The Weekly Brief: Mexico


May 7, 2018 edition—Tamaulipas’ wind; Round 3.2 postponed; and NAFTA in May?




Last Week in a Minute or Less


Renewables & Electricity. Discovery Management will build a wind park in Yucatán; Tamaulipas will open three wind parks this year; and IUSA won the CFE’s meter auction again.


Natural Gas & Liquid Fuels. Pemex runs steam crackers at full steam; and oil giants will sell jet fuel to ASA.


Oil & Gas Upstream. The CNH put off the Round 3.2 ruling; Pemex plans to produce more crude oil; and the CNH will offer seven farmouts.


Money & Power. AMLO would respect NAFTA; Mexico grew 2.4% in the first quarter; and Banxico will cut interest rates in 2018 if inflation drops.


Déjà vu all over again. Last week’s readers were particularly interested in Siemens and Cemex’s alliance (El Financiero – Spanish); Alpek’s sale of cogeneration plants (Reforma – Spanish); and plans to connect pipelines (El Norte – Spanish).



NAFTA Negotiation


A NAFTA agreement could not be reached before the US government’s trip to China. The NAFTA partners are speeding up efforts to reach a tentative deal while the US gets ready for negotiations with China (Bloomberg – English). The push has come up short despite progress on key issues, postponing meetings until after the US trade trip to China (Bloomberg – English).


AMLO would respect NAFTA. The front-runner in Mexico’s presidential elections would respect the renegotiated and modernized NAFTA (WSJ – English) if Canada, Mexico, and the US reach a deal before the elections. AMLO would not reopen talks to renegotiate chapters already agreed on.


Mexico asked for creativity and flexibility on NAFTA negotiations. Mexico’s Economy Minister said the NAFTA renegotiation needed creativity and flexibility from Canada, Mexico, and the US (Reuters – English). US Trade Representative Robert Lighthizer said that if a deal cannot be reached in three weeks, approval by the US Congress could be in danger (Reuters – English).


Lighthizer expects a NAFTA deal in May. US Trade Representative Robert Lighthizer wants to reach a deal on NAFTA in the coming weeks (Bloomberg – English). Canada said there was a lack of progress on key issues.


The White House delayed tariffs for some allies. The Trump administration delayed the decision to impose steel and aluminum tariffs on Canada, the European Union, and Mexico for another 30 days (NYT – English). The administration is worried that European Union nations might retaliate on American products.



The Road to Reform


The CNH will offer seven farmouts. The National Hydrocarbons Commission approved the bidding bases for seven farmouts with Pemex to explore and extract oil in fields or clusters in onshore fields. The presentation will be on October 31, 2018 (El Economista – Spanish), and Pemex will have 45% of the contracts.


The CNH put off the Round 3.2 ruling. The National Hydrocarbons Commission (CNH) postponed the receipt of proposals by two months to coincide with Round 3.3 (El Economista – Spanish). Both rounds will now take place on September 27.


IUSA won the CFE’s meter auction, again. The state-owned company followed the OECD’s recommendations for the meter auction. Nonetheless, IUSA, under investigation for simulating competition, won again (El Economista – Spanish), against four other companies. Only Electrometer de las Américas, IUSA, and Controles y Medidores Especializados (CONYMED) met the technical criteria.


The Sener wants a clean-powered Mexico by 2034. The Energy Minister plans to reach the goal of generating half of all power from clean energy 16 years sooner than expected (Platts – English). The country’s current clean energy certificate policy would achieve the goal by 2050.


Oil giants will sell jet fuel to ASA. The Energy Regulatory Commission handed 78 permits to import gasoline to companies such as BP, CFE Glencore, Noble, Shell, Tesoro, Total, Trafigura, Valero, and Vitol to supply jet fuel to national and international airlines. The 78 permits amount to 51,079 million liters of jet fuel (El Universal – Spanish).



Political Economy


Mexico grew 2.4% in the first quarter. The Mexican economy expanded by 2.4% in the first quarter (El Economista – Spanish) compared to the same period in 2017. The primary sector propelled the economy with 5.1% growth.


