October 31, 2016 edition— One more week for Trion questions; Enel will invest US$1bn; and Eni is drilling Amoca 2.
Last Week in a Minute or Less
Renewables & Electricity. Enel bets US$1bn on Mexico; 14 electricity companies switched to the new scheme; and Sener creates a clean energy atlas.
Natural Gas & Liquid Fuels. Cofece needs 180 days to decide on liberalization of gasoline prices; pipeline construction divided the Yaqui community; and Fenosa and Natgas partnered to open nine natural gas stations.
Oil & Gas Upstream. Trion bidders got an extra week for more questions; Eni will drill an assessment well; and Pemex’s crude oil exports increased 22%.
Money & Power. Mexico established terms on a 1.9bn euros bond; Congress increased the internal debt to MXN525bn, and together with the Finance Ministry added MXN50bn to the budget.
Déjà vu all over again. Last week’s readers were particularly interested in the shale project approved by the CNH (Spanish); Pemex’s second farm-out for two shallow-water offshore fields (English); and the reform to the Hydrocarbons Law (Spanish).
The Road to Reform
CNH offered yet another extra week to Trion bidders. The National Hydrocarbons Commission (CNH) modified the bidding terms to extend the deadline for contenders to submit questions (Spanish). The period for requesting information ends October 31 and the responses will be offered by November 4.
The CRE approved new gasoline contracts. The Energy Regulatory Commission (CRE) approved contract models for marketing and retailing gasoline and diesel to be used by Pemex (Spanish). Suppliers of the state-owned company will have to adopt these contracts, selecting either a direct sale or a marketing contract.
Small electricity generators are switching to the new scheme. Fourteen power generators are migrating to the regulations created after the reform since the new sector structure is largely implemented (Spanish). Energy sector officials say the rules permit more business opportunities, and that operators representing 1,000MW are abandoning the old regime.
The second farm-out is a US$4.2bn pie. The state-owned company expects investments of US$4.2bn in the second farm-out in the Ayin and Batsil fields. Operations could start in three years and achieve peak production of 70,000 barrels per day, a little more than 3% of Pemex’s current output (Spanish).
Sener creates a clean energy atlas. The Energy Ministry is developing an atlas of areas of high potential for clean energy (Azael) to help investors in planning for biomass, geothermal, solar, and wind projects (Spanish). Sener is still working on adding co-generation, hydroelectric, and wave power to the atlas.
Fitch and Pemex clashed over the state-owned company’s finances. According to Fitch, the taxes levied by the government will affect Pemex’s finances, increasing its debt and causing the company to face insolvency (English). José Antonio González, Pemex’s CEO, responded, pointing out the company’s finances are stable following the budget cut of MXN100bn (Spanish).
Mexico set terms on 1.9bn euros bond. The dual-tranche bond of 1.9bn euros was defined in a spread of mid-swaps plus 125bp on a 1.2bn euros eight-year tranche, below its initial guidance of 135bp (English) (Spanish). Expected ratings are A3/BBB+/BBB+. The funds will refinance public debt, and bookrunners include BNP Paribas, Citigroup, and Santander.
The Finance Ministry and Congress added MXN50bn to the budget… The Finance Ministry and the Finance Commission of the lower house agreed to include an extra MXN50bn in the federal revenues law for 2017 (Spanish). The funds will be obtained from increased efficiency in tax collections, improved expectations for the exchange rate, and an increase in projected oil production.
…and congressmen increased the debt. The Chamber of Deputies approved a total increase of domestic debt of MXN525bn, MXN5.3bn more than the amount proposed by the government in its federal revenues law (Spanish). The debt approved equals 2.8% of GDP, and will be used to reduce the deficits of Pemex and CFE.
Cofece forgave Pemex’s fines in exchange for transparency. The Federal Economic Competition Commission (Cofece) pardoned fines imposed on the state-owned company for differential treatment of wholesale and retail distributors of marine diesel. Pemex committed to avoid discriminatory practices and will have to publish any discount offered on sales during the next five years (Spanish).
Cofece needs more time to decide about gasoline liberalization. Cofece needs 180 working days to deliberate on the conditions for competition in the gasoline markets (Spanish). The Energy Regulatory Commission (CRE) must define the pace of price liberalization in harmony with the Cofece opinion.
