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November 2, 2020 edition—Siemens’ solar financing; possible farmouts; and maybe another LNG terminal.
Last Week in a Minute or Less
Electric Power & Renewables.
Siemens offers financing for solar; CFE is considering a new nuclear plant; and Jalisco and the British embassy will boost renewables.
Natural Gas Mid-Downstream & LNG. US natural gas keeps crossing the border; and IEnova may consider a second LNG terminal.
Liquid Fuels Mid-Downstream. Pemex lost almost 40% of the gas stations; Nuevo León’s energy cluster denounced the illegal fuel market; and Mexico’s oil deficit with the US hit a new record.
Oil & Gas Upstream. The Energy Minister is open to farmouts.
Government & NGO. The USMCA brought US$5.74bn in investments; AMLO may expand the border-free zone to the South; and AMLO asked Banxico to cut rates.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s LNG Market (Natural Gas Intel – English); LPG regulation (El Financiero – Spanish); and Iberdrola’s future in Mexico (Forbes – Spanish).
Editor’s note: Last week’s blurb on gas regulation (“The LNG sector asked for flexible regulation.”) incorrectly focused on LNG when, in fact, the article was about LPG regulations. We apologize for the error.
Geopolitics & Trade
France’s investors have Mexico in sight. French companies in Mexico (Concamin) are looking “to increase or even double” their investments through strategic alliances in the auto, technology, energy, and cybersecurity sectors” (El Economista – Spanish). Concamin emphasized the benefits of Mexico as a strategic partner in North America.
The USMCA brought US$5.74bn in investments. According to the Energy Ministry, since July 1, the new NAFTA has brought US$5.74bn in new foreign investments (El Financiero – Spanish). If this tendency continues, the USMCA agreement will bring approximately US$14bn in its first year.
The USMCA secures equal energy ground. The new NAFTA guarantees economic competition between Pemex, CFE, and private competitors (El Economista – Spanish). The recent limitations to investments in renewables may be reviewed by dispute resolution panels.
Political Economy
The IMF trusts Mexico’s finances. The International Monetary Fund (IMF) expects Mexico’s public finances to remain healthy even if the country does not develop a new tax reform, despite the 9% economic contraction in 2020 and the recovery forecast for 2021 (El Economista – Spanish).
Mexico’s economy grew 1.1% in August from July. According to the national statistics agency (INEGI), Mexico’s economy grew more slowly than expected in August, growing 1.1% month-on-month in seasonally adjusted terms (Reuters – English) (El Economista – Spanish). The economy contracted 9.4% from August of 2019.
AMLO may expand the border-free zone to the South. President López Obrador said that the Northern border-free zone program will be broadened to the Southern border (El Financiero – Spanish). The program includes more than 40 border municipalities in Baja California, Sonora, Chihuahua, Coahuila, Nuevo León, and Tamaulipas.
AMLO asked Banxico to cut rates. President López Obrador said that the central bank should cut interest rates further to reactivate the economy (Bloomberg – English). The president’s directive is unusual as the bank is considered autonomous per the constitution.
Legal & Regulatory
US lawmakers do not like AMLO’s energy policy. A group of US state senators accused Mexico of slowing US energy investments to benefit Pemex, violating the spirit of the new NAFTA (Platts – English) (El Economista – Spanish). AMLO answered that the government’s energy policy will continue its focus on Pemex’s recovery (El Economista – Spanish).
The Supreme Court stopped the Sener’s energy policy. The Supreme Court confirmed its decision to halt the Sener’s new policy (El Economista – Spanish). President López Obrador answered the decision by pledging to promote a constitutional reform for the energy sector (El Economista – Spanish).
Coparmex warned AMLO’s new rules on energy could bring trouble. Mexico’s Business Confederation (Coparmex) warned that the actions taken by President López Obrador’s government in the energy sector could unchain lawsuits with costs worth millions to the country (Proceso – Spanish).
