The Weekly Brief: Mexico

November 27, 2017 edition— Round 3.2 licenses; open seasons in the New Year; and NAFTA fifth round disappointment.




Last Week in a Minute or Less


Renewables & Electricity. The biggest transmission project was delayed; Acciona will bring solar energy to rural areas; and Guatemala suggested creating a shared Electricity Market.


Natural Gas & Liquid Fuels. Pemex Logística will offer two pipeline open seasons in January 2018; gasoline prices across Mexico will be free by November 30; and Pemex will use private companies’ pipelines.


Oil & Gas Upstream. CNH confirmed that Round 3.2 will be licenses and the Finance Ministry established values for deep water blocks.


Money & Power. The fifth round of NAFTA talks ended with no big agreements; the USTR updated its negotiating goals; and the minimum wage was raised.


Déjà vu all over again. Last week’s readers were particularly interested in the renewable power auction (English); the supply contract between CFEnergía and Emerging America and the Abraaj Group (Spanish); and Pemex’s issue of debt in pounds (Spanish).



NAFTA negotiations


The USTR updated its NAFTA negotiating goals… The Trump administration reiterated the goal of reducing the trade deficit and added proposals opposed by Canada and Mexico in the list of negotiating goals (English). According to the US government, the US had a US$63bn trade deficit with Mexico and a US$7.7bn surplus with Canada.


…and Canada and Mexico asked for flexibility. Mexico and Canada did not offer counterproposals to the US demands in the NAFTA negotiations, and asked for more flexibility (Spanish). Mexico accepted strengthening the rules of origin for the auto sector, but only if the productive and export capacities of the country are not restricted (Spanish).


The fifth round ended with no big agreements. The last round of NAFTA talks finished without major breakthroughs and with no major chapters closed (English) (Spanish). US Trade Representative Robert Lighthizer accused Canada and Mexico of being unwilling to “engage on provisions that will lead to a rebalanced agreement” (English). The next round will be held January 23-28 in Canada (English).


All NAFTA parties talk cooperation on energy. The three energy ministers discussed cooperation in cross-border energy regulation, security, and safety (English). Mexico’s Energy Minister explained that trade in energy between the three nations grew twice as fast as that of any other product in the region (Spanish).



The Road to Reform


The Finance Ministry set values for deep water blocks. The Finance Ministry published the minimum and maximum values for the fields to be tendered in Round 2.4 (Spanish). For all the blocks, the maximum value of additional royalty that bidders could offer will be 20% (Spanish).


CNH okayed Sener’s Round 3.2 recommendation. The National Hydrocarbons Commission (CNH) approved the Energy Ministry’s proposal that the Round 3.2 crude oil and gas contracts for onshore fields be licenses (Spanish). The areas offered average 250 square kilometers and are located in Nuevo León, Tamaulipas, Veracruz, and Tabasco.


Pemex Logística will offer two pipeline open seasons by January 2018. The Energy Regulatory Commission (CRE) announced Pemex Logística will offer two pipeline capacity auctions in the Northeast and Pacific regions (Spanish). By year-end, only one of 2017’s five announced open seasons will have been completed (Spanish).


Mexico’s biggest transmission project ever got delayed…again. The 3,000 MW, 1200-km. high voltage direct line connecting the Tehuantepec Isthmus with central Mexico has been postponed, and is now projected to start operations in December 2021 (Spanish). The call for bids will be published in August 2018.


Gasoline prices nationwide will be free by November 30. The Energy Regulatory Commission (CRE) advanced the gasoline liberalization from December 30 to November 30 (Spanish). The CRE decided to speed things up based on the experience of the previous liberalization phases  and the stable fuel prices in those regions.



Political Economy


Finland and Mexico discussed trade and energy. Finland’s deputy secretary of Foreign Economic Relations expressed support for modernizing the Global Agreement between the European Union and Mexico (Spanish). The Mexican Association of Environmental Companies and the Finnish Embassy’s commercial office signed an agreement to develop opportunities for exchanges in the energy sector.


Pemex contracted 27,000 substitutes. Between January 1 and September 30, the state-owned company contracted 26,796 workers for temporary work to cover for personnel on vacations and substitutes. Two out of ten workers have substitutions during the year, for which Pemex must pay an additional cost added to the payroll (Spanish).


