May 4, 2020 edition—CRE’s fuel permits; Pemex’s low cost production; and IEnova’s LNG bet.
Last Week in a Minute or Less
Electric Power & Renewables. During the lockdown, CFE bets on remote connections; the CRE answered the PROY-NOM-001-CRE/SCFI-2017 comments; and the subsidy for summertime power is being discussed.
Natural Gas Mid-Downstream & LNG. LNG prices do not reassure North American projects; and IEnova will bet big in Baja California’s LNG terminal.
Liquid Fuels Mid-Downstream. The CRE will limit fuel sale permits; Mexico plans to cancel US gasoline imports; and LP gas suppliers will donate fuel during the COVID-19 pandemic.
Oil & Gas Upstream. AMLO pushes to be self-sufficient; Pemex is reducing its platform crews to halt coronavirus spread; and Mexico did not deliver on its OPEC+ oil production goal.
Déjà vu all over again. Last week’s readers were particularly interested in US natural gas futures (Reuters – English); Coparmex’s opinion on rating downgrades (Forbes – Spanish); and Pemex’s downgrade (Reuters – English).
Geopolitics & Trade
Mexico has a plan to end COVID-19 disruptions in US-Mexico supply chains. President López Obrador expected an agreement to allow industrial supply chains connecting the US and Mexico to operate normally again after a review by authorities (Reuters – English). Operating restrictions to prevent the COVID-19 spread caused disruptions in the supply chain.
AMLO said Mexico and the US need each other on migration. President López Obrador said Mexico and the US “need each other mutually,” referring to migration after being asked his opinion on President Trump’s decision to suspend some immigration to the US (Reuters – English).
The US finally finished the procedures to implement the USMCA. US Trade representative Robert Lighthizer announced that the US has fulfilled the domestic procedures to implement the new NAFTA after July 1st (USTR – English) (El Financiero – Spanish). Lighthizer emphasized that the crisis and recovery will boost manufacturing capacity and investment in North America.
Mexico and the EU finally have a trade agreement. Under the new trade agreement, Mexico and the European Union will trade practically all goods duty-free (EC – English) (Reuters – Spanish). The pact now includes a commitment to implement the Paris Climate Agreement.
Moody’s expects Mexico’s contraction to reach 7%. The international rating agency updated its outlook for Mexico’s economy, expecting a 7% contraction (El Financiero – Spanish). Mexico would be the third G20 country most affected by the COVID-19 crisis, after Italy and Great Britain.
S&P is concerned about uncertainty surrounding public policies. The negative outlook offered by the international rating company for Mexico’s rating is a result of investors’ uncertainty produced by President Lopez Obrador’s administration and policies and the worrisome economic growth (El Economista – Spanish).
Inflation may help Mexicans face this crisis. As inflation gets close to Mexico’s central bank’s goal, it could help limit the impoverishment in Mexican homes (El Economista – Spanish). During the 1995 crisis, inflation was at 55% and the economic contraction was close to 7%.
Banxico is concerned about commodity prices. Mexico’s central bank’s governor said that a drop in commodity prices will make it difficult for emerging market countries to carry out fiscal stimulus plans (Reuters – English). President López Obrador will increase spending on social programs by US$25.6bn.
Pemex asked workers to voluntarily cut their paychecks. The state-owned company asked its employees to cut their salaries by 25% to help the struggling company suffering from financial problems and the coronavirus pandemic (El Financiero – Spanish). Pemex detailed measures to save US$4.57bn (Reuters – English) (Forbes – Spanish).
Legal & Regulatory
The CRE answered to the PROY-NOM-001-CRE/SCFI-2017 comments. The Energy Regulatory Commission (CRE) answered the comments received regarding the PROY-NOM-001-CRE/SCFI-2017 power meter systems (DOF – Spanish). The CRE provided the questions, their authors, and its answers.
The CRE will limit fuel sale permits. The Energy Regulatory Commission (CRE) is looking to limit the award of permits to sell fuel in gas stations other than Pemex’s (El Financiero – Spanish). Private gas station owners have accused the regulator of delaying permits.
