May 15, 2017 edition— Pemex won back most of its pipelines; BMW bets on solar; and Ecopetrol set its sights on Mexico.
Last Week in a Minute or Less
Renewables & Electricity. Ten companies want a piece of the third electricity auction and BMW will build a solar project in Mexico.
Natural Gas & Liquid Fuels. Pemex got 59% of capacity auctioned in the Cenagas open season; Oxxo Gas demands CRE speed up title-holder changes; and CRE will use the design for the first open season in the coming auctions.
Oil & Gas Upstream. Pemex will develop all its assigned fields and Ecopetrol plans to compete in the next Round.
Money & Power. Inflation skyrocketed; forex hedges reviewed; and the US Chamber of Commerce defended NAFTA.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s third electricity auction (English); China-Mexico relations (English); and the winners of Pemex’s first open season (English).
The Road to Reform
CRE plans to duplicate the first open season nationwide. The Energy Regulatory Commission (CRE) stated that the design used for the first open season would be used in the next four biddings (Spanish). By the end of May, the CRE expects to receive Pemex’s request to launch the open season 1.2.
BP, Shell, and Vitro won the Cenagas open season. ArcelorMittal, BP, Industrias Peñoles, Shell, and Vitro benefitted from reserving capacity to transport gas in Pemex pipelines in the first open season of the National Center of Gas Control (Spanish). Pemex won 59% of the volume on offer in natural gas pipelines (Spanish).
Ten companies will compete in the third electricity auction. The third electricity auction will have a turnout of 10 private companies and will count on more sellers with new clean energy generation plants (Spanish). As a first, there would be offers to buy power from private companies, in addition to CFE.
Pemex will take care of its fields. The state-owned company plans to develop most of the 120 fields the government allocated to Pemex in 2014 (Spanish). The end of the three-year period to invest or give up the fields is close, and Pemex’s CEO believes the company will develop nearly all its assigned fields.
Asea wants to break free. The Security, Energy, and Environment Agency (ASEA) has achieved recognition, and now needs legal reforms to protect its independence (Spanish). The goal is to achieve the same level of autonomy and institutional strength of the National Hydrocarbons Commission (CNH) and the Energy Regulatory Commission (CRE).
Political Economy
Canada and Mexico will team up on trade. Mexico’s central bank governor, Agustín Carstens, and his Canadian counterpart, Stephen S. Poloz, met with Mexican businessmen and Canadian industry representatives to discuss an alliance to preserve trade policies (Spanish). Poloz pointed to protectionism as the biggest threat to economic growth.
Pemex and CFE can breathe at last. Pemex’s CEO said there is stability in Pemex’s finances now and predicted a return to profitability by 2020 (English). By the end of 2016, CFE’s past due loan portfolio was 15% less than in the same period in 2013, and now stands at MXN38.6bn (Spanish).
The US Chamber of Commerce backed NAFTA. Thomas Donohue, president of the US Chamber of Commerce, said a withdrawal from NAFTA would devastate “the workers, business, and economies of our countries” (English) (Spanish). Donohue believes the leaders of the three member nations understand the damage that could be caused by undoing NAFTA.
Four soldiers died after fighting suspected oil thieves. Soldiers sent to Palmarito, Puebla, to investigate oil pipeline theft were shot at by a group that used children and women as human shields (English). Two soldiers died in the attack and two more soldiers died in a later attack nearby (Spanish).
Market Trends
Mexico won again on renewing forex hedges. Mexico’s central bank sold all US$200m on offer in its auction of forex hedges that expire in 62 days (English). The auction replaces US$200m worth of the instruments which were placed at an exchange rate of 19.6177 (Spanish).
Mexico’s annual inflation rose to 5.82%. Mexico’s annual inflation increased to 5.82% in April, while consumer prices rose 0.12% in the same month (English) (Spanish). A survey from Reuters had forecast a 5.74% annual inflation rate. The central bank does not discard further tightening of interest rates.
Crude oil exports declined. The state-owned company announced that oil exports in March reached a record low, just above 1 million barrels per day (bpd), a 6% drop compared to the same period last year (English). Pemex’s crude exports amounted to 1.001 million bpd, the lowest level since 1990.
Analysts believe in Mexico’s economic growth. In the last Citibanamex survey, analysts increased their growth forecast for 2017 to 1.8%, up from 1.6% (Spanish). The higher growth will lead to an annual inflation rate of 5.74%, above the 5.35% rate registered in March.
Strategy & Operations
Oxxo Gas asks the CRE to speed up title-holder changes. Oxxo Gas is pressing the Energy Regulatory Commission (CRE) to hasten changes in ownership papers to avoid sanctions from the Federal Prosecutor for Consumer Protection (Profeco) (Spanish). In April, Profeco identified 122 irregularities in 386 of the gas stations belonging to Oxxo Gas.
BMW set the stage for a solar project in Mexico. The German company will install a solar energy plant in San Luis Potosí to supply all the power needs of its car factory (Spanish). BMW will install 71,000 square meters of solar panels with an investment of US$1bn.
Energy reform makes it rain. México Infrastructure Partners wants to make another placement of capital development certificates (Spanish). Funding for solar power is being raised by Girasol, a crowdfunding platform created in Monterrey that connects investors and solar panel installers (Spanish).
Ecopetrol has Mexico and Brazil in its sights. The Colombian state-owned oil company will participate in the next tenders for shallow water exploration in Mexico in June and in Brazil in September (Spanish). Ecopetrol is already drilling the Warrior well with Anadarko in the Gulf of Mexico.
Old School Social
Events in the world beyond your screen – go see and be seen!
The 3rd Mexico Gas Summit is May 24-25 in San Antonio, Texas.
Lateral Thinking
Trash will power Mexico City’s metro. The Mexico City thermovalorization plant will generate power to illuminate the subway using garbage, transforming 4,595 tons of waste. As part of the project, an ecological park will be built at the Tláhuac Metro station with an investment of MXN11.5bn (English) (Spanish).
Quote of the Week
“Los ejércitos son los más grandes apoyos de la tiranía.”
“Armies are the biggest supporters of tyranny.”
-Francisco Villa (1878-1923), Mexican Revolutionary general
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