September 2, 2019 edition—Pemex’s 64 allocations; Yucatán’s solar; and the pipeline conflict ended.
Last Week in a Minute or Less
Renewables & Electricity. Tamaulipas will take more advantage of wind; and Yucatán is working on all energy fronts.
Natural Gas & Liquid Fuels. Mexico reached a deal on pipelines; Profeco will stop 11 LP gas suppliers; and illegal taps are thriving.
Oil & Gas Upstream. Pemex retained 64 allocations; AMLO says new rounds depend on output; and Premier Oil is selling the Zama field.
Money & Power. Mexico is working on migration and growing at 0.0%; and Moody’s and Fitch celebrate the pipeline agreement.
Déjà vu all over again. Last week’s readers were particularly interested in the US-Mexico border energy park (Climate Liability News – English); Morena’s request for investment (El Financiero – Spanish); and the resolution over the pipeline conflict (Platts – English).
Mexico said no again to the United States’ “safe third country” proposal… Mexico Foreign Minister Marcelo Ebrard welcomed the Senate’s decision to reject “the safe third country proposal made by the US” (Reuters – English). The resolution to block a possible proposal means that the approval of the Senate would be needed before it could be implemented.
…and Mexico is working on migration. President López Obrador said the country was “doing well” attending to US demands to contain migration. Mexican and US officials will meet on September 10 to assess the situation after the 90-day deadline expires (Reuters – English).
Trump hopes for a quick ratification for USMCA. President Donald Trump hopes the US Congress will vote soon on the new NAFTA (Reuters – English). Prime Minister Justin Trudeau said the USMCA is a good agreement for workers.
The Road to Reform
Illegal taps are thriving like it’s 2018. Despite the government strategy to fight illegal taps, they remain at the same levels found in 2018. According to Pemex’s data, in 2019, between January and July, 8,655 illegal taps were registered while in the same period in 2018, 8,706 were found (El Economista – Spanish).
Mexico reached a deal on pipelines. The government and several infrastructure companies agreed to end the dispute over pipeline contracts. The agreement would result in US$4.5bn in savings for the government (Financial Times – English) and modifications in the length of certain contracts (El Economista – Spanish) (El Financiero – Spanish).
Pemex was awarded 64 allocations. The Energy Ministry let the state-owned company keep the assignments awarded in Round 0 that Pemex could have lost for lack of investment and activity on August 27 (El Economista – Spanish). The new allocations include 12 deepwater blocks, 22 in shallow waters, and 30 onshore (Natural Gas Intel – English).
Trucks wait for news on the clean diesel rule. Mexico’s truck manufacturers are not investing in assembling and importing vehicles that use clean diesel as doubts surround the application of the new rules that restrict the use of high-sulfur diesel (Reuters – English). The distribution of ultra-low sulfur diesel has been slow.
The Senate supports national and foreign investment in natural gas distribution. The president of the Senate Energy Commission defended the participation of private companies and investment to distribute gas (El Financiero – Spanish). The goal is to quickly develop gas distribution and electricity generation.
AMLO says new rounds depend on output. President López Obrador said that no new contracts will be awarded to private companies if they do not produce crude or invest (Reuters – English). The two deepwater rounds promised 31 wells, but that does not mean 31 new discoveries (Pulso Energético – Spanish).
Mexico is growing at 0.0%. Mexico’s GDP was reviewed and left at 0.0%, slightly weaker than the preliminary estimate of 0.1% (El Financiero – Spanish) (Reuters – English). President López Obrador is not as concerned with the flat growth as with wealth distribution (El Financiero – Spanish).
Mexico enjoys a record current account surplus. According to official data, Mexico published its largest current account surplus and the first in nine years thanks to strong foreign trade with the US (Reuters – English). Mexico runs a current account surplus equivalent to 1.6% of GDP.
Banxico’s governor is underwhelmed by Mexico’s growth. The head of Mexico’s central bank said that Mexico’s economy was growing less than it could have in previous quarters and that this gap has increased while facing a worldwide slowdown (Reuters – English).
Banxico cut Mexico’s growth outlook for 2019 and 2020. Mexico’s central bank reduced Mexico’s growth outlook for 2019 to 0.2% from 0.7% (El Economista – Spanish). Banxico cut the 2020 growth estimate from between 1.7% and 2.75% to between 1.5% and 2.5% (Reuters – English).
The Finance Ministry will “defend” Pemex and Mexico’s rating. Deputy Finance Minister Gabriel Yorio said the institution will work to defend Mexico’s and Pemex’s ratings, developing a realistic and prudent economic package for 2020 (El Financiero – Spanish). Yorio’s main concern was the risk of the US and China trade war.
Pemex’s production dropped between January and July. The state-owned company produced 1,671,000 barrels of crude per day on average in July, an 8.3% reduction compared to the same period in 2018 (El Economista – Spanish). In the first seven months of the year, average crude extraction has fallen 10%.
Mexico imports 90% of the natural gas it needs. Mexico imports 90% of the gas consumed in the country, an increase from the 88% registered in 2018 (El Financiero – Spanish). The data shows national domestic and industrial demand without considering the gas that Pemex uses internally for different activities.
Moody’s and Fitch celebrate the pipeline agreement. Moody’s said that the deal between the government and infrastructure companies over pipeline contracts was positive for the firms’ credit ratings (Reuters – English). Fitch agreed that the dispute resolution is positive, but does not end the uncertain environment surrounding the energy sector (El Financiero – Spanish).
Strategy & Operations
Yucatán is working on all energy fronts. While the Cenace recommended generation plants for Mérida, Cancún, and Campeche (El Financiero – Spanish), the governor requested the CCE’s help to complete solar projects (El Financiero – Spanish). Pemex pledged to supply 50 million cubic feet more of natural gas per day to Yucatán (El Financiero – Spanish).
Profeco will stop 11 LP gas suppliers. The consumer advocate institution (Profeco) said that 11 LP gas distributors refused to be reviewed a second time (El Economista – Spanish). Profeco presented a complaint before the Energy Regulatory Commission to retire their operation permits.
AMLO met ENI directors. President López Obrador met with the national and international CEOs of the Italian company (El Financiero – Spanish). AMLO thanked ENI for complying with its responsibilities, becoming the first company to produce oil after the energy reform.
Tamaulipas will take more advantage of wind. Tamaulipas’ Energy commissioner said that there are four projects that will start construction soon: two projects by Acciona and two by Thermion (El Financiero – Spanish). Engie Mexico plans to build a wind park in the Llera de Canales municipality.
Premier Oil launched the Zama field’s sale. The UK company launched a sale process for the 25% stake in the Zama offshore discovery to reduce its debt (Platts – English). The process would still leave it with other Mexican license stakes, including Block 30.
Old School Social
Events in the world beyond your screen—go see and be seen!
The Green Expo is scheduled for September 3–5 at the World Trade Center in Mexico City.
Puebla’s robotic trees will fight air pollution. Puebla installed “robotic trees” that aspirate as much air pollution as 368 real trees. The robotic trees, designed by a Mexican startup, use microalgae in their towering metal structure to clean carbon dioxide and other contaminants (France24 – English).
Quote of the Week
“La materia, inmortal como la gloria, cambia de formas, pero nunca muere.”
“Matter, as immortal as glory, changes shape, but never dies.”
– Manuel Acuña (1849-1873), Mexican writer focused on poetry.
We hope you have a productive week. Please send any news, comments, or robotic tree designs to MexicoWeekly@energynarrative.com.
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