November 5, 2018 edition—IEnova’s bet on lines; 17 completed wells; and Fitch’s outlook.
Last Week in a Minute or Less
Renewables & Electricity. Eólica del Sur may run into trouble; the CRE explained how telecom companies will use posts; and IEnova is considering a bet on transmission lines.
Natural Gas & Liquid Fuels. Mexico lacks the jet fuel to cover demand; the Finance Ministry killed the subsidy on Premium gasoline; and President Peña spent MXN23.5bn in oil hedges.
Oil & Gas Upstream. The CNH is disappointed with the number of completed wells; Idesa is after Round 3; and Oro Negro won the battle with its creditors.
Money & Power. The cancellation of the airport created commotion; Fitch changed Mexico’s outlook to negative; and the IDB and the OECD are working with the new government.
Déjà vu all over again. Last week’s readers were particularly interested in the structural changes in the Sener (El Financiero – Spanish); Odebrecht’s offer (Reuters – English); and the possible gas shortages in southern Mexico (Platts – English).
The CCE worries over how the NAIM cancellation may hit the USMCA. According to the Business Coordinator Board, the cancellation of the new International Airport of Mexico (NAICM) breaks different free trade treaties, including NAFTA. The legal infringement would be related to the guaranty for foreign investments, as the conditions when the investments were made have changed (El Economista – Spanish).
Lindsey Graham used the trade deal to menace Mexico over the caravan. Senator Lindsey Graham said that Mexico’s trade agreement with the US and Canada may be in danger if Mexico does not stop the caravan of migrants from Central America (Washington Examiner – English). The senator insisted the US Congress could make Mexico pay a price when the trade deal is to be approved.
Analysts expect the energy sector to remain the same with the USMCA. Experts do not expect any risks for the energy industry although the USMCA allows for the Mexican government to modify the constitution and the secondary laws of the Energy Reform (El Financiero – Spanish).
Bridgestone is happy with the USMCA…for the most part. Bridgestone considers the USMCA as an opportunity for investments and an increase in exports. The challenge would be to transform and substitute rubber from Asia, as the national production cannot provide for all the industry (El Economista – Spanish).
The Road to Reform
The CRE explained how telecom companies will use electricity distribution posts. The Energy Regulatory Commission published the administrative rules for the telecommunication industry to use the light posts of the national power system (DOF – Spanish). Companies would have to pay 100.84 pesos per CFE post (El Financiero – Spanish).
The CNH is disappointed with the number of completed wells. The National Hydrocarbons Commission (CNH) has found that only 17 wells out of the 138 wells awarded in the new rounds have been concluded, 12.31% progress (El Financiero – Spanish).
Idesa is after Round 3. Grupo Idesa expects the new government to increase hydrocarbon extraction in Mexico, helping out the national chemical industry (El Financiero – Spanish). Grupo Idesa plans to participate as a joint venture with Tonally Energía in Round 3 in 2019.
Peña spent MXN23.5bn in oil hedges. Mexico’s government spent MXN23.5bn in the third quarter of 2018 on oil hedges (El Financiero – Spanish). The team of President-elect López Obrador said the oil hedges program will continue during the new administration.
The IDB and the OECD are working with the new government. The Inter-American Development Bank is discussing 25 priority projects with the new government in which the organization and the government could cooperate (El Economista – Spanish). The OECD is proud and calm regarding the transition of government (El Economista – Spanish).
Illegal taps are killing people. Three people died due to a fire caused by an illegal tap in the Minatitlán-México pipeline (El Financiero – Spanish). Pemex may have reached a total of 40,000 illegal taps in the last six years through August (El Universal – Spanish).
The cancellation of the airport had consequences. President Peña Nieto said that if the new administration does cancel the airport, additional tax resources would be required (El Financiero – Spanish). After the cancellation vote, Pemex’s bonds fell (El Norte – Spanish) due to the concern that the state-owned company could be next.
Pemex’s union election may have been shady. Pemex workers said the union elections were controlled by people close to Romero Deschamps. The irregularities during the election were the registration of “unique workforces,” intimidation, the occupation of state headquarters, and the lack of security at the ballot box (El Financiero – Spanish).
