The Weekly Brief: Mexico


October 15, 2018 edition—CRE’s new interconnection methodology; Pemex’s discoveries; and inflation on the rise.




Last Week in a Minute or Less


Renewables & Electricity. The CEE forecasts low power prices; the CRE issued the new methodology for interconnection; and analysts expect high prices in the next power auction.


Natural Gas & Liquid Fuels. PMI declared the international light oil tender void; Repsol plans to open 200 gas stations this year; and ExxonMobil plans to collaborate with Pemex on new storage and distribution terminals.


Oil & Gas Upstream. Pemex made two new oil discoveries; AMLO will maintain farmouts; and a debate surrounds fracking.


Money & Power. Banxico held interest rates steady; fuel prices pushed inflation to 5.02%; and a Fibra E for jet fuel storage will be launched by the new government.


Déjà vu all over again. Last week’s readers were particularly interested in Enel’s sale (El Financiero – Spanish); IEnova and Trafigura’s new marine terminal (Platts – English); and the US turn to China after the NAFTA agreement (WSJ – English).



NAFTA Negotiation


Trade experts discussed the new NAFTA. The former US Undersecretary of Commerce and International Trade under President Obama said the new deal is “a redo, not a do-over” and a big win for the White House (Bloomberg – English).


Mexico emphasized its energy sovereignty in the new deal. The transition government’s negotiator for NAFTA said the energy chapter declares Mexico’s sovereignty over its energy resources (El Financiero – Spanish). The agreement provides legal certainty to service providers.


The new agreement may not consider the environment. According to the environmentalist organization Sierra Club, the trade agreement between the US, Mexico, and Canada does not mention climate change and ignores the commitments undertaken by the US in environmental multilateral agreements (El Universal – Spanish).


API gave it a thumbs up. The American Petroleum Institute and other business organizations welcomed the US-Mexico-Canada Agreement preserving investment protections (OGJ – English). Business groups urged Congress to approve the USMCA.


Mexico will depend more on the US with the new agreement. The USMCA reduced trade with Asia by drawing supply chains further inward among the three North American countries (Bloomberg – English). The US limited non-trio components in textiles and apparel, auto parts, and steel and aluminum.


E-commerce was discussed in the final tweaks to the new NAFTA. The US hoped to allow higher-value shipments to Canada and Mexico by online retailers, but failed with Canada’s more restrictive threshold (Reuters – English). The US goal was to double the value of goods that could be imported without customs duties from the US through shipping companies to Mexico.



The Road to Reform


PMI declared the international light oil tender void. Pemex Comercio Internacional (PMI) declared the international competition to buy 350,000 barrels of light crude oil (El Universal – Spanish) to be void. Participants could not meet the conditions requested to supply the Pajaritos terminal.


AMLO will maintain farmouts and power auctions. The chief advisor of the transition’s economic team announced farmouts and long-term power auctions will continue in the López Obrador administration (El Economista – Spanish) (Platts – English). The option to import fuel from other countries will also be considered.


The IMP backs 10% ethanol in gasoline. The Mexican Institute of Oil (IMP) supports the use of 10% ethanol to oxygenate gasoline in the metropolitan area of the Mexican valley (Reforma – Spanish). The IMP found no significant difference in emissions using 10% ethanol.


Analysts expect high prices in the next power auction. Experts estimate an increase in prices in the fourth long-term power auction that will take place in November (El Financiero – Spanish). Analysts pointed to the need for the new administration to announce investments for the transmission grids.


The CRE issued the new methodology for interconnection. The Energy Regulatory Commission published the methodology to estimate the financial guarantees for the interconnection of power plants and the connection of charging centers (DOF – Spanish).




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Political Economy


Doubts surround the future of fracking. President-elect López Obrador said that fracking would not be used during his administration (Milenio – Spanish). The director of Pemex’s exploration said there are 10,000 wells in Mexico that use fracking without contaminating aquifers (Excelsior – Spanish).


