Spanish).



The Road to Reform


Rounds 2.2 and 2.3, promising for natural gas extraction. Nine of the 12 blocks in Round 2.2, and nine of the 14 blocks in Round 2.3 are rich in natural gas (Spanish). Up to now, 15 companies have shown interest and four have paid to access the data room.


CFE’s subsidiaries make 400 daily offers in the Electricity Market. On a daily basis, the six subsidiaries of the state-owned company make 400 offers in the electricity market (Spanish). The offers represent the total capacity available and all of CFE’s different types of technology.


Social impact studies put 563 projects on hold. The Energy Ministry has 563 social impact evaluations (EvIS) pending, putting project development on hold (Spanish). The social impact evaluations and consultations with indigenous communities are required for energy projects; 280 electricity projects are included among the 563.


CRE decision to suspend capacity allocation sends a bad signal. The Energy Regulatory Commission (CRE) has offered no explanation about its suspension of its allocation of Pemex Logística’s storage and transportation capacity in northern states. Energy sector analysts believe this methodological error stems from pressure to meet the reform’s tight implementation schedule   (Spanish).


SAT and CRE allied against tax evasion. The Tax Administration Service (SAT) and the Energy Regulatory Commission (CRE) signed an agreement to share information to verify tax compliance in the hydrocarbon, oil, and petrochemical industries (Spanish). The CRE will send SAT information on the permits that it issues.



Political Economy


PEP “forgot” to penalize a contractor’s delay. Pemex Exploración y Producción (PEP) failed to collect $34m in fines from Sistemas Integrales de Compresión (SIC) for a 470-day delay in starting work on a platform (Spanish). The contract work was for compression and interconnection of gas to Cantarell field facilities.


The NAFTA renegotiation continues with strains. The Economy Minister asserted that country-specific rules of origin within NAFTA will not be accepted (English). Under the current trilateral trade agreement, the rules of origin ensure that products meet regional (NAFTA) content requirements to be tariff-free, but no national content rules apply.


The oil expropriation anniversary stoked the “gasolinazo” fire. Hundreds of citizens protested recent increases in gasoline prices at Pemex facilities in Baja California and Hidalgo to celebrate the 79th Anniversary of the Oil Expropriation (Spanish). In Chiapas, teachers from the CNTE took over gas stations and gave gasoline away for free.


CFE’s Basic Service subsidiary received 400 complaints. After less than three months in operation, CFE Suministrador de Servicios Básicos has racked up 393 complaints from customers angry about charges (Spanish). The subsidiary is responsible for marketing electricity for residential and small commercial users with electricity demand less than 3MW.



Market Trends


Gas production in free fall and demand is growing… Since 2008, Mexico’s natural gas production has dropped by 30% and natural gas imports amount to 53% of domestic demand (Spanish). Considering the low production level and growing demand, it is imperative to find ways to increase domestic production of natural gas (Spanish).


…led by Pemex and CFE. The two state-owned companies are the largest consumers of natural gas in Mexico, accounting for 75% of domestic demand (Spanish). CFE and its private producers consume 3,798 million cubic feet per day (mmcfd) and the oil sector devours 2,094 mmcfd, not counting venting.


LP gas prices were frozen temporarily. Liberalization of LP gas prices increased tariffs by almost 40% for 70 million residential consumers (Spanish). During the first two weeks of March, 16 states froze LP gas prices per kilo and 20 states held prices per liter steady, according to the Energy Regulatory Commission (Spanish).


The Finance Ministry expects to recover rating agencies’ confidence. The Finance Ministry is looking to regain rating agencies’ trust by reducing public debt to 50.2% of GDP from 50.5% of GDP by year-end (Spanish). The last issuance of US$3.15bn allowed the government to reduce its obligations for 2018 by 30%.



Strategy & Operations


Iberdrola will operate the Topolobampo III combined-cycle plant. CFE awarded Iberdrola a contract to construct and operate the Topolobampo III combined-cycle power plant in Sinaloa (Spanish). The Spanish company will invest US$400m in the project and will manage 766 MW to serve 2.5 million users by January 2020 (Spanish).


A fuel corridor connecting urban centers in the Yucatán peninsula will be ready by 2017. The project to transport and store hydrocarbons in the peninsula will connect the cities of Progreso and Mérida with Cancún and will be completed before the end of this year (Spanish). The investment will total approximately MXN3.7bn.


Yucatán and Tamaulipas wind up. Companies in Yucatán and Tamaulipas have pledged investments of almost US$340m for three wind farms (Spanish). The Chacabal I and Chacabal II wind farms in Yucatán will have a combined capacity of 60MW, while El Cortijo in Tamaulipas will produce 168MW.


Canada may advise Nuevo León on energy. Representatives from Ontario and Alberta met with executives of the Nuevo León Energy Cluster to agree on investment and partnership projects in the energy and aerospace sectors, with an emphasis on renewable energies (Spanish). Alberta province already has successful agreements for sector development with Jalisco (Spanish).



Old School Social


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


The Pecom Petroleum Exhibition & Conference of Mexico is March 28-30 in Villahermosa, Tabasco.


The Border Energy Forum XXIII is April 4 in Monterrey, Nuevo León.


The 2017 Mexico Energy Assembly is April 8-9 in Mexico City.



Lateral Thinking


A 14-year old scientist noticed that phone signals threaten oysters. A 14-year-old student from Baja California verified that the low frequency magnetic fields generated by mobile phones harm the development of oysters and caused high mortality rates of oyster larvae (English). The young student has worked during weekends in a laboratory since 2015.



Quote of the Week


“Los árboles esperan: tu no esperes, éste es el tiempo de vivir, el único.”


“Trees wait: you shouldn’t, this is the time to live, the only one.”


-Jaime Sabines Gutiérrez (1926-1999), Mexican poet and politician.



We hope you have a productive week. Please send any news, comments, or new impacts of mobile phones to


Tell your friends and colleagues about the Weekly Brief! They can sign up for a free one-month trial  here.