November 29, 2021 edition—Hydrocarbons import and export; Andritz Hydro’s contract; and Lukoil’s discovery.
Last Week in a Minute or Less
Electric Power & Renewables. Andritz Hydro will give CFE’s hydropower plants a makeover; private companies will give their opinion on the power reform; and if the power reform is in, General Motors is out.
Liquid Fuels Mid-Downstream. Mexico will allow private companies to import and export hydrocarbons; Pemex is recovering the gas station market; and AMLO safeguarded his refinery.
Oil & Gas Upstream. Pemex saves money by cutting production time; Lukoil found black gold; and the Ichalkil and Pokoch shallow water fields started commercial operations.
Government & NGO. AMLO nominated Victoria Rodríguez as Banxico’s governor; the “three amigos” promised a North American Methane Strategy; and the IMF renewed Mexico’s credit line.
Déjà vu all over again. Last week’s readers were particularly interested in CFE’s green practices (El Financiero – Spanish); Morena’s confidence in PRI’s support (Forbes – Spanish); and Fitch’s rating (El Economista – Spanish).
Geopolitics & Trade
Biden ignored Mexico’s and Canada’s complaints over EVs. The US House of Representatives approved the Build Back Better Act proposed by President Joe Biden that includes credits for the purchase of electric vehicles assembled in the US (El Financiero – Spanish).
Mexico and Canada will work on inclusion and cooperation. In a bilateral meeting, President López Obrador and Prime Minister Justin Trudeau exchanged opinions over the two countries’ priorities and decided to focus on actions guaranteeing equality, security, and development (El Economista – Spanish).
The CFE is sure the power reform and the USMCA are compatible. The main lawyer of the state-owned company defended the power reform, saying it does not violate any of Mexico’s trade agreements (Expansión – Spanish). The lawyer argued the constitutional reform does not contravene chapters 8, 14, or 27.
The US is concerned with Mexico’s polluting energies. Considering the power reform, the US said the use of more expensive and dirty technologies will make it difficult to meet the shared climate goals (El Economista – Spanish). The fight against climate change is a priority for both governments, according to the US State Department.
The “three amigos” promised a North American Methane Strategy. President López Obrador, Prime Minister Justin Trudeau, and President Joe Biden pledged to create a “North American strategy on methane and black carbon” (Natural Gas Intel – English). The goal is to reduce “methane emissions from all sectors, especially oil and gas.”
Foreign Direct Investment hit the gas pedal to close the year. Foreign investment recovered by the end of the year, capturing US$24.8bn (El Financiero – Spanish), reaching a 5.7% increase (El Economista – Spanish). Considering the same period, it will be the third highest amount since 1999.
The IMF renewed Mexico’s credit line. The International Monetary Fund (IMF) approved a new two-year agreement for Mexico’s flexible credit line for US$50bn (El Financiero – Spanish). The credit line is designed to prevent crisis, and Mexico has had one since 2009.
Inflation reached the highest level in 20 years. Due to the end of the power program, inflation increased to 7.05% in the first two weeks of November (El Financiero – Spanish). President López Obrador trusts prices will return to normal once the post-Covid global crisis ends (Forbes – Spanish).
AMLO nominated Victoria Rodríguez as Banxico’s governor. President López Obrador nominated Victoria Rodríguez Ceja to run Mexico’s central bank, after unexpectedly abandoning the previous candidate (Forbes – Spanish) (Reuters – English). The decision pushed the peso down and created uncertainty over monetary policy.
AMLO and companies will discuss a minimum wage increase. President López Obrador asked for an agreement with the business sector regarding an increase in the minimum wage in 2022 (El Financiero – Spanish). AMLO did not mention the percentage of the increase.
Legal & Regulatory
AMLO safeguarded his projects. President López Obrador declared his signature projects (airport, Maya train, and Olmeca refinery) as national security projects (El Financiero – Spanish). The IMEF said the decision could increase the risk of uncertainty and corruption (El Economista – Spanish), which could affect companies (El Financiero – Spanish).
The power reform menaces US$22bn in contracts. The power reform could end more than US$22bn in solar, wind, and other renewable energy installations from foreign companies (El Financiero – Spanish). The power reform would cancel certain contracts awarded to private companies to favor CFE’s hydroelectric, nuclear, and natural gas plants.
Moody’s warns of the power reform’s effect on the rating. The international rating agency ratified Mexico’s sovereign grade in Baa1- but warned that the power reform approval could produce a downgrade (El Economista – Spanish). The reform could reduce investment, eliminate the independent regulatory systems, and increase support to the CFE.
