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March 30, 2020 edition—Sempra’s LNG project confirmed; Total’s block; and CFE’s combined cycle plants.
Last Week in a Minute or Less
Electric Power & Renewables. CFE goes all-in on combined cycle plants; the Soto La Marina port will be powered up by solar; and solar energy companies had a win in court.
Natural Gas Mid-Downstream & LNG. Sempra confirmed the Costa Azul LNG project.
Liquid Fuels Mid-Downstream. Mexican crude sold at US$15.78; and gasoline demand is down in Mexico.
Oil & Gas Upstream. Total gave up the rights for a deep water block; Mexico’s oil production slipped; and the CNH and the Sener fight coronavirus.
Government & NGO. Trump and AMLO agreed on the importance of trade; Moody’s expects Mexico’s recession to reach 3.7%; and Banxico made a 50-point emergency rate cut.
Déjà vu all over again. Last week’s readers were particularly interested in Nuevo León’s transmission line (El Financiero – Spanish); the government’s invitation for energy projects (Forbes – Spanish); and Iberdrola’s gas supply (El Economista -Spanish).
Geopolitics & Trade
US and Mexico discussed travel restrictions and migrants’ return… US Secretary of State Mike Pompeo and his Mexican counterpart, Marcelo Ebrard, are working on travel restrictions to reduce the spread of COVID-19 (Reuters – English). Mexico will allow the US to return to Mexico any Central American migrants caught trying to enter the US illegally (Reuters – English).
…and Trump and AMLO agreed on the importance of trade. President Trump and President López Obrador discussed the coronavirus pandemic and agreed on “the importance of preserving trade and critical services, regardless of travel restrictions” (Reuters – English).
Mexico will pour sugar on the US market. Mexico could export up to 25% of its sugar production to the US in 2020 (El Financiero – Spanish). The US announced that it may need 1.65 million metric tons, the biggest amount since 2014.
Mexico’s private sector asked to push back the USMCA start date. The president of the Business Coordinator Board asked to reconsider the start date of the new NAFTA as the three countries are dealing with the COVID-19 pandemic (El Financiero – Spanish). The USMCA was set to start 90 days after the ratification of the agreement by the three countries.
Political Economy
Moody’s expects Mexico’s recession to reach 3.7%. The rating agency forecast a recession in Mexico of 3.7% in 2020 due to the impact of a weak US economy and the expected drop in tourism (El Economista – Spanish). Moody’s predicts a recovery of 0.9% in 2021.
Fitch worries over Pemex’s vulnerability to oil prices. The rating agency said that the state-owned company is the “most vulnerable” to low oil prices among national oil companies in Latin America (Reuters – English). With prices below US$20 per barrel, Pemex exploration and production do not cover operational and financial costs.
Inflation slowed to 3.71%. Mexican consumer prices rose 3.71% through the first half of March, a slight drop from the 3.87% registered in the second half of February (El Economista – Spanish) (Reuters – English). Inflation remains above the central bank’s target of 3.0%.
Scotiabank expects a 5.77% contraction in 2020… Scotiabank forecasted that Mexico’s economy will contract by 5.77% this year. The reasons are: the COVID-19 pandemic and its effects on the economy, the oil price war, and a financial crisis similar to the one in 2008 (El Financiero – Spanish).
…and the Citibanamex survey is getting there. Economists who answered Citibanamex’s survey expect a GDP contraction of 3%, up from 0.7% in the previous survey (El Financiero – Spanish). For 2021, economists increased the forecast from 1.6% to 1.7%.
COVID-19 threatens AMLO’s goal of 4% growth. The impact of the coronavirus crisis on the economy could make President López Obrador’s goal of 4% growth unreachable (El Financiero – Spanish). AMLO ruled out either company bailouts or requesting an IMF line to face the COVID-19 crisis (Bloomberg – English).
Legal & Regulatory
Alfonso Romo believes in the energy sector investment plan. The chief of the Presidency Office said that the energy sector investment program will be published soon, and it will be essential to recover investors’ trust (El Economista – Spanish).
Lawmakers asked for renewables in government buildings. Mexico’s House of Representatives approved the creation of programs to generate power with renewable energy in government buildings (El Financiero – Spanish). The proposal is now in the Senate.
