October 23, 2017 edition— Pemex will offer 15 more farmouts; NAFTA talks will extend into 2018; and Yucatán goes green.
Last Week in a Minute or Less
Renewables & Electricity. Yucatán will power cinemas with clean energy; El Cortijo wind farm will be working by the end of 2018; and Tamaulipas builders expect more wind farms.
Natural Gas & Liquid Fuels. Ethanol content complicates gasoline imports; Total entered Mexico’s retail petroleum market; and Gulf will invest US$611m in gas stations and storage facilities.
Oil & Gas Upstream. Pemex will auction 15 more farmouts; Pemex continues repairs at Salina Cruz; and the presidential election schedule will not affect tenders.
Money & Power. NAFTA negotiations will extend into 2018; the WB, the IMF, and Fitch raised Mexico’s economic growth forecast; and Mexico’s GDP may be shaken by earthquakes.
Déjà vu all over again. Last week’s readers were particularly interested in the CNH’s search for a fuel marketer (Spanish); the meeting between US and Mexican business leaders to defend NAFTA (Spanish); and the expected increase in the cost of solar energy (Spanish).
The NAFTA negotiations
The fourth round ended and the peso and loonie can relax. The trilateral statement on the conclusion of the Fourth Round affirmed negotiators made progress in customs and trade facilitation, digital commerce, and good regulatory practices (English). Canada’s and Mexico’s currencies recovered following the announcement that the NAFTA talks would be extended (English) (Spanish).
NAFTA renegotiation turned sour… US negotiators proposed ending independent legal dispute tribunals that oversee trade and investment (English). Another US proposal –a sunset clause to allow the NAFTA deal to expire after five years—is opposed by Mexico, Canada, and the U.S. Chamber of Commerce (English) (Spanish).
…and will extend into first quarter of 2018. Although US and Canadian trade officials accused each other of sabotaging the renegotiation (English), trade ministers from the three NAFTA countries agreed to extend talks into the first quarter of 2018 (English) (Spanish). The next rounds could each last up to a week (Spanish).
CCE gets ready to answer US demands. The Business Coordinating Council (CCE) will present counterproposals to US demands in the energy and automobile sectors during the November round of negotiations (Spanish). Mexico’s National Agricultural Council expects that allies of Mexico and Canada in Congress and US private companies will resist the proposals (English).
Come what may, Mexico and Canada will stick with NAFTA. Mexico’s President and Canada’s Prime Minister pledged to work out a renegotiation of NAFTA even as talks turned sour in the fourth round (English). Mexico and Canada agreed to remain in NAFTA even if the US leaves the agreement (Spanish).
The Road to Reform
Presidential election schedule will not affect tenders. The Energy Ministry’s undersecretary of hydrocarbons, Aldo Flores Quiroga, emphasized that next year’s calendar for tenders will remain unchanged (Spanish). Flores Quiroga said it is up to companies to decide whether they will remain in the country if Andrés Manuel López Obrador is elected president.
Gasoline imports in doubt over ethanol. A federal judge ruled against increasing ethanol content in gasoline from 5.8% to 10%, making it difficult to import gasoline (English) (Spanish). Private companies now operating gas stations depend on Pemex’s gasoline due to the lack of a pipeline network and storage terminals for handling imported fuel (Spanish).
Pemex will offer 15 more farmouts. In the last quarter of 2017 and first of 2018, Pemex plans to launch between 10 and 15 farmouts for exploration and production in fields of the Southeastern Basin (English) (Spanish). Pemex has received US$2.5bn from three blocks offered in farmouts or partnership (Spanish).
CFE subsidiary EPS IV bought some coal for Petacalco. The state-owned company purchased 2.6 million tons of coal worth an estimated US$260m (Spanish). The CFE subsidiary saved US$70.8m through the open auction process (Spanish).
Political Economy
International organizations are getting more bullish on Mexico’s economic growth. The Finance Ministry reported that the World Bank (WB), the International Monetary Fund (IMF), and Fitch ratings raised their growth forecasts for 2017 to 2.1%, 2.2%. and 2.3%, respectively (Spanish). Despite uncertainty generated by the NAFTA renegotiation, the international agencies believe structural reforms will push growth.
Pemex fired four warehouse workers for oil theft. The state-owned company rescinded the contracts of four workers at a warehouse and distribution center in Guanajuato to combat oil theft (English) (Spanish). Pemex will file criminal complaints against the workers and will investigate workers at other sites.
Mexico and Japan hit the gas on the TPP. Mexico and Japan pledged to accelerate a possible Trans-Pacific Partnership (TPP) with 11 signatory countries and without the US (English). The Economy Minister will propose anti-corruption regulations for NAFTA that are stronger than those in the original TPP rules.
