The Weekly Brief: Mexico


May 27, 2019 edition—Enel’s and Iberdrola’s power plants; Pemex’s exploration; and USMCA’s latest boost.




Last Week in a Minute or Less


Renewables & Electricity. Enel and Iberdrola cut the ribbon on power plants; and the CRE got back to work.


Natural Gas & Liquid Fuels. The Dos Bocas construction may start without an environmental report; Mexico and Central America wish for a connecting gas pipeline; and low sulfur diesel is on hold.


Oil & Gas Upstream. Pemex’s upstream maintenance is eating its development budget; Pemex will explore the Veracruz Basin and Tabasco’s shallow water; and MODEC awarded a contract for gas production to MAN Energy Solutions.


Money & Power. Mexico’s inflation is expected to break all records; Trump asked Democrats to pass USMCA; and the OECD has a positive outlook for Mexico’s economy.


Déjà vu all over again. Last week’s readers were particularly interested in the power market’s uncertainty (RTO Insider – English); CFE’s projects in Querétaro (El Economista – Spanish); and the Baker Institute’s shale evaluation (OGJ – English).



NAFTA Negotiation


China’s tensions helped North American trade. Mexico’s Deputy Foreign Minister said relations between the United States and China helped the US understand the importance of North American trade (Reuters – English). The deputy minister believes the end of the steel and aluminum tariffs will ease the ratification of the new deal.


Trump and Trudeau discussed tariffs and NAFTA. Canadian Prime Minister Justin Trudeau and President Donald Trump discussed steel and aluminum tariffs and the trade agreement signed between the two countries and Mexico (Reuters – English). They also discussed China and the USMCA.


The USMCA will not bring short-term economic growth. The Business Coordinator Board (CCE) warned that the USMCA ratification could take place during the summer and an improvement in growth will not arrive this year (El Economista – Spanish). The ratification will bring certainty to foreign investments and the country.


Trump asked Democrats to pass USMCA. President Donald Trump told Democratic congressional leaders to pass the replacement for NAFTA (Bloomberg – English). The White House and Democrats are discussing details, which has halted approval of the new NAFTA (Bloomberg – English).



The Road to Reform


Pemex’s upstream maintenance is impacting its development budget. Analysts said that the state-owned company’s increasing maintenance spending, reaching 54% of the total upstream budget, can limit its ability to develop new fields (Platts – English). The increase in maintenance costs can be seen in higher production costs in Pemex’s biggest oil fields.


The Dos Bocas construction may start without an environmental permit. The Security, Energy, and Environment Agency said that without an environmental impact report, the Dos Bocas construction cannot begin (El Financiero – Spanish). The Energy Minister argued that they are working with a report presented in 2012 that considered drilling in the area (El Financiero – Spanish).


The CRE got back to work. The Energy Regulatory Commission (CRE) approved nine permits that would amount to an investment of US$656.6m to generate 652MW (El Financiero – Spanish). The CRE had gone 80 days without sessions and had not handed out power, natural gas, or oil permits (El Economista – Spanish).


Low sulfur diesel regulations are still pending. Although the deadline to replace diesel with ultra-low sulfur diesel came and went, the Energy Ministry asked for a delay of a year. The low sulfur diesel produced in Pemex’s refineries amounts to 53% of the total diesel production, and its production has fallen 23% since 2015 (El Economista – Spanish).



Political Economy


ECLAC launched its development plan to stop Central American migration. The ECLAC secretary published the Development Plan for Mexico and Central America to boost the region’s economy (El Financiero – Spanish). President López Obrador asked his foreign minister to reach agreement with the US and Canada on support of the development plan to control migration (Reuters – English).


AMLO has high hopes for Pemex. President López Obrador pledged that Pemex’s debt will not increase (Reuters – English), while studying ways to cut the state-owned company’s tax burden (Reuters – English). Meanwhile, Pemex plans to increase oil production by 1 million barrels per day by 2024 (Reuters – English).


The industry sector managed expectations for 4% growth. The National Chamber of the Transformation Industry said Mexico needs legal and economic certainty to reach 4% growth. Although Canacintra recognized the importance of ending corruption, it is not enough to reach that growth level (El Financiero – Spanish).