Former Pemex CEO’s protection ended. Emilio Lozoya and his lawyer were granted access to the investigators’ files and the trial for amparo (similar to injunction) was dismissed (Spanish).  The Attorney General’s Office must make public how it handled the complaint filed by Morena against Lozoya (Spanish).


Guatemala wants Mexico to share its Electricity Market. Guatemala’s government and businessmen from the energy sector suggested setting up an electricity market that could allow Mexico to export electricity (Spanish). The goal is to expand the electricity markets of both countries.


Mexico’s minimum wage will rise by December. The National Commission of Minimum Wages (Conasami) agreed to move forward the December wage review of each year to make a direct increase of five pesos (Spanish). A 3.9% increase will be applied to the daily minimum wage, raising it from 80.04 pesos to 88.36 pesos by December 1.



Market Trends


Banxico sold US$500m of forex hedges. Mexico’s central bank assigned US$500m of foreign exchange hedges offered in auctions with three different expiration dates (English). The bank received bids totaling US$1.7bn for US$200m of 30-day contracts, US$200m of 62-day contracts, and US$100m of 90-day contracts.


Mexico is the best route for exporting gas to Asia. The port of Manzanillo, with a regasification capacity of 500 mmpcd, is the cheapest alternative route for shipping LNG gas to Asia (Spanish). The transit time for shipping LNG to Japan from Manzanillo could be 39% less than the route from Louisiana, 14 versus 23 days, respectively.


Development banks will finance solar projects. Bancomext, Banobras, Nafin, and the North American Development Bank will put up US$294m to finance Zuma Energía’s Orejana and Fisterra Energy’s Santa María solar parks (Spanish). Orejana will produce 158MW and Santa María 179MW. Both will be operating by June 2019.



Strategy & Operations


Acciona will power up rural areas with solar. The Spanish company was chosen to install and maintain for four years solar installations that will light up 720 homes in Nuevo León, Chiapas, and Tamaulipas (Spanish). The installations will begin in December 2017 and be completed by April 2018.


Querétaro’s wind park will open by 2018. The wind park located in the Huimilpan municipality received an investment of US$60m and will open by June 2018 (Spanish). In December, the permits for the 15-generator wind park will be granted to investors.


Gas Natural Noroeste will install a 6-km pipe in Veracruz. The Spanish company met the requirements to install 6,100 meters of 6-inch pipes to transport natural gas through the Xalapa, Coatepec, and Emiliano Zapata municipalities (Spanish). The pipe will connect with the 48-inch pipeline of Pemex Gas and Petroquímica in Emiliano Zapata.


Pemex will use private companies’ pipelines. Pemex will use private infrastructure for fuel transportation and storage to guarantee supply of its products throughout the country (Spanish). Pemex Transformación Industrial (PTI) is about to conclude negotiations to rent three terminals in different states where Pemex does not have storage and transportation facilities.


Russia wants in on Mexico’s nuclear development. Russia’s Rosatom is ready to participate in Mexico’s nuclear development program, which requires an investment of MXN328.6bn for the construction of three new power plants: two in Veracruz and one in Tamaulipas (Spanish). The construction of the nuclear plants could start in 2024.



Old School Social


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


The USMCOC Binational Meeting is December 3-4 in Mexico City.


The 3rd Mexico Infrastructure Projects Forum is January 17-18 at Hotel Camino Real, in Monterrey.


Energy Mexico 2018 is January 30-February 1 at Centro Citibanamex, in Mexico City.



Lateral Thinking


Comener, Sener, and HYC teamed up to propel energy. The  Mexican Energy Board (Comener), the Energy Ministry, and the Houston Technology Center (HTC) signed an agreement to invest US$1.08m in the Accelerator Program for Energy Technology Development (Spanish). Mexican companies will attend networking and efficiency workshops.



Quote of the Week


“Todo hombre aspira a mejorar sus condiciones de existencia con repetida terquedad. No importa que fracase una y muchas veces. Hay un veneno de esperanza, inagotable y recóndito que nace en algún rincón de la conciencia y fluye silenciosamente hasta invadirla con ancho cauce reparador.”


“Every man’s aim, with repetitive stubbornness, is to improve his living conditions. It does not matter if he fails once and many times. There is an endless and remote poison of hope that is born in some corner of conscience and flows silently until it invades awareness with its broad healing channel.”


– Jesús Silva Herzog (1935-2017), Mexican economist and politician.



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