October 14, 2019 edition—El Mezquite’s wind is up; Chevron’s blocks; and 3% inflation.
Last Week in a Minute or Less
Renewables & Electricity. El Mezquite wind park is up in the air; the Texcoco Airport may become a solar farm; and a private power auction will leave US$240m in contracts.
Natural Gas & Liquid Fuels. The CFE will ensure gas supply for Francisco Ríos Pérez thermoelectric plant; it is unclear how much fuel crosses the border; and Pemex’s refineries will pay market price.
Oil & Gas Upstream. Hokchi and Talos gave up on their oil contracts; AMLO said Pemex is not after Zama; and Chevron went all in on Shell’s blocks.
Money & Power. AMLO asked for a tax reform by 2022; inflation reached Banxico’s goal of 3%; and analysts expect two more cuts from Banxico.
Déjà vu all over again. Last week’s readers were particularly interested in CFE’s pending pipelines negotiation (El Financiero – Spanish); Paullada’s ratification (El Financiero – Spanish); and Pemex’s interest in Zama (El Economista – Spanish).
The US Chamber of Commerce pressed US lawmakers on USMCA… The US Chamber of Commerce asked Congress to ratify the new NAFTA before Thanksgiving (El Economista – Spanish) (Logistics Management – English). The US Chamber of Commerce emphasized that time is of the essence for Congress to move forward.
…while a US labor leader asked to slow down. A US labor leader is concerned about labor protection measures in Mexico and believes fast action would be a colossal mistake (Reuters – English). Democrat lawmakers asked Mexico to do more on labor (Reuter – English) (Bloomberg – English).
AMLO wrote to Pelosi to speed up the ratification. President López Obrador sent a letter to the US House Speaker Nancy Pelosi asking for a timely approval of the treaty to favor the economy of the three countries (AP News – English) (El Financiero – Spanish).
Mexico’s Finance Minister is waiting for USMCA ratification. Finance Minister Arturo Herrera said that the USMCA ratification would change the countries’ conditions, lowering uncertainty (El Economista – Spanish). The Finance Minister also pledged to be careful with Mexico’s public finances.
Mexico is after China’s position as #1 US exporter. Mexico exported products to the US worth US$240bn between January and August 2019 (El Economista – Spanish). US imports from China fell 12.5% during the same period while Mexico’s registered an increase (El Financiero – Spanish).
The Road to Reform
Hokchi and Talos gave up on their oil contracts. The National Hydrocarbons Commission (CNH) said the consortium formed by Hokchi Energy, Talos Energy, and Wintershall Dea has renounced its oil contract in shallow waters due to the lack of commercial discovery (Reuters – English) (El Economista – Spanish).
AMLO said Pemex is not after Zama. After the US State Department showed concern over the possibility of Pemex’s taking control of the Zama field, President López Obrador denied Pemex’s interest and said that no oil contract from the Energy Reform is being reviewed (El Economista – Spanish) (Reuters – English).
The Finance Minister wants Pemex out of deep waters. Finance Minister Arturo Herrera explained that deep water crude exploration and exploitation requires technology that Pemex may not have, a risk that Pemex should not take (El Economista – Spanish). Pemex’s future investments in deep waters should be discussed.
The Energy Ministry answered comments on radioactive classification and transportation. The Energy Ministry published the classification of fissionable substances and radioactive materials (DOF – Spanish), and answered comments received during the public consultation on the new norm to limit activity and classification of radioactive materials (DOF – Spanish) (DOF – Spanish).
Pemex, CFE, and the Sener are the big winners of public spending. According to the 2020 budget, 56.6% of public investment spending will go to Pemex, CFE, and the Energy Ministry. Pemex would receive MXN332bn, CFE MXN51.1bn, and the Energy Ministry MXN46.2bn (El Economista – Spanish).
The CRE certified four clean energy companies. The Energy Regulatory Commission (CRE) awarded four companies the certificate for clean energy centers (Reforma – Spanish). The CRE approved, by September 30, 25 new power projects with an estimated investment of US$9bn (Reforma – Spanish).
AMLO endorsed saying no to fracking. President López Obrador pledged that his energy plan does not consider fracking in gas extraction (Proceso – Spanish). A senator from his own party, together with business sector representatives and other legislators, asked the president to reconsider his position.
Mexico has an ace up its sleeve against recession: infrastructure. Mexico will announce 1,600 major infrastructure projects designed with the private sector to boost the economy (Reuters – English). The goal is to increase economic growth and end with the specter of recession.
