The Weekly Brief: Mexico


November 22, 2021 edition—Natural gas storage; the reform debate; and Mexico’s gas flaring.




Last Week in a Minute or Less


Electric Power & Renewables. Morena still expects PRI’s support for the power reform approval; Iberdrola powers up coffee; and MPC Energy bought Los Santos Solar I.


Liquid Fuels Mid-Downstream. Pemex put out a fire in the Cadereyta refinery.


Natural Gas Mid-Downstream & LNG. Veracruz’s salt dome natural gas storage may go ahead.


Oil & Gas Upstream. Markets will end Mexico’s flaring.


Government & NGO. Banxico increased the interest rate to 5%; and Fitch ratified Mexico’s rating at BBB- stable.


Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s concerns with the natural gas market (Natural Gas Intel – English); the Supreme Court’s decision (El Financiero – Spanish); and US lawmakers’ opinion on the power reform (El Economista – Spanish).



Geopolitics & Trade                            


US lawmakers accused AMLO of discrimination. Approximately 40 lawmakers asked the Biden administration to double the efforts to pressure the Mexican government to secure a level playing field for US companies in the country (El Economista – Spanish).


The federal government will review the USMCA corridor. The project is being promoted by its architects to receive the okay from the federal government (El Financiero – Spanish). Caxxor Group is happy with the support received from the Senate.


Biden will face AMLO and Trudeau’s opposition to the EV cars plan. In their meeting, the leaders of the US, Canada, and Mexico discussed the tax loans for electric vehicles proposed by the US president (El Economista – Spanish). Both Canada and Mexico want a level playing field in the competition to attract companies to build auto plants.


Mexico and Canada discussed energy before the meeting. Mexico’s foreign minister and his Canadian counterpart discussed energy, migration, and the Nicaraguan elections (Forbes – Spanish). Both leaders discussed the importance of trade and investment between the nations.



Political Economy


Banxico increased the interest rate to 5%. Mexico’s central bank increased the interest rate of reference, and further increases are expected by 2022 (El Financiero – Spanish). Banxico increased its inflation forecast in the short term.


The 2022 economic package will not boost the economy. According to the expert team from the Mexican Institute of Finance Executives (IMEF), the economic package for 2022 will not reactivate the Mexican economy (El Financiero – Spanish). Although it secures resources for public investment, there is a lack of confidence and legal certainty in the package.


Fitch ratified Mexico’s rating at BBB- stable. The international rating agency ratified the country’s sovereign rate in BBB- with a stable outlook (El Economista – Spanish). The rating remains at the lowest level of investment grade since April 2020.


The World Bank declared Mexico the third global remittance receiver. According to the World Bank, Mexico will become the third-biggest remittances receiver in the world, after India and China, receiving US$52.7bn (El Economista – Spanish).



Legal & Regulatory


Concamin warned the power reform will be expensive. The Conference of Industrial Chambers assured the power reform will create a monopoly as 46% of power generation will be controlled by the state-owned company (El Financiero – Spanish). The reform will cost Mexican families MXN60bn.


Morena still expects PRI’s support for the power reform approval. The Morena coordinator at the House of Representatives expects the opposition party PRI to vote in favor of the power reform proposed by President López Obrador (Forbes – Spanish).


Fitch warns of the power reform consequences. According to the international rating agency, the proposed energy reform would cause chaos for private power generators as their supply contracts with non-state offtakers would be canceled (Natural Gas Intel – English).


Morena, PVEM, and PT sing the power reform praises. The 277 Morena, PT, and PVEM lawmakers will walk the streets boosting the power reform (Forbes – Spanish). During the gatherings, lawmakers will explain what the power reform entails.



Market Trends


Foreign investment left the country. Between January and November 2021, approximately MXN266bn in foreign investment left due to monetary policy, high inflation, and reforms that generate uncertainty (El Financiero – Spanish). In the last two years, Mexico has lost more foreign investment than any other country in the world.


The CRE published the power tariffs for November. The Energy Regulatory Commission set the tariff for basic supply for November 2021 (DOF – Spanish). The publication includes the prices for each division of the country.


Markets will end Mexico’s flaring. According to Commissioner Jim Wright of the Railroad Commission of Texas, Mexico’s natural gas flaring needs to be solved by improving markets as “a sustainable natural gas market will eliminate waste and most needs to flare” (Natural Gas Intel – English).



Strategy & Operations


AMLO will not use coal. The state-owned company CFE said no more plants working with coal or fuel oil will be built (El Financiero – Spanish). AMLO assured the investment in Tula is to transform fuel oil into gasoline (El Economista – Spanish).


Pemex put out a fire in the Cadereyta refinery. The state-owned company put out a fire in a cooling tower at the Cadereyta refinery in Nuevo León that was being dismantled (Expansión – Spanish). The dismantling is back on track, and no personnel or production has been affected by it.


Veracruz’s salt dome natural gas storage may go ahead. The Mexican government is advancing plans for strategic natural gas storage and considering building a salt dome storage facility in Veracruz (Natural Gas Intel – English). The project would have the capacity to store 6 Bcf/d of natural gas.


CFE argues it is greener than private companies. The state-owned company said that between January and September, 37.52% of its power generation came from clean energies while the private sector generated 20.3% from those sources (El Financiero – Spanish).


Iberdrola powers up coffee. The Spanish company cut the ribbon on the new solar system that will provide 80% of the power needed by the LDC coffee plant in Perote, Veracruz (Forbes – Spanish). The plant will generate 251MWh per year.


MPC Energy bought Los Santos Solar I. The company acquired a 15.8-MWp operational solar photovoltaic (PV) plant located in the northern state of Chihuahua (Renewables Now – English). MPC Energy has also signed a right of first refusal agreement with the project developer.



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!)


Encuentro Internacional de Energía México is scheduled for November 24-25.


Mexico Assembly will be held in May 2022 in Mexico City.



Lateral Thinking


Oxxo will save on the power tariff with natural light. Oxxo announced a new model of shops that incorporates domes to take advantage of natural light (El Financiero – Spanish). Together with efficient lighting, Oxxo will save 50% on its power tariffs.



Quote of the Week


“Las cosas discretas, amables, sencillas; las cosas se juntan como las orillas.”


“Discrete, kind, simple things; things come together like shores.”



– José Gorostiza (1901-1973), Mexican poet, educator, and diplomat.




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