The subsidy for summertime power is being discussed. According to Sonora’s governor, the agreement for subsidized power in 72 municipalities in the northern state during the summer is being negotiated (El Economista – Spanish). The summer tariffs start on May 1st.
The energy plan was put on hold. Considering the COVID-19 pandemic, the pending energy sector infrastructure plan, which was estimated at MXN147bn, is not expected to be published any time soon (Reforma – Spanish).
LNG prices do not reassure North American projects. Worldwide LNG prices are not expected to recover before next winter, and that pressures North American developers trying to increase new liquefaction capacity as the coronavirus lockdown hit demand (Platts – English). Sempra Energy’s LNG export project is seen as the only new liquefaction project with a chance to be sanctioned.
AMLO pushes to be self-sufficient… President López Obrador said that his administration is working to be self-sufficient in gasoline production, and not depend on market fluctuations (Forbes – Spanish). The National Hydrocarbons Commission informed that oil production reached 1,746,000 barrels per day in March (El Financiero – Spanish).
…and Mexico did not deliver on its OPEC+ oil production goal. The state-owned company’s main fields did not reach the production goal set by March 2020 (Forbes – Spanish). The amount is 35,000 barrels less than what Mexico reported in the OPEC+ meeting (Forbes – Spanish).
Mexico plans to cancel US gasoline imports. Mexico is trying to cancel US fuel imports during the COVID-19 pandemic. PMI declared force majeure measures on gasoline imports as many ships are waiting to unload fuel on both coasts (El Financiero – Spanish).
Strategy & Operations
During the lockdown, CFE bets on remote connections. With 30 known cases of COVID-19 infected CFE workers, the state-owned company is emphasizing the importance of remote work, even to perform reconnection services (El Economista – Spanish). A third of CFE’s employees are working from home.
IEnova will bet big in Baja California’s LNG terminal. IEnova estimates the LNG project in Baja California will require an investment of US$1.9bn (El Financiero – Spanish). The project, to be developed in association with Sempra Energy, includes a pipeline.
Fuel sales dropped between 30% and 50% in Mexico’s North. In Nuevo León, regular gasoline sales fell by 30% while premium gasoline sales dropped 50% (El Economista – Spanish). In the northern state, there are more than 700 gas stations from 14 brands.
Pemex is trimming its platform crews to halt the coronavirus spread. The state-owned company is limiting the number of workers at its oil platforms to halt the spread of the coronavirus (Platts- English) (Mural – Spanish). Pemex will reduce the number of workers by half, leaving only essential personnel.
Pemex will focus on lower-cost production. The state-owned company pledged to prioritize lower-cost production, allowing the government to comply with its “international commitments” (Reuters – English). The goal is to help reduce Pemex’s financial flows and Pemex offered a US$40.5bn cut in its budget.
LP gas suppliers will donate fuel during the COVID-19 pandemic. LP gas distributors will offer free gas to low-income homes and NGOs affected by the COVID-19 pandemic (El Financiero – Spanish). Through the GLP Transforma Fundation, companies will donate 131,000 liters of LP gas.
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!)
2nd Edition of Shallow and Deepwater Mexico was postponed due to the 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 rescheduled for November 17-18 in Mexico City.
The Mexican Petroleum Congress is scheduled for June 24-27 in Monterrey and may be postponed until September.
A hotel in Mexico offered a day of free health and wellness activities. Velas Resorts offered a “Wellnessing Getaway” during the COVID-19 lockdown to help people stay active and have fun for free (Forbes – English). The event included video workshops by various instructors.
Quote of the Week
“El periódico es el vehículo del contagio en una multitud esparcida.”
“The newspaper is a vehicle of infection in a spread-out crowd.”
– Emilio Rabasa (1856-1930), politician, journalist, and writer.
We hope you have a productive week. Please send any news, comments, or tips to relax to MexicoWeekly@energynarrative.com.
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