November 1, 2021 edition—Ultra-low sulfur diesel; MPL’s progress; and CFE’s 16 new plants.
Last Week in a Minute or Less
Electric Power & Renewables. One year has passed since CRE’s last permit; Bartlett promised 16 new plants; and Chiapas, Veracruz, and Guerrero will have new solar systems and transmission lines.
Liquid Fuels Mid-Downstream. Ultra-low sulfur diesel rule postponed to 2025; and LP gas prices went down at last.
Natural Gas Mid-Downstream & LNG. MPL makes progress in its LNG project.
Oil & Gas Upstream. Pemex is investing in Tabasco.
Government & NGO. The World Bank promotes green hydrogen in Latin America; BBVA lowers Mexico’s growth forecast to 6%; and Mexico’s economy grew 5% in September.
Déjà vu all over again. Last week’s readers were particularly interested in Tamaulipas’ energy policy (El Economista – Spanish); USMCA’s conflict with the power reform (El Financiero – Spanish); and the import permits for the chemical industry (El Financiero – Spanish).
Geopolitics & Trade
US and Canadian companies are ready to sue. The Coparmex said the USMCA forces Mexico to compensate US and Canadian companies if the power reform is approved (El Financiero – Spanish). If Mexico does not do it, private companies are ready to sue and win.
Mexico will seek arbitration to fix the auto dispute. Mexico plans to seek arbitration to resolve a dispute with the US over the interpretation of rules of origin in the automotive industry (Reuters – English) (Excelsior – Spanish). Mexico favors a more flexible interpretation of the auto industry regulations than the US.
US EV tax credit may run afoul of the USMCA terms. The Biden Administration proposed an EV tax credit for American-made vehicles that could run afoul of the terms in the USMCA (Reuters – English). Canada believes the tax would have a major adverse impact on the future of EV and automotive production in Canada.
BBVA lowers Mexico’s growth forecast to 6%. BBVA México reduced its GDP growth forecast for 2021 from 6.3% to 6.0%. For 2022, the growth forecast increased from 3.0% to 3.2% (El Economista – Spanish).
AMLO believes inflation will decrease soon. President López Obrador assured the increase in inflation levels is transitory after Inegi showed the inflation data for the first two weeks of October, boosted by an increase in power tariffs and LP gas prices (El Economista – Spanish) (El Financiero – Spanish).
Mexico wants to cut its IMF credit line. Mexico and the International Monetary Fund (IMF) are discussing a plan to reduce the US$63bn credit line by 20% when it is renewed in November (El Financiero – Spanish).
Mexico’s economy grew 5% in September. In September, the Mexican economy grew 5%, recovering the growth rhythm after losing steam in the second quarter (El Economista – Spanish). Trade and services boosted the national economy thanks to the reopening of leisure activities.
The World Bank promotes green hydrogen in Latin America. According to the World Bank, green hydrogen production and exports could boost the economy of Latin America and the Caribbean, which were hit by the COVID-19 crisis (El Economista – Spanish). Hydrogen can become an alternative to fossil fuels.
Legal & Regulatory
The ultra-low sulfur diesel rule was postponed to 2025. According to the Environment and Natural Resources Ministry, Mexico postponed for three years the rule to construct and import only trucks and buses that use ultra-low sulfur diesel as there is not enough of the fuel available (El Economista – Spanish).
One year has passed since CRE’s last permit. The Energy Regulatory Commission (CRE) has spent one year without awarding permits to private companies to generate electric energy (El Financiero – Spanish). The CRE has denied five permits to generate power in the last sessions.
AMIF warned lawmaker about distributed generation. The Mexican Association of Solar Industry (AMIF) warned that the power reform will concentrate control over the national grid in the CFE, and that would affect the private sector’s participation in distributed generation (PV Magazine – Spanish).
The power reform could affect the 2022 budget. The 2022 Expenditure Budget Project ignores the expenses associated with the power reform and, if it is approved, the proposed budget would not add up (El Economista – Spanish). Compensation for private companies if the reform is approved could cost US$85bn.
