The Weekly Brief: Mexico


October 12, 2020 edition—The infrastructure plan; the CRE’s new rules; and Chihuahua’s solar.




Last Week in a Minute or Less


Electric Power & Renewables. The CRE changed its rules to change power permits; experts warned that Mexico’s grid needs a makeover; and Aljaval will shine in Chihuahua.


Natural Gas Mid-Downstream & LNG. The infrastructure plan has LNG exports in sight; CFE cut the ribbon on Zapotlanejo’s pipeline; and the Wahalajara pipeline is working.


Liquid Fuels Mid-Downstream. The CRE cut fuel transportation, storage, and sale permits; and the IMF recommended postponing the Dos Bocas refinery.


Oil & Gas Upstream. Pemex will trust Talos on Zama; Pemex’s new fields contribute 121,000 barrels; and Pemex has a plan for the Ku field.


Government & NGO. Analysts expect inflation to end 2020 at 3.88%; ECLAC expects Mexico’s economy to recover by 2025; and the new NAFTA protects the energy reform.


Déjà vu all over again. Last week’s readers were particularly interested in Blackstone, GE, Mitsui, and Actis’ considerations (El Financiero – Spanish); Sempra’s LNG project (Platts – English); and Mexico’s energy reform (Reuters – English).



Geopolitics & Trade


The new NAFTA protects the energy reform. International trade advisors said that Mexico cannot overturn the energy reform without violating commitments signed in the new NAFTA and the CPTPP (El Economista – Spanish).


Mexico tried to convince 16 global companies to spend. Economy Minister Graciela Márquez Colín said the ministry is in discussions with 16 global CEOs to convince them to invest in Mexico (El Financiero – Spanish). Some companies have transferred some processes to Monterrey and Tijuana.


If Biden wins, Mexico will have to work on green energy. If Joe Biden wins the US presidency, he could boost Mexico’s move to renewables, enforcing the Paris Agreement and the USMCA’s energy chapter (Platts – English) (El Financiero – Spanish). Mexico’s Economy Minister said the country does not foresee major changes in trade relations with the US if Biden wins (Reuters – English).


Mexico and the US remained best trade buddies. Total trade between Mexico and the US reached US$337.4bn between January and August in 2020, placing Mexico as the top trade partner of the US. Canada follows with US$335.2bn and China with US$332.2bn (El Financiero – Spanish).



Political Economy


Analysts forecast a GDP contraction of 1.5%. JP Morgan expects Mexico’s GDP growth potential to drop in the coming years to between 1.7% and 1.5% (El Financiero – Spanish). UBS explained that Mexico’s growth was decreasing before the COVID-19 pandemic.


Mexico received less investment in July. Gross fixed investment in Mexico registered a 21.2% loss in July compared to the same period in 2019 (El Financiero – Spanish). Mexico has now recorded 18 months of consecutive declines in investment, the worst streak since 2000-2002.


The IMF and the Finance Ministry disagreed. The International Monetary Fund (IMF) suggested public investment could boost jobs and private investment in Mexico (El Financiero – Spanish). The IMF also recommended a tax reform, but the Finance Ministry discarded that suggestion (El Economista – Spanish).


ECLAC expects Mexico’s economy to recover by 2025. The Economic Commission for Latin America and the Caribbean (ECLAC) expects Mexico to return to pre-COVID19 economic levels by 2025 (El Financiero – Spanish). The ECLAC expects Mexico’s recovery in 2021 to reach 3.2%.


Analysts expect inflation to end 2020 at 3.88%. According to Citibanamex’s survey, inflation will close the year at 3.88%, 4 points higher than the previous estimate (El Financiero – Spanish). The forecast for 2021 also increased to 3.58% from 3.55%.



Legal & Regulatory


The CRE cut fuel transportation, storage, and sale permits. The Energy Regulatory Commission (CRE) has delayed 300 permits requested by private companies to sell, transport, or store fuels. The CRE handed out only 21 permits, all to companies with agreements with the state-owned companies (El Economista – Spanish).


