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November 16, 2020 edition—Total’s share; Mexico City’s solar panels; and 2021 oil rounds.
Last Week in a Minute or Less
Electric Power & Renewables. Mexico City government will regulate solar panels; the Finance Ministry considers public-private partnerships for CFE; and CFE will create rules for construction work.
Natural Gas Mid-Downstream & LNG. CFE has a plan for Mexico’s surplus gas; Sempra will soon make a decision on the Costa Azul plant; and Mexico will remain the US natural gas outlet.
Liquid Fuels Mid-Downstream. Mexico tries to protect Pemex’s share.
Oil & Gas Upstream. The Energy Ministry may reconsider oil rounds; Tabasco’s floods hit Pemex’s well; and Total handed over a 15% share in Mexican deep waters.
Government & NGO. Inflation reached 4.09% in October; Santander and BlackRock trust Mexico for investments; and the IMF is unhappy with Pemex’s business strategy.
Déjà vu all over again. Last week’s readers were particularly interested in French renewables’ investment (El Economista – Spanish); CRE’s approved permits (El Financiero – Spanish); and CFE’s payments for gas pipeline contracts (Platts – English).
Geopolitics & Trade
US Ambassador is sure the USMCA will be safe… The US Ambassador to Mexico, Christopher Landau, is confident the USMCA will be maintained, even if Vice President-elect Kamala Harris voted against it (El Financiero – Spanish). Landau said disputes will not disappear, but the new NAFTA provides a base to work from.
…and the USMCA will improve US-Mexico relations. Former Secretary of State for the Western Hemisphere Kimberly Breier expects the USMCA to allow US President-elect Joe Biden to improve the relationship between Mexico and the US (El Financiero – Spanish). Breier expects a continuity of the infrastructure, development, and connectivity projects developed by the previous administration.
Analysts expect changes in Mexico’s energy sector with Biden’s victory. With the victory of Joe Biden, analysts expect Mexico to adapt to a new economic reality with changes to energy and labor policy (El Financiero – Spanish). Biden promises to boost clean energies while President López Obrador bets on fossil fuels and coal.
The US and Mexico discussed the ex-defense minister’s arrest. US Attorney General William Barr spoke with Mexico’s Foreign Minister Marcelo Ebrard to lower bilateral tension arising from the US arrest of a former Mexican defense minister on drug charges (Reuters – English).
Political Economy
AMLO got a jump on the second infrastructure plan. President López Obrador assured that Mexico has recovered from the economic consequences of the COVID-19 crisis (El Economista – Spanish). AMLO also announced a meeting with the president of the business board to introduce the second infrastructure plan.
The IMF is unhappy with Pemex’s business strategy. According to the International Monetary Fund (IMF), the state-owned company needs to modify its business strategy and reform its governance (Platts – English). Pemex has kept its strategy mostly unchanged, even after the coronavirus pandemic, and will likely need additional budget support.
Inflation reached 4.09% in October. Inflation increased by 0.61% in October, reaching an annual rate of 4.09%, the highest rate since May 2019 (Proceso – Spanish). According to a Citibanamex survey, analysts expect inflation to end 2020 at 3.9% (El Financiero – Spanish).
Mexico is the new CAF member. Mexico was accepted as a full-fledged member of the Development Bank of Latin America (CAF), which gives credit to nations across the region (Reuters – English). CAF has provided financing to the Development Bank of Mexico, supporting the agricultural sector, the digitization agenda, and trade facilitation.
Legal & Regulatory
The Energy Ministry may reconsider oil rounds. Depending on the results of oil contracts handed to private companies, the Energy Ministry could consider new rounds after 2021 (El Economista – Spanish). Shale resources could be considered if fracking improves and environmental conservation is guaranteed.
The Finance Ministry considers public-private partnerships for CFE. The Finance Ministry is considering the participation of private companies with the state-owned company to compensate for 2021 budget cuts (El Financiero – Spanish). CFE will experience a 12% reduction in its budget.
CFE will create rules for construction work. The state-owned company will develop specific norms for its construction work to reduce corruption risks in the construction and purchase processes (El Financiero – Spanish). Up until now, the criteria for purchases were developed by public servants.
The Mexico City government will regulate solar panels. The capital’s Economic Development Ministry will develop a program to regulate solar panels (El Financiero – Spanish). According to the ministry head, there are bad installations, with solar panels facing north, under trees, etc.
Market Trends
Mexico tries to protect Pemex’s share. Mexico is helping the state-owned company keep its market share in the sale and distribution of fuels using anticompetitive practices (Platts – English) (El Economista – Spanish). However, panelists expect the market to slowly disappear as the global energy transition takes hold.
Gross fixed investment fell 16.6%. Gross fixed investment in Mexico fell 16.6% in August compared to the same period in 2019 (El Financiero – Spanish). The indicator built up 19 months of losses, its worst spell since 2000 and 2002.
Santander and BlackRock trust Mexico for investments. The president of Grupo Santander, Ana Botín, and the director of BlackRock, Larry Fink, assured that Mexico is one of the best countries for investment in the region (El Financiero – Spanish). According to Botín, while Europe’s growth slows, Latin America and the US have a growth blend and attractive markets.
Mexico will remain as the US natural gas outlet. According to NAmerico Energy Holdings LLC (NEH) President Jeff Welch, the development of Mexico’s natural gas market will be vital for US suppliers in the coming years (Natural Gas Intel – English).
Strategy & Operations
CFE has a plan for Mexico’s surplus gas. The state-owned company will launch two tenders to build two power generation plants powered by natural gas to use the surplus (El Financiero – Spanish). CFE also plans a cross-country pipeline and a liquefaction plant.
Tabasco’s floods hit Pemex’s well. The state-owned company’s CEO said bad weather and floods have affected the company’s wells in Tabasco (El Norte – Spanish). Just in Tabasco, the tropical depression Eta and cold weather have affected 100,000 people, with 8,000 people evacuated (Heraldo – Spanish).
Sempra will soon make a decision on the Costa Azul plant. The US energy company expects to make a final investment decision this year to build its Costa Azul liquefied natural gas export plant (Reuters – English). Sempra has been waiting for the export permit all year.
Total handed over a 15% share in Mexican deep waters. The National Hydrocarbons Commission (CNH) okayed the French company’s transfer of 15% of its shares to Qatar Petroleum International for exploration and production of two of its four contracts in the Gulf of Mexico (El Economista – Spanish).
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
Cementos Moctezuma will power up with solar. The company is investing US$10m in the installation and construction of a solar park to power up one of its plants in San Luis Potosí (Forbes – Spanish). The goal is to replace a percentage of the power purchased from CFE.
Quote of the Week
“La pasión verdadera que se llama amor no puede alojarse en corazones duros y rebeldes a todo buen sentimiento.”
“True passion that is called love cannot be hosted in hard hearts, rebellious to all good feelings.”
– Manuel Payno (1810-1894), Mexican writer.
We hope you have a productive week. Please send any news, comments, or solar solutions to MexicoWeekly@energynarrative.com.
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