Pemex used to allocate 80% of its contracts directly. Pemex CEO González Anaya declared that former Pemex CEO Lozoya Austin assigned “directly” 80% of the company’s contracts, while today 80% are awarded through tenders (Spanish). Regarding the Odebrecht case, Pemex filed a complaint with the Attorney General’s Office and has contracted an independent investigation.
A gas leak forced 1,294 to evacuate. An illegal tap produced a gas leak in the Cárdenas municipality of Tabasco, forcing 330 families, numbering 1,294 people, to evacuate (Spanish). The Mexican army took control of the area to prevent an explosion and physical harm to people from breathing the hydrocarbon.
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Market Trends
Banxico thinks Mexico’s GDP may be shaken by the earthquakes. Banxico’s deputy governor expects GDP growth forecasts to be adjusted downward in the short term due to the effects of the two earthquakes and recent hurricane (Spanish). The Bank of Mexico projects economic growth of between 2% and 2.5% in 2017.
Special economic zones will get investments before February 2018. The three special economic zones will receive their first investments before February 2018 (Spanish). Investments for US$6.5bn are expected for Puerto Chiapas, Coatzacoalcos, Lázaro Cárdenas, Salina Cruz, and Progreso.
Pemex is producing crude like it’s 1980. In September, the state-owned company produced 1.73 million barrels per day, 18% less than in the same period in 2016, and the lowest level in 37 years (Spanish). Analysts blame low fuel prices, Pemex’s lack of investment in drilling, and delays in forming Pemex partnerships.
Caution’s the word at Banxico. Mexico’s central bank will maintain a prudent monetary policy stance due to the state of NAFTA renegotiations (English). Analysts doubt Banxico will cut interest rates anytime soon.
Strategy & Operations
Yucatán’s clean energy will power a national cinema chain. In the first quarter of 2018, Yucatán will provide clean energy from wind plants in Dzilam de Bravo to national companies, notably Cinépolis (Spanish). In 2019, Yucatán will produce 1,344MW of clean energy, the equivalent of 35% of national clean energy production.
Gulf will bet US$611m on Mexico. Gulf will invest approximately US$611m in Mexico to “revolutionize” the gasoline market (Spanish). The first of the projected 2,000 gas stations was opened in Puebla, and Gulf will invest MXN4bn to transform 2,000 gas stations to its brand, winning 20% of the domestic market.
Total is also going for the retail gasoline market. Total allied with Gasored to rebrand a network of 250 retail outlets in Mexico City and around the capital under the Total brand (English). Total announced its first retail outlets will be open by year-end.
El Cortijo wind farm will be ready by the end of 2018… The wind farm located in Reynosa, Tamaulipas, with a capacity of 168MW, will start operations by the end of the third quarter of 2018 (Spanish). El Cortijo, operated by Acciona Energía, will power 350,000 homes with an investment of US$221m.
…and Tamaulipas builders expect more wind farms. The Tamaulipas chapter of the Mexican Construction Industry Chamber (CMIC) wants to go into the wind park construction business, a growing market in the state (Spanish). The chamber has met with wind farm developers and noted there is a lot of work for small, certified companies.
Repair work continues at Salina Cruz. Pemex reported that the restoration process continues at the Salina Cruz refinery in Oaxaca to repair damages caused by the September 7 earthquake (Spanish). Electricity generators moved laterally during the quake, affecting refinery operations, although the refinery installations did not suffer structural damages.
Old School Social
Events in the world beyond your screen – go see and be seen!
The 2o FIEM is November 15-16 at Querétaro Centro de Congresos. The event has achieved ample recognition in the energy sector and has become the opportunity to take advantage of and promote clean energies in the region.
Lateral Thinking
The border could be monitored by a camera-toting balloon. The US Border Patrol is considering watching the border for illegal activity using a surveillance balloon that can be moved quickly (English). The helium-filled balloon, coupled with hand-launched drones, could reduce the number of agents needed.
Quote of the Week
“El gobernante que pretende encauzar a su país hacia la democracia tiene que empezar por ser un verdadero demócrata, y demostrarlo tolerando la oposición, por más cruda que se ejerza en el mitin, en la prensa, en la diatriba personal.”
“The leader who pretends to direct his country towards democracy must start by being a true democrat, and prove it by tolerating opposition, no matter how harshly it is exercised in rallies, in the press, in personal diatribe.”
– Lázaro Cárdenas (1895-1970), a general in the Mexican Revolution and president of Mexico, 1934-1940.
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