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October 26, 2020 edition—LNG regulation; Dos Bocas’ progress; and CNH’s wells.
Last Week in a Minute or Less
Electric Power & Renewables. The Grijalva river will power up Chiapas; and if AMLO wishes, Iberdrola will stop its Mexico investments.
Natural Gas Mid-Downstream & LNG. The LNG sector asked for new regulation; Mexico is the future of LNG; and the Salina Cruz LNG project may not be viable.
Liquid Fuels Mid-Downstream. The Dos Bocas refinery is close to 25% completion, but will cost 11% more than expected; and Kansas City Southern picked up refined products rail shipments.
Oil & Gas Upstream. The CNH okayed investments for oil wells; and Pemex plans to produce 2 million barrels in 2024.
Government & NGO. Citibanamex expects 3.5% growth in 2021; the IMF forecast Mexican fiscal equilibrium in 2021; and AMLO expects job recovery by 2021.
Déjà vu all over again. Last week’s readers were particularly interested in CRE’s energy permits (El Financiero – Spanish); Impulsora’s agreement with TESLA (El Financiero – Spanish); and Baja California’s solar plant (PV Magazine – Spanish).
Geopolitics & Trade
The US industry lobby opposes Canada’s plastics ban. Nearly 70 American industry groups are concerned with Canada’s proposed single-use plastics ban, saying that any ban on plastic products manufactured in the US “meets the definition of a non-tariff barrier” (Politico – English).
Canadian dealers do not trust the USMCA. The chief economist for the Canadian Automobile Dealers said the increase in cost pressure should develop over the next two years (Wards Auto – English). The new deal states that automakers have to increase their sourcing to ensure 75% of a vehicle’s parts are made in the three countries.
US elections hit Mexico’s economy. Due to the impasse in the US Congress, the Mexican peso lost its winning streak against the US dollar. The link between greater political stability in the US with a stronger peso and higher investor confidence can be tracked back to 2016 (Mexico News Daily – English).
Political Economy
The IMF forecast Mexican fiscal equilibrium in 2021. According to the International Monetary Fund (IMF), Mexico’s public finances will recover its fiscal equilibrium next year (El Financiero – Spanish). The IMF forecasts the current administration’s average would be a 0.3% surplus.
AMLO expects job recovery by 2021. President López Obrador expects formal employment lost during the COVID-19 pandemic to recover in March 2021 (El Financiero – Spanish). Close to 320,000 jobs, among the 1,117,584 that were lost between March and July, are back.
Citibanamex expects 3.5% growth in 2021. According to the Citibanamex survey, Mexico’s GDP will contract by 9.8% in 2020 and grow by 3.5% in 2021 (El Financiero – Spanish). The new forecast is an improvement from the previous prediction of 3.4%.
Pemex’s finances are up for discussion. Analysts expect a financial plan from Pemex to avoid risking Mexico’s sovereign rating (El Economista – Spanish). Pemex faced a deficit in its financial balance due to its tax burden (El Financiero – Spanish), as half of its income goes to the Finance Ministry (El Economista – Spanish).
Legal & Regulatory
The new tax on gasoline was canceled. The Finance Minister confirmed dropping the proposal to create a complementary fee to the special gasoline tax already paid by gasoline consumers (El Economista – Spanish). The decision was made after the meeting between parliamentary groups and the Finance Minister.
The Dos Bocas refinery is close to 25% completion. The Dos Bocas’s refinery Phase 1 development is now completed, bringing the general progress to 24% (OGJ – English). President López Obrador said the refinery will be open by July 1, 2022 (El Financiero – Spanish).
Coparmex asked the government to respect regulating bodies. Mexico’s Business Confederation (Coparmex) asked for clear, transparent, and predictable regulation to continue the investments that generate more jobs and well-being for Mexican families (PV Magazine – Spanish).
The CNH okayed investments for oil wells. The National Hydrocarbons Commission (CNH) approved US$545m in investments in the third quarter of 2020 to drill 14 oil wells (El Financiero – Spanish) (Platts – English). Five of the wells were okayed for Pemex, two for IHSA, and two for Shell, among others.
The LNG sector asked for flexible regulation. According to the Mexican Association of LNG, the energy reform generated excessive regulation for LNG specialized companies, and the association asked for more flexible regulation and help to avoid cost overruns (El Financiero – Spanish).
Market Trends
Pemex plans to produce 2 million barrels in 2024. The state-owned company will produce 2,023,000 daily barrels of oil in 2024, thanks to the production from new fields (El Financiero – Spanish). The level is down from the 2.4 million barrels forecasted by the current administration as a goal for 2024.
Gasoline demand will recover slowly. Analysts expect a weak recovery in gasoline demand as long as the COVID-19 pandemic lasts (El Financiero – Spanish). Gas stations expect a complete reactivation in a year, as today workers continue in home offices and young people study at home.
Kansas City Southern picked up refined products rail shipments. The company increased rail shipments of refined products to Mexico by 61% in the year to 25,900 car loads, pushing revenues in the segment up 55% to US$49.8m (Platts – English).
Mexico is the small-scale future of LNG. Stabilis Energy LLC sees Mexico’s small-scale LNG market growing in “double digits” in the coming years (Natural Gas Intel – English). Natural gas pipeline exports from the US have continued to rise this year in step with pipeline infrastructure coming online.
Strategy & Operations
The Dos Bocas refinery will cost 11% more than expected. The new refinery will cost at least 11% more than the previous estimate, requiring a total investment of US$8.9bn (El Economista – Spanish). The Energy Minister requested additional budget for Pemex’s works in the refinery for MXN25bn in 2019.
The Salina Cruz LNG project may not be viable. According to Gadex, a proposed LNG export project is not logistically or economically feasible under current conditions (Natural Gas Intel – English). The government’s infrastructure plan included a MXN25.2bn gas export terminal in Salina Cruz on the Pacific Coast.
The Grijalva river will power up Chiapas. President López Obrador asked the state-owned company to change its model and increase actions to control the dams of the Grijalva river to avoid floods to Tabasco’s flatland (PV Magazine – Spanish). The goal is to set hydro as baseload and contribute to the regulation of Villahermosa’s voltage.
If AMLO wishes, Iberdrola will stop its Mexico investments. The CEO of the Spanish company said that no new projects will be started in Mexico if the government does not want it to keep investing there (Forbes – Spanish).
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
Thousands of pre-Hispanic ruins were found near the Maya train route. Experts in Mexico detected more than 2,000 pre-Hispanic ruins along the proposed route of the president’s Maya Train project on the Yucatán peninsula (US News – English). The sites were located using LiDAR elevation mapping technology.
Quote of the Week
“El crecimiento humano se derrama como los ríos: corre hacia las tierras bajas o deshabitadas.”
“Human growth spills like rivers; it runs toward low and uninhabited lands.”
– Lázaro Cárdenas del Río (1895-1970), Mexican general who served as President of Mexico between 1934 and 1940.
We hope you have a productive week. Please send any news, comments, or infrastructure projects to MexicoWeekly@energynarrative.com.
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