Private companies will give their opinion on power reform. The House of Representatives will hear the opinion of power company owners in the debate over the power reform (El Economista – Spanish). The ruling party plans to approve the bill either before December 15 or in January, 2022.
Mexico will allow private companies to import and export hydrocarbons. The Finance Ministry established the possibility for any private company to request and obtain a permit to import and export hydrocarbons (El Financiero – Spanish) (Argus Media – English). The resolution will allow others besides the state-owned companies to devote themselves to fuel import/export activities.
Gas Bienestar arrives in Tláhuac 20% more expensive. The state-owned LP gas company arrived in Tláhuac with a 20% increase in its prices compared to the tariff offered in Iztapalapa (El Financiero – Spanish). The director of the company assures the cylinders offer better performance than the competition.
Mexico will not follow the US lead on crude production. After the announcement of President Joe Biden to inject 50 million oil barrels, Energy Minister Rocío Nahle said Mexico will maintain its current strategy of steady production increases to build the use of domestic fuel (El Economista – Spanish).
Pemex is recovering the gas station market. Retail fuel station owners in Mexico are slowly going back to the state company, as government permitting and compliance measures have begun to hurt their ability to compete. The government suspended activities of the reception terminal operated by Glencore in the Dos Bocas port (Platts – English).
Strategy & Operations
If the power reform is in, General Motors is out. General Motors representatives in Mexico are concerned with the future of renewable energy use in Mexico (Forbes – Spanish). If Mexico does not include renewable energies in its future and a sustainable legal framework, General Motors and other companies will stop short-term and medium-term investment (El Economista – Spanish).
Pemex saves money by cutting production time. The state-owned company has saved MXN59bn due to the strategy developed to cut production costs, reducing production time (La Jornada – Spanish). The strategy has been deployed in 12 new fields.
Lukoil found black gold. Lukoil announced a discovery in the oil field of Yoti West in Block 12 on the Mexican coast (El Financiero – Spanish) (OGJ – English). The initial oil could reach 250 million barrels, and the well was drilled 60km off the coast.
Andritz Hydro will give CFE’s hydropower plants a makeover. The state-owned company awarded Andritz Hydro the modernization of nine of CFE’s 14 hydropower plants throughout the current administration (El Economista – Spanish). The US$892.9m contract will add 246MW to the national power capacity.
Mexico City will boost renewables. Mexico City is promoting the Ciudad Solar program that will promote the use of efficient energy and renewable sources in the public and private sectors (El Economista – Spanish).
Hermosillo will use its sun. Hermosillo plans to be the first municipality to transition towards clean energies, saving MXN150m (El Economista – Spanish). Solar energy will be used to power up public buildings and the water and public light system.
Braskem’s ethane imports skyrocketed. Ethane imports to the Braskem Idesa facility reached a record 22,400 b/d in September (Natural Gas Intel – English). The milestone was achieved after completion in August of an expansion to the Fast Track project, an initiative to shore up ethane imports to the plant.
Querétaro plans a substation. The governor of Querétaro plans for the State Energy Agency to develop the construction of a new substation to provide electric power (El Economista – Spanish). The goal is to secure power for investment projects in the state.
Ichalkil and Pokoch shallow water fields started commercial operations. The shallow water fields in Campeche Bay operated by Fieldwood Energy E&P México began commercial operations, producing light oil and natural gas (Natural Gas Intel – English) (Milenio – Spanish). Existing infrastructure was upgraded and demonstrated the collaboration between Pemex and the private sector.
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!)
Platts’ Mexican Energy Virtual Conference will be held December 2-3.
Expogas CDMX 2021 is scheduled for December 7 in Mexico City.
Mexico Assembly will be held in May 2022 in Mexico City.
Walmart will have gas stations. The supermarket brand and the company Gazpro signed a plan to launch new gas stations in Walmart’s parking lots (Forbes – Spanish). The plan is to offer clients the option to fill their tanks in the same place in which they do their shopping.
Quote of the Week
“Nada te detiene aquí mas que tus ideas, tus sueños, compréndelo.”
“Nothing stops you here but your ideas, your dreams, understand that.”
– Rodolfo Usigli (1905-1979). Mexican playwright, essayist, and diplomat.
We hope you have a productive week. Please send any news, comments, or gas station tricks to MexicoWeekly@energynarrative.com.
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