The Finance Ministry killed the subsidy on Premium gasoline. Consumers buying premium gasoline will pay the complete special tax of 3.88 pesos per liter (El Economista – Spanish) now that the Finance Ministry eliminated the fiscal stimulus on the fuel. The Finance Ministry clarified that the decision does not mean an increase in final fuel prices.
The IEA expects OPEC to increase production. The International Energy Agency (IEA) said OPEC should increase oil production in the next meeting to soothe the market (World Oil – English) (El Financiero – Spanish). The US$10 per barrel drop in oil prices is welcomed, but is not enough (Platts – English).
Energy investors are concerned with the airport’s cancellation. Energy investors regard the cancellation of the airport as a “bad precedent” for investors, considering López Obrador’s opposition to the energy reform (Platts – English). López Obrador said he plans to change the constitution to make this type of referendum legal.
Mexico lacks the jet fuel to cover demand. National jet fuel production is falling and is 36.4% of the demand (El Universal – Spanish). External sales between October 1 and October 19 averaged 77,600 barrels per day, 72.2% of the national demand.
Fitch changed Mexico’s outlook to negative. The international rating agency changed Mexico’s outlook from stable to negative and maintained the BBB+ rating (El Financiero – Spanish) (Forbes – English). The cancellation of the airport, the possible stall on approved reforms, and the campaign promises of large investments are some of the reasons for the change.
Strategy & Operations
IEnova is considering betting on transmission lines and a fuel terminal. The Sempra subsidiary plans to participate in the tender for two major power transmission projects and a new marine terminal for refined products in Baja California Sur (Platts – English). The lines go from Ixtepec to Yautepec and from Hermosillo to Mexicali.
CFE powered up states affected by Willa. The state-owned company re-established power to 71% of those affected by Hurricane Willa in Durango, Michoacán, Nayarit, and Sinaloa (El Economista – Spanish). The hurricane affected 117,567 clients, 2.87% of the clients of the states.
GE focuses on Mexico’s power. General Electric (GE) will abandon its oil businesses to focus on aerospace and power generation, increasing its investments in the sectors in Mexico (El Financiero – Spanish). GE’s hydrocarbons will sell its shares to a company that offers services to oil companies.
Oro Negro won the battle with its creditors. The lawyers of Oro Negro stopped the embargo of five oil platforms (El Financiero – Spanish) in the Gulf of México and requested creditors to abandon the Decus platform. The next step would be to determine the total debt and to reorganize it.
Eólica del Sur may run into trouble. The indigenous community of Juchitán de Zaragoza, Oaxaca, demanded the Supreme Court of Justice invalidate the enquiry developed by the Energy Ministry and cancel the permits handed to Eólica del Sur to build the Megaproyecto Eólico (La Jornada – Spanish).
Old School Social
Events in the world beyond your screen—go see and be seen!
The Latin American LPG Seminar & Workshops will be held November 6-8 at the Hyatt Regency Mexico City.
Energy Storage North America is scheduled for November 6-8 at the Pasadena Convention Center in Pasadena, California.
The Residuos Expo will be held November 7-9 at Expo Guadalajara, in Guadalajara, Jalisco.
The S&P Global Platts 22nd Annual Mexican Energy Conference is scheduled for November 8-9 at the St. Regis Mexico City Hotel. This conference is the leading event for Mexico’s energy industries. Meet with senior officials, regulators, and entrepreneurs and learn the latest about Mexico’s energy reforms. For more information, including a full agenda and confirmed speaker line-up, visit www.platts.com/mexicanenergy.
The XLII Semana Nacional de Energía Solar is scheduled for November 12-16 at the Palacio de Minería in Mexico City.
A secret chamber was found in the Pyramid of the Moon. A hidden tunnel leads to a 15-meter wide chamber within the structure of the Pyramid of the Moon (IFL Science – English). The tunnel is located to the south of the Luna square, but there may be another entrance to the east side.
Quote of the Week
“Ya es tiempo de que los prejuicios acaben, de que la sociedad se establezca sobre bases más sólidas, más naturales, más sabias, más justas y más nobles.”
“It is time to end prejudices, time for the society to establish more solid, more natural, wiser, more just, and more noble bases.”
-Francisco “Pancho” Villa (1878-1923), Mexican revolutionary general.
We hope you have a productive week. Please send any news, comments, or secret chambers to MexicoWeekly@energynarrative.com.
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