September 7, 2020 edition—Shell’s deep water investment; ethane imports; and CFE’s private investment.
Last Week in a Minute or Less
Electric Power & Renewables. Concamin said 285 power projects are waiting; CFE may have to open up to private investment; and Greenlux has big plans in Mexico.
Natural Gas Mid-Downstream & LNG. Pipelines are crossing Chiapas without much information; and Mexico’s natural gas demand was hit by COVID-19.
Liquid Fuels Mid-Downstream. The CRE is accused of favoring Pemex on “dirty” diesel; refineries have not yet recovered; and Mexico will increase ethane imports.
Oil & Gas Upstream. Shell will bet US$441m in deep water; and Pemex is after its second farmout.
Government & NGO. AMLO plans no more debt or taxes in 2021; Mexico will have to check its US steel exports; and the Finance Ministry’s income took a hit.
Déjà vu all over again. Last week’s readers were particularly interested in LNG imports (Argus Media – English); Braskem-Idesa and Pemex’s contract (El Economista – Spanish); and the fracking debate (El Economista – Spanish).
Geopolitics & Trade
Mexico will have to check its US steel exports. US Trade Representative Robert Lighthizer announced additional measures to control steel imports coming from Mexico and Brazil (El Financiero – Spanish). Mexico’s steel exports will remain tariff-free.
Terra went from Mexico’s solar to the US. The Mexican company Terra will compete in the US solar power generation market (El Economista – Spanish). Terra has 50MW of distributed generation in homes, commerce, and industries in Mexico.
US farmers are unhappy with the USMCA. The southeastern produce industry believes the USMCA trade agreement has not helped them (Market Place – English). On September 1, the US Trade Representative released its plan, which includes 201 investigations on blueberries, strawberries, and bell peppers (Produce Blue Book – English).
The Finance Ministry’s income took a hit. The Finance Ministry announced that the COVID-19 economic crisis caused a MXN395.1bn loss in public income, a 10.7% fall compared to July 2019 income (El Economista – Spanish). The reason is the drop in oil and tax income of 27.3% and 6.7%, respectively.
HR Ratings expects Mexico’s economy to contract by 9.5%. The international rating agency changed its economic forecast for Mexico to a 9.5% contraction, from a previous 7.4% contraction forecast (El Financiero – Spanish). HR Ratings is concerned with the increase of contagions.
Pemex’s climate change policy concerns investors. Investors expect Pemex to adapt to climate change and set goals to cut carbon emissions just like BP, Royal Dutch Shell, and Repsol have (El Economista – Spanish). However, the state-owned company seems determined to swim against the flow.
Banxico expects “Great Depression” economic lows. Mexico’s central bank warned that the country’s economy could contract by almost 13% this year (Reuters – English). The GDP data showed the COVID-19 effect in the country sank the economy to Great Depression levels.
AMLO plans no more debt or taxes in 2021. President López Obrador said that he does not plan to increase debt or taxes for the 2021 budget (El Financiero – Spanish). The budget proposal will be published September 8.
Legal & Regulatory
CFE may have to open up to private investment. The state-owned company may have to look for new partnerships with private companies to boost the power system digitalization and the use of renewable energies (El Financiero – Spanish). In recent months, the CFE has been closed to private investment.
The CRE is accused of favoring Pemex. The Energy Regulatory Commission (CRE) offered another extension to the state-owned company to meet the norm for clean diesel, allowing it to continue selling “dirty” diesel (El Norte – Spanish). Pemex Transformación Industrial (TRI) was allowed to continue selling in the areas close to storage terminals (Periódico Supremo – Spanish).
Concamin said 285 power projects are waiting. According to the Energy Commission of Mexico’s Industry Chamber Confederation, there are 285 power infrastructure projects that represent US$100bn in investment pending approval by the Energy Ministry (El Financiero – Spanish).
Pemex is after its second farmout. The Energy Ministry asked to implement the second farmout of a shared field between a private company, Hokchi Energy, and the state-owned company (El Economista – Spanish). The Itta-1EXP was drilled by Pemex in July 2019.
After the makeover, refineries have not recovered. Despite the almost MXN23bn invested to rehabilitate the refineries, in July, Pemex’s refineries processed 520,300 barrels per day, the third-lowest amount in history (El Economista – Spanish). The goal of Pemex’s business plan is to reach 788,000 barrels per day.
Baja California’s heat pushes power subsidies up. The state-owned company signed an agreement with Baja California to increase subsidies and support for its clients (El Economista – Spanish). The state is experiencing high temperatures and, consequently, high power demand in the last weeks of the summer.
Mexico’s natural gas demand was hit by COVID-19. According to the US Energy Information Administration (EIA), the COVID-19 pandemic hit Mexico’s natural gas demand between April and July. Gas consumption in Mexico averaged 8.2 Bcf/d (Natural Gas Intel – English).
Mexico will increase ethane imports. Considering the insufficient domestic natural gas production, Mexico will need to build infrastructure to import ethane used in its petrochemicals industry (Natural Gas Intel – English). Pemex’s total natural gas output, including with joint venture (JV) partners, stood at 3.75 Bcf/d as of July.
Strategy & Operations
Pipelines are crossing Chiapas without much information. According to a specialist in rural development and indigenous communities’ representative, the construction of three pipelines in Chiapas has not been very transparent and almost no information has been given to the populations that the pipelines cross (El Financiero – Spanish).
Shell opened a gas station in Nuevo León… The oil giant opened its first gas station in the 41st kilometer of the Monterrey-Saltillo highway (El Financiero – Spanish). Shell has over 200 gas stations in 17 states in Mexico.
…and Shell will bet US$441m in deep water. The National Hydrocarbons Commission (CNH) approved Shell’s request to increase its investment in the areas awarded in Round 2.4 by 36% to US$441m by 2023 (El Economista – Spanish). The Xochicalco-1EXP well will be the fourth well that Shell drills in deep waters in Mexico.
Greenlux has big plans in Mexico. Greenlux plans to extend renewable energy benefits, installing more than 2 million solar panels per month (El Financiero – Spanish). The company offers both systems connected to CFE and hybrid systems (connected to the grid and to batteries).
Generación VI recovered 95.21MW. The CFE subsidiary recovered 95.21MW by implementing a power generation rehabilitation and maintenance program (PV Magazine – Spanish). Generación VI increased its generation availability by 5.6%.
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!)
The 2nd Edition of The Madrid Energy Virtual Conference will be held September 28-October 2.
MIREC Week has been postponed from June 2-4 to October 8-10 at Centro Citibanamex.
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.
Youths go to court to fight climate change. A Mexican court will hear a case brought by 15 young people demanding President López Obrador’s government set clear policies on climate change (Voa News – English). The youths, aged 17 to 23, demand clear regulations and public policies.
Quote of the Week
“El conocimiento no debe comenzar por la puerta falsa de la inteligencia, sino por la de los sentidos.”
“Knowledge should not start with the false door of intelligence but using the senses.”
– Daniel Cosío Villegas (1898-1976), Mexican economist, historian, and diplomat.
We hope you have a productive week. Please send any news, comments, or climate change rulings to MexicoWeekly@energynarrative.com.
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