The Weekly Brief: Mexico


October 8, 2018 edition—NAFTA ends, IEnova looks offshore, and Enel sells out.




Last Week in a Minute or Less


Renewables & Electricity. Enel sold its share in eight power plants; Engie will grab some rays in Sonora; and 34 bidders are after the fourth power auction.


Natural Gas & Liquid Fuels. IEnova and Trafigura will develop a marine terminal; the Tula refinery will receive a big push; and AMLO promises to fight fuel robbery.


Oil & Gas Upstream. Hokchi will bet US$2.5bn in Tabasco; the CNH okayed Talo’s Zama appraisal plan; and the CNH will allow Pemex to choose its partners.


Money & Power. A final NAFTA deal was reached; the Finance Ministry will keep oil hedging info to itself; and violence menaces energy investments in Tamaulipas.


Déjà vu all over again. Last week’s readers were particularly interested in the fourth power auction (Reforma – Spanish); Mexico’s new entity for natural gas (Platts – English); and the refusal of thermoelectric plants (Reforma – Spanish).



NAFTA Negotiation


Canada joined the US and Mexico trade agreement… Canada joined the trade deal that the US and Mexico reached last month, meeting the negotiators’ midnight deadline to allow Peña Nieto, the current Mexican president, to sign the agreement on his final day (The Washington Post – English).


…but Canada’s car industry may be happier than its farmers. Canadian auto exports will not be affected by any US tariffs on automobiles (Bloomberg – English). The new deal opens the milk trade, giving the US greater access to Canada’s dairy market and eliminating its new milk pricing system (Bloomberg – English).



With the NAFTA deal, the US has an upper hand on China. The White House trusts the trade deal with Mexico and Canada will strengthen the US position in the battle with China on economic issues and national security (WSJ – English).


Peña Nieto and AMLO are satisfied with the trade agreement. President Enrique Peña Nieto said the trade agreement was a “win” for the US, Mexico, and Canada (Reuters – English). The new ambassador believes the new trade agreement will strengthen internal markets and human capital (El Economista – Spanish).



The Road to Reform


The CNH will allow Pemex to choose its partners… The National Hydrocarbons Commission (CNH) supports the proposal to permit Pemex to pick its own equity partners for exploration and production projects following “the same transparency standards that the CNH has used” (Reuters – English).


…and believes AMLO’s oil goal is doable. The president of the National Hydrocarbons Commission (CNH) said the goal of President-elect López Obrador to reach production of 2.48 million daily barrels of oil by 2024 is “technically viable” (El Economista – Spanish). The challenge will be to provide Pemex with US$20bn in investment.


The CNH okayed Talo’s Zama appraisal plan. The National Hydrocarbons Commission (CNH) approved the appraisal plan for Talos Energy’s Zama-1 discovery on Block 7 and is reviewing the application for the required drilling operation permits (OGJ – English). The CNH approved a US$325m gross budget for the appraisal plan.


AMLO will honor existing oil contracts. In a closed-door meeting, President-elect López Obrador assured private energy executives that contracts will not be canceled (Reuters – English). The transition team is reviewing oil investments, as only 12.2% of planned investments have been made so far (El Financiero – Spanish).


All eyes set on the fourth power auction. The fourth long-term power auction received 396 offers from 34 bidders (Reforma – Spanish), according to the National Center of Energy Control (Cenace). The Cenace will evaluate legal, financial, technical, and execution capacity.



Political Economy


Cartel violence menaces Tamaulipas’ energy investment. Violence threatens the first-ever auction of exploration and production rights to shale fields in February (Reuters – English). The fields are in the Burgos basin, an area fought over by the Gulf and Zeta cartels (La Jornada – Spanish).


AMLO promises to fight fuel robbery. President-elect López Obrador warned fuel robbery will be finished inside and outside of Pemex (Proceso – Spanish). Alleged fuel thieves and elite elements of the state police fought in El Bajío (Reforma – Spanish), while the army and the Attorney General’s office are investigating 37 local policemen involved in fuel robbery (Reforma – Spanish).


The Tula refinery will receive a big push. President-elect López Obrador announced the investment of MXN5bn to rehabilitate the Tula refinery in 2019 (Animal Político – Spanish). The train cars for the Maya Train project will be built in Ciudad Sahagún by Bombardier.


Lozoya points to the Finance Ministry. Emilio Lozoya Austin suggested that the Attorney General call Miguel Messmacher Linartas, Deputy Minister of Finance, for a meeting to clarify why he excluded Odebrechdt from a bidding process to award the contracts of the Tula Refinery (Reforma – Spanish).