Pemex and the Education Ministry owe CFE. The CFE revealed Pemex and the Education Ministry lead the list of 30 federal institutions that owe payment for power service (El Universal – Spanish) to CFE Suministrador de Servicios Básicos. Pemex owes MXN182m.


Enquiries may delay projects. A proposed law for Indigenous Enquiries pending in the current Congress could establish the right for Indigenous communities to be consulted by three orders of Government for the development of any infrastructure in their territories (Reforma – Spanish). A secondary rule in the energy reform to develop social impact evaluations is lacking.


Fuel prices push inflation to 5.02%. The increase in fuel prices increased general inflation to 5.02% (Expansión – Spanish), slightly above the forecast of Reuters analysts. The rate is still well above Banxico’s goal of keeping it in the 3% range.


The INAI asked for info on Etileno XXI. The National Institute of Transparency, Access to Information and Personal Data Protection (INAI) said Pemex must hand over a public version of the minutes on Etileno XXI (Reforma – Spanish). Only the part dealing with the specifications and technical characteristics of the project must be protected.



Market Trends


Banxico held interest rates steady. Mexico’s central bank maintained interest rates steady in a divided vote (Reuters – Spanish) (Expansión – Spanish). A majority of Banxico board members voted to keep interest rates at 7.75%.


The CRE agreed to hold off on power tariff increases. The president of the National Chamber of Industry (Canacintra) reached an agreement with the Energy Regulatory Commission to stop power tariff increases in 2018 (El Economista – Spanish). The industries most affected by the increase in tariffs are the plastic, textile, and ice industries.


Onexpo asked to maintain fuel price control. The main group of gas station owners proposed to maintain the formula to fix gasoline prices in the next year (El Universal – Spanish). Since 2017, a mechanism was established to fix the maximum prices for gasoline and diesel for each region.


A jet fuel Fibra E will wait for the new government. Airports and Auxiliary Services (ASA) will leave the placement of Fibra E to the next administration (Milenio – Spanish). The goal is to modernize the infrastructure of jet fuel storage.



Strategy & Operations


Tabasco’s Congress advanced the new refinery. The Congress of Tabasco approved reforms to local public construction and acquisition laws to provide tenders for strategic construction projects and allow the construction of the refinery (Reforma – Spanish).


Repsol plans to open 200 gas stations this year. The Spanish company expects to open 200 gas stations; 18 are new gas stations and the rest used to be Pemex-branded (El Financiero – Spanish). Repsol already has 100 stations operating in 11 states.


The CEE forecasts low power prices…thanks to renewables. The Mexican Business Coordination Council (CEE) predicts Mexico’s power prices will drop by 40% by 2024 thanks to the increasing renewable capacity (Platts – English). Renewable generation capacity could lower prices from US$64/MWh in 2017 to US$38/MWh in 2024.


ExxonMobil will collaborate with AMLO. ExxonMobil will consider collaborating with López Obrador’s administration to explore opportunities in Mexico’s energy sector (Platts – Spanish). ExxonMobil could collaborate with Pemex in developing new storage and distribution terminals.


Pemex made two new oil discoveries. Pemex announced two new discoveries, the Manik and Mulach fields, in shallow waters close to Tabasco, which could contribute 45,000 daily barrels of oil by the fourth quarter of 2020 (El Economista – Spanish) (Pemex – English). Pemex’s six fields in the region could add a combined 210,000 barrels per day of new supply.



Old School Social


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



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.


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



Lateral Thinking


Asia can’t get enough of Mexico’s sea cucumbers. The high demand for sea cucumber is destroying the population of sea cucumbers in the Yucatán Peninsula (NYT – English). Divers in Río Lagartos found 14 metric tons of sea cucumber this year in contrast with the 260 metric tons harvested in 2014.



Quote of the Week


“El arte ha de ser, ante todo, un halago a los sentidos.”


“Art must be, above all, a praise for the senses.”


– Martín Luis Guzmán (1887-1976), Mexican novelist and journalist.



We hope you have a productive week. Please send any news, comments, or restocking strategies for sea cucumbers to


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