October 5, 2020 edition—Sempra’s optimism; CNOOC’s exploration; and Pemex’s shrinking market.
Last Week in a Minute or Less
Electric Power & Renewables. Bimbo powers up with sun; Morcos Flores said goodbye to the Cenace; and Mexico won’t see a new energy reform until 2021.
Natural Gas Mid-Downstream & LNG. Sempra is “optimistic” regarding its LNG project permit; and Mexico’s natural gas imports keep rising.
Liquid Fuels Mid-Downstream. Pemex is losing fuel market share; Profeco said there are lower fuel prices; and ethanol could lower gasoline prices.
Oil & Gas Upstream. CNOOC went back to exploration work.
Government & NGO. Banxico cut rates again; inflation remained outside Banxico’s goal; and the USMCA helped during the COVID-19 pandemic.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s natural gas demand (Natural Gas Intel – English); Pemex’s unitization project (Platts – English); and Quintana Roo’s combined cycle construction (El Economista – Spanish).
Geopolitics & Trade
Exports fell 7.7% in August. The value of trade exports was US$36.9bn in August, a 7.7% fall and the smallest fall since March, when it dropped 1.7%. Oil exports were US$1.6bn, a 11.4% drop for August (El Financiero – Spanish).
The US ambassador said the USMCA would not solve everything. According to Christopher Landau, the US ambassador, the USMCA will not solve all problems between the US, Mexico, and Canada (El Financiero – Spanish). Landau said the implementation of the labor reform would be watched by the US.
The USMCA helped during the COVID-19 pandemic. As the COVID-19 pandemic has made all countries’ economies less stable, the USMCA agreement has provided certainty to the three countries’ economies (The Globe and Mail – English). Canada’s access to the US was key to stabilizing things during the pandemic.
Moody’s is happy with the Finance Ministry’s restructuring plan. According to the international rating agency, the second stage of the restructuration plan announced by the Finance Ministry and the National Banking Commission is especially beneficial for small banks (El Financiero – Spanish).
Inflation remained outside Banxico’s goal. In the first two weeks of September, inflation reached 4.10% (El Economista – Spanish). Inflation remained above Mexico’s central bank’s goal of 3% +/- 1 percentage point.
Banxico cut rates again. Mexico’s central bank lowered interest rates to help stimulate the economy hit by the COVID-19 pandemic (Reuters – English). Banxico cut the benchmark rate by 0.25 basis points to 4.25%, the 11th consecutive cut since August 2019.
S&P expects Mexico’s GDP to fall 10.4%. The international rating agency forecasts Mexico’s economy will contract 10.4% in 2020 (El Economista – Spanish). S&P said Mexico and Argentina could reach pre-COVID-19 production levels by the end of 2023.
Legal & Regulatory
Morcos Flores said goodbye to the Cenace. Alfonso Morcos Flores stepped down from general direction of the National Center of Energy Control (Cenace) (El Economista – Spanish). Carlos Gonzalo Meléndez was named new director of the Cenace (El Economista – Spanish).
Mexico will wait on a new energy reform until 2021. President López Obrador asked regulators to help strengthen Pemex and CFE using existing laws, but said that he could seek energy reforms next year if required to reach his goals (Reuters – English) (El Economista – Spanish). Only if the rescue mission fails would the reform be used.
The ICC is concerned with Mexico’s energy sector… The International Chamber of Commerce Mexico (ICC) warned that international arbitrage would be used if the constitutional modification affects the energy reform and Mexico’s potential as a destination for investors (El Economista – Spanish).
…and so is the US State Department. According to a recent US State Department report, Mexico’s regulatory and policy changes have affected investor confidence in the energy sector (Natural Gas Intel – English). The report cites actions that favor state-owned companies Pemex and CFE.
Pemex is losing fuel market share. Despite President López Obrador’s efforts to restore the state-owned company’s former strength, Pemex lost 13% of Mexico’s gasoline market to private companies, compared with 4.5% in the previous 35 months (Bloomberg – English) (El Financiero – Spanish).
Ethanol could lower gasoline prices. According to the Mexican Board of Energy, using ethanol in gasoline could reduce its price by MXN2.55 per liter (El Financiero – Spanish). The Energy Regulatory Commission (CRE) is considering broadening the use of ethanol in Mexico’s most important cities.
Mexico’s natural gas imports keep rising. Despite the COVID-19 pandemic, pipeline natural gas flows from the US to Mexico averaged an estimated 6.2Bcf/d in September, up from 5.5Bcf/d in September 2019 (Natural Gas Intel – English). US natural gas futures jumped over 6% (Reuters – English).
Profeco said there are lower fuel prices. The consumer protection agency said the average price of gasoline showed a reduction (Milenio – Spanish). Profeco said Redco, Arco, and Chevron sold the most expensive fuel while Total, Orsan, and G500 were the cheapest.
Strategy & Operations
CNOOC went back to exploration work. China National Offshore Oil Corporation (CNOOC) will continue its exploration activities in the ultra-deepwater Gulf of Mexico after halting work for a few months due to the COVID-19 pandemic (Platts – English). The exploration plans were approved by Mexico’s National Hydrocarbons Commission on September 22 during a webcast session.
Power investors may leave the country. According to Darío Celis, four big international investors of the energy sector, Blackstone, Actis, Mitsui, and GE Gas Power, doubt they will remain in Mexico (El Financiero – Spanish). The reason is the sudden change in rules to guarantee Pemex and CFE’s power.
Bimbo powers up with the sun. The Environmental and Natural Resources Ministry received documents from Bimbo to obtain permits to install solar panels in its plant in Mexicali (PV Magazine – Spanish). The project would include an 848.9 kWp solar system.
Sempra is “optimistic” regarding its LNG project permit. The company is hopeful that it will receive the government export authorization and make a final investment decision “this year” regarding the LNG project (Platts – English). Sempra’s CEO blamed the novelty of the permit for the delay.
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!)
MIREC Week has been postponed from June 2-4 to October 8-10 at Centro Citibanamex.
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.
Oil spills in the Gulf of Mexico affect stingrays. Sharks and rays detect the electric fields generated by their prey’s underwater movements, but it was discovered that stingrays exposed to crude oil lost their ability to smell prey underwater (Inside Science – English). Only five hours of exposure to oil was enough to see such an effect.
Quote of the Week
“En el gallinero de la política, la gallina más alabada no es la que pone el mejor huevo sino la que mejor sabe cacaraquearlo.”
“In the henhouse of politics, the most praised hen is not the one that lays the best egg, but the one which knows to how best to brag about it.”
– Plutarco Elías Calles (1877-1945), Mexican military general and politician.
We hope you have a productive week. Please send any news, comments, or help for stingrays to MexicoWeekly@energynarrative.com.
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