Market Trends


Gasoline prices are up 23% this year. In the first eight months of the year, Magna gasoline prices increased by 23% and Premium gasoline prices went up 16% (Reforma – Spanish). Chihuahua suffered the greatest increase, from paying 15.32 pesos in December 2017 to 18.88 pesos in August 2018.


The private sector waits for an answer on power tariffs. The private sector expects authorities to publish an agreement regarding the new power tariffs (El Financiero – Spanish). The proposal is to pay just what is consumed without absorbing system inefficiencies or cross subsidies.


The Finance Ministry will keep mum about oil hedges. The detailed information regarding the number of barrels that were covered by oil hedges cannot be published until 2022 (El Universal – Spanish). The publication of the data could increase the cost of the coverage for new oil hedges in the international financial markets.


Pemex expects investment to stop the output decline. Pemex said Mexico will be required to double its annual oil exploration investment to reverse the decline in output (Reuters – English). From June to August, Pemex did not export a drop of light crude due to the scarcity of the fuel and low production (Reforma – Spanish).



Strategy & Operations


Engie will get some sun in Sonora. The French company will build a solar energy park in Sonora with a power generation capacity of 130.8MW and an investment of US$111m (El Financiero – Spanish). The plant will have 400,000 photovoltaic panels.


Enel sold its share in eight power plants. The Italian company sold 80% of its capital to Caisse de dépot et placement du Québec (CDPQ) and the Mexican CKD Infrastructura (CKD) in eight plants with a total capacity of 1.8GW (El Financiero – Spanish).


Hokchi will bet US$2.5bn in Tabasco. Hokchi Energy will invest US$2.5bn in the next 25 years to develop the block awarded in Round 1.2, located in the Salina Basin. From October 2018 to June 2021, a plant will be built to treat oil and gas, and generate power (El Financiero – Spanish).


G500 will go after 750 gas stations. The G500 Network group plans to add 750 gas stations in 2019 to its network and expects to close the year with 500 units (El Financiero – Spanish). The G500 Network was created a year ago with the association between the G500 Group and Glencore, the Swiss company specializing in petrochemical distribution and sale.


IEnova and Trafigura will develop a marine terminal. IEnova and Trafigura signed a long-term agreement to build a refined products marine terminal in the Port of Manzanillo, in Colima (Platts – English). The terminal will begin operations by the end of 2020, with a 1.48 million-barrel storage capacity.



Old School Social


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


The Business Case for Community Engagement: Getting Prior Consultation Right in Mexico will be held October 9 at the CID-ANUIES, Tenayuca 200, Sta. Cruz Atoyac, in Mexico City.


The Foro Petrolero Coparmex is scheduled for October 14-16 at the Centro de Convenciones Tabasco 2000, in Villahermosa.


The OGEP Oil & Gas Expo Procura will be held October 22-24 at the Centro de Convenciones Tabasco 2000, in Villahermosa.


The Mexico Energy Reform Symposium is scheduled for October 23 at the Hyatt Regency Houston, in Houston.


The Energy Day 2018 will be held October 23 at the British Chamber of Commerce, in Mexico City.


The S&P Global Platts 22nd Annual Mexican Energy Conference is scheduled for November 8-9 at the St. Regis Mexico City Hotel. This conference is the leading event for Mexico’s energy industries. Meet with senior officials, regulators, and entrepreneurs and learn the latest about Mexico’s energy reforms. For more information, including a full agenda and confirmed speaker line-up, visit



Lateral Thinking


The Popocatepetl volcano got angry this week. The Popocatepetl volcano spewed ashes and steam in the past week, reaching neighborhoods in the southern area of Mexico City’s capital (Fox News – English). Geophysicists have found an increase in the volcano’s activity since the September 2017 earthquake that shook central Mexico.



Quote of the Week


“No hay reglas ni leyes ni tradiciones que se puedan aplicar universalmente…incluyendo ésta.”


“There are no rules nor laws nor traditions that can be applied universally… including this.”



– Gerardo Murillo (1918-2001), Mexican writer and painter, who signed his works “Dr. Atl”.



We hope you have a productive week. Please send any news, comments, or strategies to calm down volcanos to


Tell your friends and colleagues about the Weekly Brief! They can sign up for a free one-month trial here.[/vc_column_text][/vc_column][/vc_row]