May 24, 2020 edition—The Hydrocarbons Law’s change; Pemex’s Chicontepec; and Yucatán’s solar.
Last Week in a Minute or Less
Electric Power & Renewables. Fonatur plans a solar park in Yucatán; IEnova has a piece of advice for Mexico’s energy transition; and clean energies contribute 33% of Mexico’s power.
Natural Gas Mid-Downstream & LNG. Goldman Sachs asked CFE for US$400m over a natural gas deal; and power plants are changing natural gas for more polluting fuels.
Liquid Fuels Mid-Downstream. The CRE canceled more fuel permits; judges stopped the Hydrocarbons Law; and Pemex will bet on Tula’s refinery.
Oil & Gas Upstream. The CNH has set rules to promote oil activities; and Pemex will come back to Chicontepec.
Government & NGO. The American Chamber is happy with the first USMCA meeting commitments; Fitch maintained Mexico’s rating with a stable outlook; and Banxico will leave interest rates at 4%.
Déjà vu all over again. Last week’s readers were particularly interested in Grupo Mexico’s investment (El Economista – Spanish); CFE’s providers (El Financiero – Spanish); and API’s complaints (Natural Gas Intel – English).
Geopolitics & Trade
Mexico and the US fought over biotechnology and farming. Mexico wrote a letter complaining about the US farm industry not applying labor laws (El Financiero – Spanish). Biotechnology Innovation Organization (BIO) accused Mexico of breaking certain USMCA compromises (El Financiero – Spanish).
The US-Mexico border is still closed to non-essential travel. The US and Mexico will extend the ban on non-essential travel until June 21, 2021 (El Financiero – Spanish). The restrictions will be eased after that date depending on the COVID-19 propagation index and vaccination process on both sides of the border.
The American Chamber is happy with the first USMCA meeting commitments… The American Chamber Mexico pointed out the progress made in the first meeting of the USMCA but warned that legal certainty with clear rules and respect for the rule of law is required (El Economista – Spanish).
…and energy and labor were the key points in the meeting. Labor rights and energy were the major points in the meeting between the US and Mexico (El Economista – Spanish). The commission discussed the reports made by 11 committees (El Financiero – Spanish).
Barclays expects a slow Mexican recovery. The US boost and the improvement in stability during the pandemic will not compensate the deep fall of 8.5% of the GDP in 2020 (El Economista – Spanish). The forecasted 5% growth will not compensate for the contraction from 2020.
Fitch maintained Mexico’s rating with a stable outlook. The international rating company ratified the rating of Mexico’s debt at BBB-, with a stable perspective (El Financiero – Spanish). Fitch said Mexico has a low debt compared with similar economies and with stable finances.
Banxico will leave the interest rate at 4%. Mexico’s central bank left the interest rate at 4% considering the increase in inflation (El Economista – Spanish). The board does not expect any more cuts and the bank will consider changes depending on inflation (El Financiero – Spanish).
The IMEF expects big things from Mexico’s economy. According to the Mexican Institute of Finance Executives (IMEF), Mexico’s economy could grow above 5% during 2021, thanks to the recovery after the COVID-19 hit (El Financiero – Spanish). The forecast growth could be between 5.4% and 5.5%.
Legal & Regulatory
The CRE canceled more fuel permits. The Energy Regulatory Commission (CRE) declared 125 permits to sell fuels as expired (DOF – Spanish) and 14 more for selling oil, methane, natural gas, and LPG (DOF – Spanish). The reason was the lack of use of the permits (Forbes – Spanish).
Romero Oropeza said Pemex secures cheaper LP gas. According to the general director of the state-owned company, in the areas in which Pemex has presence, LP gas is cheaper (El Financiero – Spanish). Romero Oropeza pointed to the abuses of certain distributors increasing LP prices.
Judges stopped the Hydrocarbons Law. Judges Juan Pablo Gómez and Rodrigo de la Peza handed suspensions to six companies fighting the new Hydrocarbons Law (El Financiero – Spanish) (El Economista – Spanish). The cancellations have general effects in the application of the new rule.