Experts warned: Mexico’s grid needs a makeover. During the Energy Meet Point, experts agreed that Mexico needs to improve its transmission grid. Mexico’s power grid, which is 108,000 km and ranges 69kw to 400kw, needs to be modernized (El Financiero – Spanish).


Mexico published the infrastructure projects at last. Mexico announced infrastructure projects worth almost US$14bn to reactivate the economy, including a new coker for one refinery and a liquefaction plant (Platts – English). The next set of projects will be announced in November (El Financiero – Spanish).


The infrastructure plan will favor Mexican companies. According to the chief of the Presidency Office, Alfonso Romo, the infrastructure investment plan will favor contracts with Mexican companies (El Financiero – Spanish). Romo emphasized that the best way to fight the economic crisis is private investment.


The CRE changed its rules to change power permits. The Energy Regulatory Commission modified the administrative rules that establish the terms to request permits to modify or transfer energy generation permits (DOF – Spanish). Charging centers could be canceled three years after their registry.



Market Trends


Mexico added an antidumping quota to Chinese wind turbines. Mexico will impose an anti-dumping quota of 21% on imports of wind towers from China starting October 6 (Competition Policy International – English) (El Economista – Spanish). From January to July 2020, Mexico imported wind towers worth US$223 million, with 59.6% of those from China.


New fields contributed 121,000 barrels in September. The state-owned company Pemex reported that new oil developments contributed 121,700 barrels of crude production in September (El Financiero – Spanish). Among the 20 new fields that Pemex was set to exploit, 15 are in the production stage.


The infrastructure plan has LNG exports in sight. The infrastructure investment plan included a liquefied natural gas (LNG) export project for Salina Cruz (Natural Gas Intel – English). The project would require an investment of US$1.2bn and will be spearheaded by CFE and API.



Strategy & Operations


Aljaval will shine in Chihuahua. The Spanish company plans to build a 300MW photovoltaic plant in Chihuahua (Renewables Now – English). The Alsacia solar park will be able to generate around 840GWh per year and will connect to the national grid by the end of 2021.


Pemex has a plan for the Ku field. The National Hydrocarbons Commission (CNH) okayed Pemex’s extraction plan with a secondary hydrocarbon recovery method in the Ku field (El Economista – Spanish). Pemex also said that 48% of the gas produced in the field is vented.


CFE cut the ribbon on Zapotlanejo’s pipeline. The CFE and Gas Natural del Noroeste (GNN) started commercial operations of the Zapotlanejo pipeline. The pipeline is 5km long and has the capacity to transport 535 million cubic feet per day of natural gas (El Economista – Spanish).


The IMF advised postponing the Dos Bocas refinery. The International Monetary Fund (IMF) recommended Mexico review its economic context for 2020 and delay its construction plans for the Dos Bocas refinery (El Economista – Spanish). The budget for the refinery could divert resources from more essential works needed by Pemex.


Pemex will trust Talos on Zama. The state-owned company will trust Talos Energy’s analysis to present a development plan before the Energy Ministry (El Economista – Spanish). In the new plan approved by the National Hydrocarbons Commission, Pemex will invest US$345m.


The Wahalajara pipeline is working. The pipeline connecting Villa de Reyes – Aguascalientes – Guadalajara is working now, doubling Mexico’s transportation capacity (El Economista – Spanish) (Natural Gas Intel – English). The pipeline is 388km long and will provide natural gas to San Luis Potosí, Aguascalientes, and Guadalajara.



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!)



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.



Lateral Thinking


Mario Molina died at 77. The winner of the Nobel Prize in chemistry in 1995, and the only Mexican scientist to be honored with a Nobel, died in Mexico City (US News – English). Molina and Frank Sherwood Rowland published a paper in 1974 that saw the thinning of the ozone layer as a consequence of chlorofluorocarbons, or CFCs, chemicals used in a range of products.



Quote of the Week


“…the planet is just too small for these developing countries to repeat the economic growth in the same way that the rich countries have done it in the past. We don’t have enough natural resources, we don’t have enough atmosphere. Clearly, something has to change.”


– Mario J. Molina (1943-2020), Mexican chemist.



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