CCE will announce more infrastructure projects in November. The Business Coordinator Board (CCE) said a second plan to invest in infrastructure will be announced in November (Proceso – Spanish). The CCE also signed a 10-point agreement emphasizing the president’s commitment to respect norms.
AMLO criticized the opening of the energy market. President López Obrador said the need to open the electric energy market was a “sophism” used by previous administrations (El Financiero – Spanish). Energy Minister Rocío Nahle said no new oil rounds were opened because “there are no results from the previous ones” (El Financiero – Spanish).
The Energy Minister is open to farmouts. Mexican Energy Minister Rocío Nahle said farmouts could be done with Pemex if feasible projects are presented (Reuters – English) (El Financiero – Spanish). However, Nahle said Pemex would ultimately decide on partnerships with other companies to boost its funding.
CFE wants to renegotiate power transmission with private companies. The state-owned company is planning to renegotiate the power purchase and transmission contracts with private companies because they are disadvantageous to the State (El Economista – Spanish). The CFE lost MXN8bn due to the subsidy offered to homes during the COVID-19 pandemic (El Financiero – Spanish).
Market Trends
US natural gas keeps crossing the border. US exports of natural gas to Mexico, mostly through pipelines, have increased in 2020, displacing LNG imports (World Pipelines – English). In August, the industrial sector in Mexico consumed an average of 10% more natural gas.
Mexico’s oil deficit with the US hit a new record. Mexico has become the first export market for US refiners, reaching historic values for over US$34bn (El Economista – Spanish). The data contrasts with the 15.5% export decline toward the Northern border.
Pemex lost almost 40% of Mexico’s gas stations. Four out of every 10 gas stations in Mexico have left Pemex’s brand for a private brand (Forbes – Spanish). Among the 12,713 gas stations that operate in the country, 61%, or 7,772 belong to the state-owned company’s brand.
Nuevo León’s energy cluster denounced illegal fuel markets. The Energy Minister recognized there is a problem with the high taxes on fuel sales, which boosts an illegal fuel market (El Financiero – Spanish). Nuevo León’s energy cluster estimates that there are at least five companies devoted to importing fuel illegally.
Strategy & Operations
IEnova may consider a second LNG terminal. IEnova may help the state-owned company CFE increase its transport capacity at the national grid by developing a natural gas liquefaction terminal (Platts – English). IEnova did not mention concrete discussions about a terminal.
Jalisco and the British Embassy will boost renewables. Jalisco’s Energy Agency and the British Embassy signed a declaration to boost strategic alliances and financial products to develop projects in the energy sector (El Economista – Spanish). Jalisco could learn from Great Britain’s experience and practices.
Siemens offers financing for solar. Siemens Mexico offers Power Purchase Agreements to clients, selling power to users onsite together with energy storage, energy efficiency, and corresponding studies (PV Magazine – Spanish). Siemens pledged to be carbon-neutral by 2030.
CFE is considering a new nuclear plant. The state-owned company is analyzing the construction of a nuclear plant in the Baja California Peninsula (El Financiero – Spanish). Energy Minister Rocío Nahle argued that nuclear energy is “the cleanest, most constant” energy, and technology has advanced a lot.
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 Mexico was postponed from March 24-26 to November 18-20 at Centro Citibanamex.
The Mexican Energy Forum is rescheduled for November 17-18 in Mexico City.
2nd Edition of Shallow and Deepwater Mexico was postponed to February 16-18, 2021, at Ciudad del Carmen, Campeche.
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.
Lateral Thinking
The Senate killed more than 100 trust funds. The Morena Party pushed legislation through the Senate to eliminate 109 semi-independent government trust funds that finance everything from science to disaster relief (AP News – English). The Senate voted to end the trusts and have the government directly administer the money.
Quote of the Week
“Solo lo absoluto merece el acompañamiento de la eternidad.”
“Only the absolute deserves the company of eternity.”
– José Vasconcelos (1882-1959), Mexican writer, philosopher, and politician.
We hope you have a productive week. Please send any news, comments, or disaster solutions to MexicoWeekly@energynarrative.com.
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