AMLO warned about fuel smuggling without his law. President López Obrador said Pemex’s control over fuel supply is needed to fight corruption and smuggling (El Financiero – Spanish). The new Hydrocarbons Law proposed by AMLO’s administration was suspended by several judges.
The CNH has set rules to promote oil activities. The National Hydrocarbons Commission (CNH) published different measures to promote the development of oil activities (DOF – Spanish). The CNH will require oil companies to present an updated timeline of the execution of oil activities.
Changes to the Hydrocarbons Law’s 13 Article published. In the federal gazette, the government published a reform to the original Hydrocarbons Law published in 2014 eliminating Article 13, the asymmetric regulation in the fuel market for the state-owned company (DOF – Spanish) (El Economista – Spanish).
Clean energies now contribute 33% of Mexico’s power. According to the National Institute of Power and Clean Energies, from 2013 until 2020, installed capacity of clean energies in Mexico increased from 26% to 33% (El Financiero – Spanish).
Goldman Sachs asked CFE for a US$400m payment. Goldman Sachs said CFE owes US$400m after a natural gas transaction during the Texas storm in February (El Financiero – Spanish). The state-owned company argued that the personnel that agreed to the deal were not authorized to do so.
The Cofece expects Mexico to fail in its clean energy goal. The Mexican antitrust watchdog (Cofece) estimates that Mexico will not reach 35% clean generation by 2024 as promised in the Paris Agreement, but rather 29.8% (El Economista – Spanish). Delays in the granting of permits affect the operation of projects.
Strategy & Operations
Pemex will come back to Chicontepec. According to the head of the state-owned company, Pemex will return to Chicontepec, an onshore field that needs fracking for gas and oil to be extracted (Forbes – Spanish). The CNH approved Pemex Exploración y Producción’s modification to its development plan for the field.
Pemex will bet on Tula’s refinery. The state-owned company will invest US$2.64bn to finish a coking plant at the Tula refinery, looking to reduce dependence on imported fuels (Platts – English). The project is expected to be finished by 2023.
Fonatur plans a solar park in Yucatán. The Mexican tourism agency Fonatur plans to develop 500MW solar generation capacity in the Yucatán Península with CFE as operator (Platts – English). The new capacity would power the main route of the Mayan train.
AMLO wants to re-purchase two hydrogen plants. Pemex sold two hydrogen plants in refineries that the head of the state-owned company wants to purchase again (El Financiero – Spanish). Pemex currently rents the plants from Air Liquide and Linde.
Power plants are changing natural gas for a more polluting fuel. Mexican plants are absorbing the excess production of fuel oil that the marine industry can no longer use (El Financiero – Spanish). Power plants that used natural gas are now burning fuel oil, increasing carbon dioxide emissions by 16%.
IEnova has a piece of advice for Mexico’s energy transition. According to the head of the Sempra subsidiary, Mexico is behind in energy transition and needs to build more infrastructure to make natural gas a bridge toward renewables (Platts – English).
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!)
30th La Jolla Energy Virtual Conference will be held on Wednesdays and Fridays throughout May, 2021.
Mexico Assembly is rescheduled for May 26-27, 2021, at Hyatt Regency, in Mexico City.
The Mexican Petroleum Congress is rescheduled for June 23-26, 2021, in Monterrey.
A storm left Tamaulipas’ clients in the dark. According to the CFE, a storm caused a power outage for 12% of clients in Nuevo Laredo, Tamaulipas (El Economista – Spanish). The storm included 150km/h winds, damaging transmission lines and structures.
Quote of the Week
“Sólo merece llamarse hombre el que sabe y puede y quiere ayudar al hombre.”
“Only he who knows how and can and wants to help man deserves to be called a man.”
– Jaime Torres Bodet (1902-1974), Mexican politician and writer.
We hope you have a productive week. Please send any news, comments, or storm effects to MexicoWeekly@energynarrative.com.
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]