CFE goes all-in on combined-cycle plants. With the Energy Ministry’s approval, CFEnergía will purchase the combined cycle plants “Mérida” and “Baja California Sur” that will be put at CFE’s disposal (PV Magazine – Spanish). The goal is to increase the energy supply in the Yucatan and Baja California peninsulas.
The CNH and the Sener fight coronavirus. The National Hydrocarbon Commission (CNH) has stopped its activities through April 19 to fight COVID-19 (DOF – Spanish). The Energy Ministry canceled deadlines and legal terms to combat the coronavirus contagion (DOF – Spanish).
Market Trends
Mexico’s oil production slipped. The National Hydrocarbons Commission (CNH) published Pemex production in February, reaching 1,721,000 per day, 3,000 barrels less than in January (El Financiero – Spanish). Private companies produced 640 barrels more than in the previous month.
Fitch forecasts 0% GDP in Mexico. The international rating agency expects Mexico’s GDP to reach 0%, but the forecast could be lowered due to the uncertainty caused by COVID-19 (El Financiero – Spanish). Fitch warned that banks could be pressured by the coronavirus and Banxico’s interest rate cut.
Mexican crude sold at US$15.78. According to the state-owned company, Mexican oil prices fell 10.84% to US$15.78 per barrel (El Financiero – Spanish). The Brent crude price closed at US$26.98 per barrel, a 5.23% fall.
Gasoline demand is down in Mexico. Fuel demand was down by 5% in the first week of March compared to the same period in 2019 due to the COVID-19 crisis (El Financiero – Spanish). Economic activity has dropped between 4% and 6% in several regions in the country.
Banxico made a 50-point emergency rate cut. Mexico’s central bank made the biggest rate cut in six years to help the economy with the coronavirus crisis, leaving the key interest rate at 6.50% (Reuters – English) (El Financiero – Spanish). Banxico’s goal was to “provide liquidity and improve the functioning” of the market.
Solar energy companies had a win in court. After five years, solar energy companies won the fight to stop paying 15% duty on imported solar panels (PV Magazine – Spanish). The decision made on May 6, 2019 was appealed by the SAT and was made final on March 20, 2020.
Strategy & Operations
Sempra confirmed the Costa Azul LNG project. Sempra Energy announced that it will go forward with the construction of the first phase of the Costa Azul LNG plant (Reuters – English). Sempra will push back the decision on a separate Texas plant (Reuters – English).
Total gave up the rights for a deep water block. The National Hydrocarbon Commission (CNH) approved the request from the French company to give up its exploration and production rights to a deep water block won in Round 1.4 (Reuters – English) (El Economista – Spanish).
Querétaro’s industry needs power. Industrial parks in Querétaro face limitations to expand their operations due to the lack of stable power supply. The industry sector has turned to the private sector to create self-generation power plants combining natural gas and solar energy (El Economista – Spanish).
The Soto La Marina port will be powered up by solar. The port infrastructure plan includes the port construction, an industrial park capable of receiving 800 containers per month, a mining project, and hydrocarbon storage and distribution facilities, all powered up by solar energy (PV Magazine – 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. Don’t forget to stay six feet apart!)
2nd Edition of Shallow and Deepwater Mexico was postponed due to coronavirus. Date TBD.
MIREC Week has been postponed from June 2-4 to October 8-10 at Centro Citibanamex.
Solar Power Mexico was postponed from March 24-26 to November 18-20 at Centro Citibanamex.
Mexico Assembly was postponed due to coronavirus. Date TBD.
The Mexican Energy Forum is scheduled for April 29-30 in Mexico City. It is probable that the event will be postponed to later in the year.
The Mexican Petroleum Congress is scheduled for June 24-27 in Monterrey and may be postponed until September.
Lateral Thinking
A new Maya kingdom was discovered in Chiapas. Archaeologists may have located Sak Tz’i’, a Maya kingdom referenced in inscriptions across the ancient Maya world, thanks to a local man’s discovery of a 2- by 4-foot tablet near Lacanja Tzeltal, Chiapas (Live Science – English). The kingdom’s capital was settled in 750 B.C.
Quote of the Week
“Es absurdo pretender la seguridad nacional aumentando la inseguridad international.”
“It is absurd to claim national security by increasing international insecurity.”
– Alfonso García Robles (1911-1991), Mexican diplomat and politician who received the Nobel Peace Prize in 1982.
We hope you have a productive week. Please send any news, comments, or really old kingdoms to MexicoWeekly@energynarrative.com.
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