May 25, 2020 edition—Cenace allows 23 parks; Valero’s gas stations; and six oil discoveries in Q1.
Last Week in a Minute or Less
Electric Power & Renewables. The Cenace will allow 23 renewable parks with amparos; the solar industry joined forces to fight the new agreement; and the EU and Canada are also concerned.
Natural Gas Mid-Downstream & LNG. US natural gas exports to Mexico remained stable.
Liquid Fuels Mid-Downstream. Valero opened for business in Aguascalientes; Oxxo Gas will donate 30,000 liters of fuel to the Red Cross; and Mexican oil caught a break in May.
Oil & Gas Upstream. There were six oil discoveries in the first quarter.
Government & NGO. The American Chamber asked for legal certainty in the sector; foreign investment went up in the first quarter; and Goldman Sachs and Fitch worried about Mexico.
Déjà vu all over again. Last week’s readers were particularly interested in CCE’s legal measures (El Financiero – Spanish); warnings from energy clusters and governors against the Cenace’s agreement (El Economista – Spanish); and CNH’s decision in Zama (El Economista – Spanish).
Geopolitics & Trade
Mexico’s auto industry will restart on June 1. Mexico delayed the reopening of automotive plants and the mining sector by two weeks after the COVID-19 lockdown (Reuters – English). The start date of the new NAFTA was one of the reasons to consider the industry an essential activity (El Financiero – Spanish).
The EU and Canada are concerned with the Sener’s new agreement. The European Union and Canada voiced their concerns to the Mexican government about the changes in renewable energy project regulation (Reuters – English) (Animal Político – Spanish). The foreign partners said the new rules threaten foreign investment in the energy sector.
The American Chamber asked for legal certainty in the sector. The US-Mexico Chamber of Commerce asked for clear rules to provide confidence to energy sector investors (PV Magazine – Spanish). The chamber stated how the Sener’s new agreement would impact Mexico negatively.
The US-Canadian border will remain closed until June 21. Prime Minister Justin Trudeau announced the agreement between both nations to stop nonessential travel (Forbes – Spanish). Trudeau explained that the border limitations should continue considering the increase of COVID-19 cases in the north of the US.
AMLO disdained the government forecast on coronavirus effect. President López Obrador pushed back against a government report from Coneval that predicts the coronavirus pandemic could drag between 6.1 and 10.7 millions of Mexicans into extreme poverty in 2020 (Reuters – English).
Specialists expect Mexico to lose its investment grade in 2022. According to the Bank of America’s survey, 75% of analysts expect Mexico to lose its investment grade between 2020 and 2023 (El Financiero – Spanish). With 41% of responses, most economists expect this to happen in 2021.
Goldman Sachs and Fitch worry about Mexico. Goldman Sachs forecasts an 8.5% GDP contraction and warns about the weak fiscal policy to face the COVID-19 crisis (El Financiero – Spanish). Fitch said that Mexico could fall into a more severe recession than other Latin American nations (El Economista – Spanish).
The GDP will drop 20% in the second quarter: IMEF. According to the Mexican Institute of Finance Executives (IMEF), the GDP will fall 20% in the second quarter (El Financiero – Spanish). Banco Base forecasts a 8.2% fall in GDP in 2020 (El Financiero – Spanish).
Legal & Regulatory
Nahle said she is looking for order. Energy Minister Rocío Nahle said the new agreement does not push private companies out of business and is only a strategy to put “order” in the market (El Economista – Spanish). Regarding new permits, Nahle said that each case will be reviewed individually.
The CCE said US$30bn in investment is at risk. The Coordination Business Board (CCE) said the new agreement is a direct attack to legal certainty in the country and could cost Mexico US$30bn in investments (El Financiero – Spanish). The Mexican Institute of Finance Executives (IMEF) warned that the new agreement could affect investments and public finances (El Norte – Spanish).
The solar industry joined forces to fight the new agreement. The Mexican Association of Solar Industry asked companies to remain united to fight the new agreement approved by the Energy Ministry (PV Magazine – Spanish). The association condemns the Sener’s decision as it will favor CFE against the rest of the sector.
A political storm followed the Sener’s decision on renewables. The Green Party asked the government to guarantee that Mexico will comply with the percentage of renewable energy participation signed in international agreements (Reforma – Spanish). The Senate Energy Commission asked the director of the National Center of Energy Control (Cenace) to explain the content of the new agreement (Reforma – Spanish).
AMLO looked into fracking permits. President López Obrador said that permits were handed to Pemex but not for fracking (El Financiero – Spanish). According to an NGO, Pemex invested MXN10.8bn in hydrocarbon exploration and extraction activities through fracking (El Economista – Spanish).
Mexican oil caught a break in May. The Mexican oil mix gained 8.04%, or $1.99, on May 18th, selling at US$26.73 per barrel (El Economista – Spanish). In the first weeks of May the Mexican barrel has recovered by 113.84%, thanks to OPEC’s production reduction.
Foreign investment went up in the first quarter. Foreign direct investment during the first quarter increased by US$10.3bn, a 1.7% increase. The amount is down compared to the 7% growth observed in the same period in 2019 (El Financiero – Spanish).
US natural gas exports to Mexico remained stable. US natural gas futures increased almost 3% due to a slowdown in output. Mexico’s imports continued at 4.6 Bcfd, the same amount that was observed a year ago (Reuters – English).
Producing power with fuel oil cost Mexico greatly. According to the CFE, producing a megawatt hour with fuel oil cost US$138 in 2019 while renewables cost US$67 (El Economista – Spanish). Environmental and health experts also pointed out that the use of fuel oil to generate power also caused health and environmental damages.
Strategy & Operations
There were six oil discoveries in the first quarter. In the first quarter, the state-owned companies made five discoveries, and Eni had one in the country (El Financiero – Spanish). The discoveries amount to 338 million barrels of additional resource, with 195 million under Pemex’s control and 143 million under Eni’s.
Valero opened for business in Aguascalientes. The company opened four gas stations in Aguascalientes (Forbes – Spanish). Valero has 35 gas stations in different cities in the country, including Guadalajara, Monterrey, Puebla, and Toluca.
Oxxo Gas will donate 30,000 liters of fuel to the Red Cross. The company will offer 30,000 liters of fuel for free to Red Cross ambulances (Forbes – English). The goal is to support the transportation of COVID-19 patients in several states.
The Cenace will allow 23 renewable parks with amparos. The National Center of Energy Control (Cenace) approved the proofs to allow 23 renewable plants to operate after a judge accepted the writs of amparo from companies (El Economista – Spanish). At least six companies obtained writs of amparo against the Cenace’s new agreement (El Economista – 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. 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 the 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.
Mexico expects a bad hurricane season. Mexican experts from the National Water Commission forecasted a higher-than-average number of storms during the 2020 hurricane season in the Atlantic and the Eastern Pacific (US News – English). There will probably be 15 to 18 named storms and hurricanes in the Eastern Pacific.
Quote of the Week
“No es lo mismo darse cuenta de la injusticia que ponerse a construir, que es la única manera eficaz de acabar con la injusticia.”
“It is not the same thing to realize injustice as it is to start building, which is the only effective way of ending injustice.”
– Carlos Fuentes (1928-2012), Mexican novelist and essayist.
We hope you have a productive week. Please send any news, comments, or tips for hurricane season to MexicoWeekly@energynarrative.com.
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