Pemex crude oil exports went up 22%. The state-owned company said that oil exports increased 22% in September, compared to the same month in 2015. Pemex exported 1.425 million barrels per day last month, its highest volume of exports in five years, since August 2011 (English) (Spanish).
World Bank forecast higher oil prices. The international financial institution raised its forecast for 2017 crude oil prices to 55 dollars per barrel from 53 dollars per barrel (English). The increase will benefit oil-producing countries and increase the cost of food due to the higher price of inputs used to produce comestibles (Spanish).
Low oil supply upsets refining. Pemex Exploración y Producción (PEP) reduced deliveries of light crude oil to the system of refineries by 54,000 barrels per day compared to 2015 (Spanish). The decreasing supply of available oil explains why refineries are operating at 63% of capacity, increasing oil product imports.
Mexico’s inflation exceeded the target level. Inflation during the first two weeks of October rose to 3.09%, its highest level in 18 months, surpassing the 3% target (English) (Spanish). According to the director of economic studies at Citibanamex, liberalization of gasoline prices will cause a rise in inflation which could reach 3.7% (Spanish).
Strategy & Operations
Eni will drill the Amoca 2 well. The National Hydrocarbons Commission (CNH) authorized the Italian company to drill a delimiting well to assess the amount of hydrocarbon reserves (Spanish). Amoca 2, located 2.1 km away from Amoca 1, will start drilling on December 1 and be finished by March 11, 2017 (English).
Enel will bet US$1bn on Mexico. The Italian multinational will invest US$1bn in the next two years (Spanish). Enel’s capacity will total 1,722MW in 2019, with 450 MW corresponding to wind plants and 53 to small hydroelectric plants, and the majority composed of new wind and solar projects.
Chevron-Texaco enters Mexico’s gasoline market. FullGas will bring the Chevron-Texaco brand to Mexico by the second semester of 2017, after completing market research and modernizing its gas stations (English) (Spanish). FullGas operates 50 gas stations in Mexico, and the Chevron-Texaco proprietary technology, offering low-sulphur fuel, is expected to be a big selling point.
Fenosa and Natgas will open nine natural gas stations. The two companies signed an agreement to propel use of vehicular natural gas in Guanajuato with nine gas stations (Spanish). Natgas and Gas Natural Fenosa will open four conversion garages and create 300 direct and 900 indirect jobs between 2016 and 2020.
IEnova’s pipeline construction divided the Yaqui community. One person was killed and eight were injured in a dispute over construction of IEnova’s Gasoducto Sonora at the Yaqui community of Loma de Bacum, Sonora (English) (Spanish). Construction is suspended until the dissenting Yaqui community agrees to allow the pipeline to pass through their territory (Spanish).
Old School Social
Events in the world beyond your screen – go see and be seen!
The Platts 20th Annual Mexican Energy Conference is November 14-15 at Hotel St. Regis, Mexico City. If you work in energy in Mexico, this is the place you need to be. Meet with senior officials and entrepreneurs from leading organizations and government institutions, and learn the latest about Mexico’s energy reform. For more information: www.platts.com/mexicanenergy.
The International Forum of Energy Mexico 2016 is November 23-24 at Querétaro Congress Center, Queretaro.
Energy Mexico 2017 is the main energy sector event that covers all activities within the energy industry, and the only one organized by the private sector that includes a conference with the most prestigious speakers and an international scale B2B exhibit. http://www.energymexico.mx/
Solar panels can clean our water. Zero Mass Water invented a material that absorbs water in the air after solar panels evaporate it to remove pollutants. The water then passes through a mineral block improving its taste (English). The company installed the panels in several countries, including Mexico and the US, in pilot programs.
Quote of the Week
“La miseria, la ignorancia, las enfermedades y los vicios esclavizan a los pueblos.”
“Misery, ignorance, sicknesses, and vices enslave nations.”
- Lázaro Cárdenas (1895-1970), Mexican president from 1934 until 1940
We hope you have a productive week. Please send any news, comments, or new ways of capturing clean water to MexicoWeekly@energynarrative.com.
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