The Weekly Brief: Mexico


November 26, 2018 edition—Five new drilling plans; TransCanada’s halt; and Asolmex in NL.




Last Week in a Minute or Less


Renewables & Electricity. Asolmex is into Nuevo Leon’s solar; the CRE hit the gas on permit processes; and Mexico really needs natural gas.


Natural Gas & Liquid Fuels. TransCanada stopped the Tuxpan-Tula pipeline; Pemex trusts LNG demand in Mexico; and the Cemda said the new refinery is illegal.


Oil & Gas Upstream. The CNH okayed five drilling plans; rounds may go slower; and Talos Energy contracted McDermott for the Zama field development.


Money & Power. The OECD trusts Mexico’s growth; US tariffs may be lifted after the USMCA’s signing; and AMLO will hold a new public consultation.


Déjà vu all over again. Last week’s readers were particularly interested in the fourth power auction (El Economista – Spanish); DeAcero and Fisterra’s project (El Financiero – Spanish); and the rules for power gas stations (Forbes – Spanish).



NAFTA Negotiation


Trudeau will work with China despite the USMCA. Prime Minister Justin Trudeau said Canada and China will work on a free trade deal (Reuters – English). The North American Free Trade Agreement (NAFTA) specifies that if a partner enters a free trade deal with a “non-market” country, the others can quit in six months.


Automakers are concerned with US tariffs. US automakers warned that US steel and aluminum tariffs could undermine the benefits of the new NAFTA, causing job losses (Reuters – English). Several automotive trade groups fear Trump’s threatened car tariffs will allow Canada and Mexico duty-free auto import quotas.


Republican senators want to push the new deal this year. Twelve US Republican Senators encouraged President Trump to submit the deal before Democrats take control of the House of Representatives (Reuters – English). The senators worry that approval of the deal without changes will be more difficult next year.


Tariffs may be lifted after the deal’s signing. The Mexican ambassador to the US expects Washington to lift steel and aluminum tariffs against Mexico after Canada, Mexico, and the US sign the new agreement. The ambassador expects at least “a very clear track that gives enough certainty that a solution is coming” (Reuters – English).



The Road to Reform


The CNH okayed five drilling plans. The National Hydrocarbons Commission (CNH) approved drilling plans for five projects with a promised investment of US$380m (El Financiero – Spanish) (Reuters – English). The plans are part of more than 100 oil and gas contracts awarded by the CNH since 2015.


Rounds may go slower. The president of the National Hydrocarbons Commission said the rhythm of oil rounds will slow down, focusing more on contract management (El Financiero – Spanish).


Nahle rejected pressuring regulators. The next Energy Minister, Rocío Nahle, denied putting pressure on the heads of the Energy Regulatory Commission (CRE) and the National Hydrocarbons Commission (CNH). Nahle said the CNH head quit to apply for another job (Reforma – Spanish).


The Energy Ministry published the rules for radioactive sources. The National Commission of Nuclear Security and Protection established rules for low sources of ionizing radiation to be exempt from high controls and regulations (DOF – Spanish). The publication sets the exemption specifications and criteria.


The CRE hit the gas on permit processes. The Energy Regulatory Commission approved new criteria to regulate permits in the power, oil, natural gas, and LP gas markets. With the new rules, the administrative processes will be cut short, from 90 days to 30 days (Gob – Spanish).



Political Economy


The Cemda said the new refinery is illegal. The Mexican Center of Environmental Law (Cemda) said the new refinery has no environmental impact authorization or change in the use of land (Reforma – Spanish), but 300 hectares of jungle have been cut. The NGO points to Pemex and the company SCCA as culprits.


AMLO held a new public consultation. The next administration developed a new national public consultation on November 24-25 to vote their opinions on 10 key policy proposals. The vote will include the Maya train line, the new oil refinery, reforestation, and free public internet proposals (Reuters – English).


AMLO suggested a national guard and some disagree. Morena proposed a project to modify the constitution to create a national guard with 40,000 elements (El Economista – Spanish). A group of 500 businessmen, activists, and social organizations rejected the proposal for a national guard as a “false way out of the insecurity crisis” (El Economista – Spanish).


Pemex trusts LNG demand in Mexico. Pemex expects gas demand in southern Mexico to boost the operation of its new LNG terminal in the port of Pajaritos (Platts – Spanish). Pemex CEO said the unattended gas demand in southern Mexico amounts to 1Bcf/d.



Market Trends


Mexico fined banks for inflating bonds. Mexico’s securities regulator fined Citibanamex, BBVA Bancomer, Barclays, Credit Suisse, and Deutsche Bank for simulating bond trades to increase trading volumes (Reuters – English). The fines amounted to more than US$1m.


Mexico needs natural gas… badly. The head of the National Hydrocarbons Commission said the new administration will need to award contracts to explore the natural gas reserves onshore in Mexico (Excelsior, p. 8 – Spanish). Gas production has dropped to a critical level.


The OECD trusts Mexico’s growth. The Organization for Economic Co-operation and Development (OECD) forecasts 2% growth for Mexico’s economy through 2020 (Excelsior – Spanish). The OECD predicts Mexico’s GDP will grow 2.5% in 2019.


Grupo Mexico and Peñoles shaken by possible changes to the Mining Law. Share prices of Grupo México and Peñoles closed with losses due to the proposal to change the Mining Law. The proposal includes the right of the Energy Ministry to declare areas as unfeasible for mining exploitation (El Financiero – Spanish).



Strategy & Operations


TransCanada stopped the Tuxpan-Tula pipeline. The Canadian company suspended work on the Tuxpan-Tula pipeline in the state of Hidalgo due to “irrational” demands of social groups that live in the area crossed by the pipeline (El Financiero – Spanish). TransCanada is waiting for the result of indigenous consultations in Puebla.


Talos Energy contracted McDermott for the Zama field development. Talos Energy decided to give an engineering services contract to McDermott International for a development project in the Zama field. The contract includes engineering services such as concept selection and follow-on pre-FEED (OGJ – English).


Asolmex is into Nuevo Leon’s solar. The Mexican Association of Solar Energy (Asolmex) signed a collaboration agreement with Nuevo León’s energy cluster to develop solar farms (El Economista – Spanish). The association and the cluster will share information and studies considering irradiation elements in the area.


Schneider Electric has the new refinery in sight. Schneider Electric is interested in how to automate processes in the new refinery (El Financiero – Spanish). The company could help produce cleaner fuels with a lower level of sulfur content and process lighter crude.




Old School Social


Events in the world beyond your screen—go see and be seen!


Cogeneration Day México 2018 is scheduled for November 29 at the Sheraton María Isabel Hotel in Mexico City.


The S&P Global Platts Americas LNG Market Dynamics Webinar will be held December 5.


Energy Mexico 2019 will be held January 29-31 at Centro Cultural Banamex in Mexico City.



Lateral Thinking


A Mexican cavefish may be the answer for cardiologists. Scientists are studying a blind fish that lives in the caves of northern Mexico to understand why some animals can regenerate their hearts and others scar (EurekAlert – English). Scientists want to identify which genes are the key regulators of heart regeneration.



Quote of the Week


“El poder es peligroso pero necesario. Su ausencia deriva en caos, su exceso en tiranía.”


“Power is dangerous but necessary. Its absence leads to chaos, its excess tyranny.”


– Jesús Silva Herzog (1892-1985), Mexican economist and historian.



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