The Weekly Brief: Mexico


May 13, 2019 edition—Shell starts drilling; modernized refineries; and the OECD has doubts.




Last Week in a Minute or Less


Renewables & Electricity. Yucatan is sailing towards renewable energy; the Cofece doesn’t want another CFE restructuring; and AMLO has clean energy goals.


Natural Gas & Liquid Fuels. Refinery revamps are rolling; and a marine was shot dead as the fuel theft battle rages.


Oil & Gas Upstream. Shell will dig deep in Mexico’s waters; Murphy aims for deepwater expansion; and the EPC contract for the Amoca field was greenlighted.


Money & Power. OECD expects the Mexican economy to slow; Pemex bonds drop amid market mistrust; and Mexico’s inflation is expected to rise.


Déjà vu all over again. Last week’s readers were particularly interested in CFE’s five projects (El Economista – Spanish); pipeline troubles (El Norte –  Spanish); and Mexico’s clean energy goal (El Financiero – Spanish).



NAFTA Negotiation


The White House is working on an enforcement mechanism for USMCA. Trump administration officials are responding to pressure from Democratic congressmen, who are pushing for stronger controls on NAFTA’s replacement, particularly regarding labor rights in Mexico (Reuters – English). The Mexican Senate just approved a new labor reform to improve the chances of ratification.


US customers may suffer the most from trade tariffs. With talks between China and the US ongoing, US customers are paying for the tariffs imposed on Mexico, Canada, and China, as companies are not assuming the costs. The tariffs have also affected investment decisions (Fortune – English).


MEMA begs for USMCA ratification. The Motor and Equipment Manufacturers Association (MEMA) urged the US Congress to approve the new NAFTA without delay (Reuters – English). MEMA, whose members employ the most of any US manufacturing sector, had not previously endorsed the USMCA.



The Road to Reform


The Dos Bocas refinery’s tender was declared void. The government declared the Dos Bocas refinery’s tender void and President López Obrador said the construction of the new refinery will be overseen by Pemex starting in June and finishing by May 2022 (Reuters – English) (El Economista – Spanish). The private firms did not comply with the budget and deadline set by the government (Reuters – English).


A battle over fuel took a marine’s life. In an armed confrontation in Northern Puebla, a marine was shot dead and three were injured by armed fuel thieves (El Financiero – Spanish). In an effort to combat illegal connections and fuel theft, the Mexican armed forces are patrolling Pemex’s pipelines alongside the federal police.


CNH calls out Pemex’s plan. The National Hydrocarbons Commission criticized Pemex’s plans to raise production through service contracts, calling it an outdated strategy (Forbes – Spanish). The proposed scheme was tried before, then abandoned after the energy reform.


The Cofece doesn’t want CFE to re-restructure. The Federal Commission on Economic Competition believes the changes to modify the legal separation of the state-owned company could risk truly free competition in the power sector (El Economista – Spanish).


The CNH okayed Pemex’s Ixachi drilling. The National Hydrocarbons Commission (CNH) approved Pemex Exploración y Producción’s plan to drill two exploratory wells in the Ixachi field. The project will count on an investment of MXN1.7bn (Oil & Gas Magazine – Spanish).


AMLO aims for more than one-third of electricity to be clean. The government is aiming to reach a share of 35.8% of total electricity output from renewables by 2024 (El Economista – Spanish). The pledge was made after the CENACE said the target is “not realistic” due to the lack of necessary financing to promote investment (Bancomext – Spanish).



Political Economy


The OECD expects Mexico’s economy to slow. The OECD adjusted its prediction for the Mexican economy to grow 1.6% in 2019 and 2% in 2020 (Reuters – English). It also laid out a series of recommendations, including a comprehensive fiscal reform and enhanced transparency mechanisms for public programs (El Financiero – Spanish).


Mexico’s new goal is energy self-sufficiency. In the National Development Plan (PND), the Mexican government outlined a five-year plan to reach the goal by 2024 (El Financiero – Spanish) (Reuters – English). Increased energy production and enhanced regulations are the major strategies, but specific measures were not detailed.


Analysts call for Pemex’s action plan. After Mexican government officials announced that savings will be used to “rescue” Pemex, AMLO ordered budget cuts to support Pemex (Reuters – English). Analysts issued calls for a specific action plan to detail how much money is needed and how it will be used (El Financiero -Spanish).



Market Trends


Mexico’s inflation rose, as expected. The traditional Holy Week vacations are partly to blame for higher inflation, as increased travel and food prices drove the indicator up (El Economista – Spanish). According to the national statistics agency, consumer prices in Mexico rose to 4.41% (Reuters – English).


Consumers are wary of Mexico’s economic outlook. Mexican consumers are becoming more cautious with their spending. The Monthly Index of Private Consumption contracted 0.2% on a month-to-month basis (El Economista -Spanish). This follows a decrease in the Consumer Confidence Index back in February and reflects more caution.


Pemex bonds drop amid market mistrust. Pemex’s underwhelming earnings report erased most of its yearly gains (El Financiero – Spanish) as investors reacted with skepticism. The state oil company reported a 12% decrease in oil production, and refineries are operating at 34% capacity.



Strategy & Operations


A revamping of Mexico’s refineries is underway. The Cadereyta refinery is getting a major refurbishment this year (El Economista – Spanish). The Mexican federal government plans to invest up to 25 billion pesos in upgrades in the next two years (El Financiero – Spanish) and build a new refinery in Tabasco in order to increase production capacity.


An EPC contract for Amoca field was greenlighted. McDermott International received Eni Mexico’s approval for the wellhead platform 1 (WHP1) (OGJ – English), located 30 km offshore Dos Bocas, Tabasco.


Shell will dig deep in Mexico’s waters. As part of a US$1 billion investment effort, Shell will start perforations of its first deepwater oil well in Mexico in December (El Financiero – Spanish). The Dutch company won nine blocks in Round 2.4 last year.


Murphy aims for deepwater expansion. Murphy Oil’s Mexico director, Gabriel Gómez, revealed proposed plans for an appraisal well off their Cholula discovery and two exploratory wells in the Salina basin block for next year (OGJ – English).


Yucatan is sailing towards renewable energy. Vive Energie invested US$140m to build a new renewable energy supply for CFE, Yucatan’s first wind power facility. The Golfo 1 plant is expected to generate 2.5MW from each of its 28 windmills (El Financiero – Spanish).



Old School Social


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



MIREC Week is scheduled for May 20-22 at the World Trade Center in Mexico City.


P&E Day 2019 will be held May 22 at Expo Santa Fé in Mexico City.


XXVIII La Jolla Energy Conference is scheduled for May 22-23 in La Jolla, California.


The 5th Mexico Gas Summit will be held May 29-30 at the Marriott Riverwalk in San Antonio, Texas.



Lateral Thinking


An arsenic-breathing lifeform was found west of Mexico. Off the Mexican Pacific coast, researchers have found an ocean microbe that breathes arsenic instead of oxygen (Science Alert – English). The team from the University of Washington consider it a possible sign of adaptation to climate change.



Quote of the Week


“La dedicación de las ciencias, las letras y las artes, participa de cierta condición de heroísmo y es levadura del saber, la sensibilidad y la conciencia del pueblo.”


“The dedication to sciences, literature, and arts, are heroic conditions and leaven the wisdom, sensibility, and conscience of the people.”



– Agustín Yáñez (1904-1980), Mexican writer and politician.



We hope you have a productive week. Please send any news, comments, or oxigen-free survival strategies to


Tell your friends and colleagues about the Weekly Brief! They can sign up for a free one-month trial here.[/vc_column_text][/vc_column][/vc_row]