The OECD has a positive outlook for Mexico’s economy. The Organization for Economic Cooperation and Development forecasted that Mexico’s economic activity will increase slightly in 2019, thanks to domestic demand (El Financiero – Spanish). The OECD advised Mexico to weigh the benefits and costs before starting construction of the Dos Bocas refinery (El Economista – Spanish).



Market Trends


Banxico kept rates, fearing high prices. Mexico’s central bank maintained the interbank rate at 8.25%, the highest level since 2008, fearing the effect of wage hikes on prices (Reuters – English). Banxico justified the decision, pointing to the uncertain domestic and international context with Pemex’s credit outlook and the US-China trade war (El Economista – Spanish).


Foreign investors trusted Mexico in the first quarter. Direct foreign investment increased 6.9% in the first quarter of 2019 compared to the same period in 2018 (El Financiero – Spanish). Foreign investment reached US$10.1bn and the most benefited sector was manufacturing.


Fitch is not satisfied with Pemex’s measures. The international rating agency said the financial package announced by the government was the right step but was still “very far” from meeting Pemex’s needs (Reuters – English). Pemex’s bank loan comes at a time when investors show uncertainty over the debt load of the state-owned company (Reuters – English).


Mexico’s inflation is expected to break all records. Analysts and economists estimate annual inflation for mid-May at 4.48% due to increases in certain agricultural and consumer goods (Reuters – English). Headline inflation is expected to drop by 0.25% thanks to subsidized summer electricity rates.



Strategy & Operations


Tampico will enjoy energy investments. Investments in Tamaulipas’ energy sector surpassed US$1.4bn and could grow in the next two years (El Financiero – Spanish). Oil platforms are being constructed and certain companies have received contracts from Pemex.


Pemex will explore the Veracruz Basin and Tabasco’s shallow water. The state-owned company will explore the foothill trend in the Veracruz Basin, which holds an estimated 1.5 billion barrels of oil equivalent (Platts – English). The CNH approved the Tenantli-1EXP well in the Amoca-Yaxche-06 assignment in the Cuenca Salina Basin (Platts – English).


Mexico and Central America wish for a connecting gas pipeline. The United Nations Economic Commission for Latin America and the Caribbean suggested that the construction of a natural gas pipeline connecting southern Mexico, Honduras, El Salvador, and Guatemala could be central to the development of the region (Platts – English).


Enel and Iberdrola cut the ribbon on power plants. Iberdrola started operations in the second combined-cycle plant in Nuevo León with an investment of US$450m (El Financiero – Spanish). In Tamaulipas, Enel announced the inauguration of the Salitrillos wind park with a 103MW capacity and US$150m (El Financiero – Spanish).


MODEC awards a contract for gas production to MAN Energy Solutions. MODEC of Japan assigned a contract to MAN Energy Solutions to supply six compressor trains for a floating production, storage, and offloading vessel in Area 1 offshore Mexico (OGJ – English). MAN will deliver the compressor trains for gas production on the FPSO.



Old School Social


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


The 5th Mexico Gas Summit is scheduled for May 29-30 at the Marriott Riverwalk in San Antonio, Texas.


The Mexican Energy Forum will be held June 4-5 at the W Mexico City, in Mexico City.


The Expo 2019 Eléctrica Internacional is scheduled for June 4-6 at Centro Citibanamex.


The Global Petroleum Show will be held June 11-13 at Stampede Park, in Calgary.



Lateral Thinking


Ice age creatures were found underwater in a Mexican cave. Divers discovered bones of a short-faced bear and wolf-like creature in an underwater cave in Mexico that lived there during the last Ice Age (LiveScience – English). The creatures were previously known only in South America.



Quote of the Week


“El pasado humano se llama Memoria. El futuro humano se llama Deseo.”


“The human past is called Memory. The human future is called Desire.”



– Carlos Fuentes Macías (1928-2012), Mexican writer.



We hope you have a productive week. Please send any news, comments, or new Ice Age creatures to


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