CFE saw lower income under its new tariff structure. The state-owned company reported a loss of MXN11.4m due to an increase in operational costs (El Economista – Spanish). CFE’s income during the first quarter was MXN93.1bn, a 5% reduction, amounting to MXN5bn less (El Economista – Spanish).


Pemex’s employees under attack in Matamoros. Two Pemex security agents were shot down in Matamoros, Tamaulipas, when traveling in an official vehicle locating illegal taps (El Universal – Spanish). One agent died, while the other was hurt after someone firing a shotgun hit the vehicle 60 times.


Elections get closer and alliances surge. Independent candidate Margarita Zavala will not ask for the “useful vote” like Ricardo Anaya and will not unite with the other candidates against Andrés Manuel López Obrador (El Financiero – Spanish). Zavala holds opposing views to AMLO regarding free trade and the defense of private property rights.



Market Trends


Pemex plans to produce more crude oil. The state-owned company expects to end 2018 producing 1.98 million b/d of crude oil, 140,000 b/d above March’s reported production and achieving its annual production goal of 1.951 million b/d (Platts – English). Pemex will reactivate almost 200 onshore wells.


Banxico will cut interest rates in 2018. Even if AMLO wins the presidential election, Mexico’s central bank plans to lower interest rates in 2018, with a possible reduction in inflation (El Financiero – Spanish). The Morena candidate’s possible victory was considered a risk factor, but not anymore.


Mexico spent more than expected on its debt. Mexico’s government continues devoting more resources to financing its debt, with a 17.4% increase in the first quarter of 2018 (El Economista – Spanish). The Finance Ministry spent MXN125bn, above the MXN123.5bn programmed in the first quarter budget.


Mexico’s banks suffered a cyberattack. Banxico asked banks to take emergency measures to protect the electronic payment network after a suspected cyberattack affected transfers (Bloomberg – English). Connections to the central bank’s payment system at two banks and a brokerage (Reuters – English) were compromised but no funds were stolen.



Strategy & Operations


Discovery Management will power up Yucatán… Discovery Management started the documentation to obtain an environmental permit to build the Kabil wind park in the Buctzotz municipality. The project would receive an investment of MXN1.4bn for 68MW of generation capacity (El Economista – Spanish), thanks to 34 wind generators.


…and Tamaulipas will cut the ribbon on three wind parks. This year, three wind parks will be opened in Tamaulipas, with investments of almost MXN1bn (El Financiero – Spanish). Acciona will open the 183MW El Cortijo farm, Enel will start up the 93MW Salitrillos plant, and Zuma will inaugurate its 424MW wind farm.


Pemex runs steam crackers at full steam. The state-owned company is running its steam crackers at 100% (Platts – English), and plans to increase its polyethylene production rate over the next two months. The increase in production coincides with planned maintenance work in mid-May by Braskem-Idesa.


The first privately funded solar park is in operation. The first solar farm developed with 100% private capital is operating in Hermosillo and will power up the Ford Motor Company plant (El Financiero – Spanish) located in the city. With a US$45m investment from US and Spanish capital, the plant will light up the streets in Empalme and Hermosillo.



Old School Social


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



NAWTEC 2018 will be held on May 14-16 in Lancaster, Pennsylvania.


The 3rd Annual Mexico Electric Power Market Conference is scheduled for May 16 at the Presidente InterContinental in Mexico City.


MIREC will be held on May 21-24 at the World Trade Center in Mexico City.


The La Joya Energy Conference is scheduled for May 23-24 at the Hilton La Jolla in California



Lateral Thinking


Mexico’s kangaroo rat resurfaced after 30 years. The last time a kangaroo rat was seen was more than 30 years ago in Baja California, but four were found in biologists’ survey traps in 2017 (Science Mag – English). Thousands of kangaroo rats once lived in the coastal valley along the Pacific coast of northern Baja California.



Quote of the Week


“Servirse de la ciencia y de la técnica con un profundo espíritu humanista, conducirlas, encauzarlas hacia el bienestar y la paz, es la tarea fundamental de nuestra época.”


“To use science and technology with a deep humanist spirit, to drive them, to channel them towards well-being and peace, is the fundamental goal of our age.”


-Guillermo Haro (1913-1988), Mexican astronomer.



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