AMLO asked for a tax reform by 2022. President López Obrador asked the Finance Ministry to design a fiscal reform to become effective by 2022. The reform will avoid an increase in taxes, except for inflation, and the goal would be to increase tributary efficiency and avoid tax evasion (El Financiero – Spanish) (Reuters – English).
Pemex wants to lend a hand to Cantarell while delaying Esah. The state-owned company plans to invest MXN28bn in Cantarell by 2020, three times the amount invested this year (El Financiero – Spanish). Pemex delayed operations at Esah; instead of producing in November, it will not produce this year (El Financiero – Spanish).
Inflation reached Banxico’s 3% goal. Mexico’s consumer prices fell to a 3-year low, reaching Mexico’s central bank goal of 3% (Reuters – English) (El Economista – Spanish). With this result, there have been five consecutive months of inflation deceleration. Fuel prices shrank by 0.7%.
It is unclear how much fuel crosses the border. Customs reported that some companies declare the import of oil instead of gasoline and diesel to pay less taxes at the northern border (El Economista – Spanish). The US Census said that Mexico imported 533,000 barrels of crude from the US in July 2019, but the Energy Ministry denies it (Forbes – Spanish) and later issued a clarification (Bloomberg – English).
Analysts expect two more cuts from Banxico. According to a Citibanamex survey, economists expect Mexico’s central bank to leave interest rates at 7.50% by the end of the year (El Financiero – Spanish). Banxico’s latest cut was motivated by low economic activity (El Financiero – Spanish), and the decision will impact banks’ profits (El Economista – Spanish).
Mexico’s gross fixed investment dropped. In July, Mexican gross fixed investment experienced the biggest fall since 2009 (Reuters – English). The gauge of spending on machinery, equipment, and new construction in Mexico dropped by 9.1%.
Pemex’s refineries will pay market price. The Finance Ministry plans to find profitability in oil production and sale as Pemex’s refineries will have to pay market price for crude oil purchases (Forbes – Spanish). Mexico faces a crude deficit of at least 50,000 barrels.
Strategy & Operations
El Mezquite wind park is up in the air. Cubico Sustainable Investments said that one wind park and one solar farm have become operational in Mexico (Renewables Now – English) (El Financiero – Spanish). The Mezquite wind farm in Nuevo León and the Solem solar PV project in Aguascalientes have a combined capacity of 600MW.
Chevron went all in on Shell’s blocks. Chevron and Shell signed an agreement for the purchase of a 40% stake in three deepwater blocks in the Mexican Gulf to strengthen Chevron’s portfolio in Mexico’s upstream (Reuters – English). The National Hydrocarbon Commission (CNH) approved the deal.
The CFE will ensure gas supply for Francisco Ríos Pérez thermoelectric plant. The state-owned company said the construction of the Tula pipeline was planned to supply gas to the Francisco Ríos Pérez thermoelectric plant (La Jornada – Spanish). The plant could receive 505 million cubic feet per day during the next 25 years (Reforma – Spanish).
The Texcoco Airport may become a solar farm. The federal government is considering installing a solar farm to generate energy in the area where the cancelled Texcoco airport would have been built. The National Commission of Water (Conagua) will contract a study to determine its technical feasibility (Reforma – Spanish).
Private power auction will leave US$240m in contracts. With 70 participants, the first long-term power auction for bilateral power exchange contracts will conclude in January 2020. Approximately 745MW in generation parks will be installed, 10% of the previous three power auctions (El Economista – Spanish).
Old School Social
Events in the world beyond your screen—go see and be seen!
The XLIII National Week of Solar Energy ANES will be held October 14-18 in Nuevo Vallarta, Nayarit.
S&P Global Platts 23rd Annual Mexican Energy Conference is scheduled for November 13-14 at Hyatt Regency Mexico City. Join over 300 executives at the meeting place for energy professionals in the region. Network with representatives from a wide range of companies from Mexico, the US and worldwide. Visit the website or download the brochure to learn more.
Scientists found a new antibiotic in a Mexican tropical forest. Scientists from Rutgers University found an antibiotic produced by a soil bacterium in a Mexican tropical forest, known as phazolicin (Science Daily – English). The discovery may lead to a “plant probiotic.”
Quote of the Week
“No hay reglas ni leyes ni tradiciones que se puedan aplicar universalmente… incluyendo ésta.”
“There are no rules or laws or traditions that can be applied universally… including this one.”
– Gerardo Murillo (1875-1964), known as Dr. Atl, was a Mexican painter and writer.
We hope you have a productive week. Please send any news, comments, or tropical forest discoveries to MexicoWeekly@energynarrative.com.
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