Coparmex warned 12,000MW could be expropriated. The business confederation (Coparmex) warned that 12,000MW of clean energy is at risk of being indirectly expropriated with the power reform. The business sector believes foreign companies will sue Mexico if the reform is approved (Forbes – Spanish).
A former CRE head said regulators and dictators do not match. According to Francisco Salazar, former president of the Energy Regulatory Commission (CRE), “Only in communist countries with dictators are there no regulators” (El Financiero – Spanish).
The menace of the reform is killing investment. According to the International Chamber of Commerce, the new power reform proposal has made companies stop investing in the country (El Financiero – Spanish). Companies are moving their investments to Central America and South America.
LP gas prices decreased at last. The average price of LP gas in Mexico went down 42 cents, breaking the streak of six weeks with increases (El Economista – Spanish). Gas Bienestar prices increased 16% during the two months of its operation (El Financiero – Spanish).
The Finance Ministry will help drivers. The Finance Ministry increased the fuel subsidy amount slightly (El Financiero – Spanish). Regular gasoline received 85.81% in subsidies, an increase of 3.34% in the incentive.
CFE promises to offer just one tariff. The general director of the state-owned company (CFE) said that if the power reform is approved, a single tariff will be implemented for the entire country, and lower prices will be guaranteed (Forbes – Spanish).
Strategy & Operations
CFE will bet on El Sauz power plant. The state-owned company will invest millions of dollars in the Pedro Escobedo municipality to strengthen the combined cycle power plant located there (Excelsior – Spanish). Querétaro needs substations to access the power passing through the state’s transmission lines.
Private sector wants a greener Mexico. Considering the positioning for the COP26, the head of the Coordinating Business Council said the private sector wants to develop new sustainable models, including a transition to renewable energies (El Financiero – Spanish).
Pemex is investing in Tabasco. The state-owned company delivered equipment in Tabasco to improve public security. Pemex has increased its exploration and production projects in the state in the last three years and expects an increase in investments by 2022 (Pemex – Spanish).
Bartlett promised 16 new plants. The head of the CFE pledged to add 16 new plants that will contribute 8,600MW to today’s installed capacity (El Economista – Spanish). Project construction is in progress, and six plants are up for bidding.
MPL makes progress in its LNG project. Mexico Pacific Ltd. (MPL) continues to advance its LNG export project for the Pacific coast of the country (Natural Gas Intel). The company signed a collaboration agreement with ConocoPhillips LNG Licensing LLC and Bechtel.
Mexico City’s subway and water could be hit by the power reform. According to the Coparmex, if self-generation contracts are canceled with the power reform, Mexico City’s water system will be affected by a cost increase that will be passed to its users (El Economista – Spanish).
Governors, the US ambassador, and companies met. Governors of the Southern states met with Ken Salazar, US ambassador to Mexico, and Mexico’s Foreign Affairs Minister Marcelo Ebrard to discuss an investment of US$25bn in the region between 2022 and 2024 (PV Magazine – Spanish).
Chiapas, Veracruz, and Guerrero will have new solar systems and transmission lines. The Energy Minister Rocío Nahle announced isolated systems with solar panels in Guerrero, Chiapas, and Veracruz (PV Magazine – Spanish). The CFE has three transmission line projects.
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!)
Solar Power is scheduled for November 9-11 in Mexico City.
Mexico Assembly will be held in May 2022 in Mexico City.
Mexico is thinking about a massive solar panel border wall. The Mexican Board of Energy proposed a solar stripe along the 2,000km border that Mexico shares with Texas (El Financiero – Spanish). The project could generate 8,404.2MW, covering more than 20,000 hectares in solar panels.
Quote of the Week
“El espectáculo raro, para quien por primera vez lo mira, de la multitud incontable de lagartos que se agrupa debajo del puente, como esperando algún desliz de la mula para tragarse al jinete.”
“The weird spectacle, for someone who sees it for the first time, of the multitude of lizards that group under a bridge, as if waiting for some slip of the mule to eat the horseman.”
– Alfredo Chavero (1841-1906), Mexican archaeologist, politician, poet, and dramatist.
We hope you have a productive week. Please send any news, comments, or border wall plans to MexicoWeekly@energynarrative.com.
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