September 9, 2019 edition—Siemens’ smart meters; Stabilis LNG plant; and crude contracts.
Last Week in a Minute or Less
Renewables & Electricity. Siemens and CFE discuss smart meters; the government slowed down renewables’ development; and Baja California municipalities suffered a blackout.
Natural Gas & Liquid Fuels. Stabilis may plan an LNG plant in Nuevo León; and Mexico has almost sealed its oil hedges.
Oil & Gas Upstream. The CNH backs Pemex’s plans; the government plans alliances with the private sector; and those contracts could stabilize crude production.
Money & Power. Pelosi and Trudeau discussed the new NAFTA; Banxico cut Mexico’s GDP outlook; and everyone expects another interest rate cut.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s gas import (El Financiero – Spanish); private investment in gas distribution (El Finabciero – Spanish); and Moody’s opinion on the pipeline resolution (Reuters – English).
The US Chamber of Commerce trusts a quick USMCA ratification. According to CNBC, the head of the US Chamber of Commerce estimates the US Congress has enough votes to pass the new NAFTA (Reuters – English). The ratification would be considered a positive signal for US-China trade talks.
US Democrats are still concerned with enforcing the USMCA. US House of Representatives Speaker Nancy Pelosi explained the Democrats’ concerns about enforcement of the USMCA and Mexico’s implementation of labor standards to Canada’s Prime Minister Justin Trudeau (Reuters – English).
Pelosi and Trudeau discussed the new NAFTA. Speaker Nancy Pelosi and Canadian Prime Minister Justin Trudeau discussed the progress of the USMCA Working Group’s discussions (The Hill- English). Trudeau tweeted to thank Pelosi for the call to discuss the USMCA (NY Post – English).
Mexico is the United States’ main trade partner. Mexico exported more products in July, reaching US$30bn, a 6.7% increase (El Economista – Spanish), compared to the US$41bn sold by China, down 11.9%, and Canada’s US$26.8bn, an increase of 0.1%. NAFTA has helped industry to maintain and increase trade.
The Road to Reform
The government plans alliances with the private sector… The government will allow Pemex to create alliances with private companies for exploration and production projects (El Financiero – Spanish). The government is organizing commissions to meet private companies and discuss projects behind closed doors.
…and the contracts could stabilize crude production. Oil produced under contracts awarded to the private sector increased 18% in a month, reaching 85,224 daily barrels in July, and largely offsetting Pemex’s 0.2% production decline (El Economista – Spanish). AMLO pledged MXN48bn in investment for PEP to exploit 20 fields.
The CNH backs Pemex’s plans. The National Hydrocarbons Commission (CNH) approved the state-owned company’s plans to increase oil production, investing US$926m in the Madrefil onshore field (El Economista – Spanish). Pemex expects to recover 10 million barrels of crude and 3,000 million cubic feet of gas more than the previous estimate by 2040.
The government slowed down renewables’ development. According to the CEO of Enlight, President López Obrador’s energy policy has focused on restructuring hydrocarbons and taking away support for renewables (Forbes – English). The amount of clean energy produced decreased by 0.18% compared to the previous year (El Economista – Spanish).
Government savings reached MXN197.8bn in July. Cuts in public spending increased in July, reaching MXN197.8bn despite the Finance Ministry’s efforts to increase public spending (El Financiero – Spanish). The Finance Ministry said the drop in programmed expenses was compensated by CFE’s expense.
Banxico cut Mexico’s GDP outlook… Mexico’s central bank reduced Mexico’s growth outlook and expects the GDP to grow between 0.2% and 0.7% (El Economista – Spanish). Analysts forecast a growth between 0.5% and 0.79% for 2019 (El Financiero – Spanish).
…and AMLO criticized the obsession over growth. President López Obrador suggested forgetting the technocratic obsession with measuring everything regarding growth and emphasized that the goal is to improve wealth distribution (El Financiero – Spanish). AMLO also said “the national interest must be above the private interest” (Reuters – English).
Moody’s tied Mexico’s rating to its 2020 GDP. The rating agency could reduce Mexico’s sovereign rating between June and September 2020 if economic growth capacity remains under 2.6% (El Economista – Spanish). The rating could also be cut if institutional weakening in the economic sector persists.
Mexico has almost sealed its oil hedges. Mexico is closing this year’s deal on its oil hedging program on Wall Street despite the slow progress due to volatile oil prices and the change to marine fuel regulations (Reuters – English). The Finance Ministry received the authorization for 2020 oil hedges (El Financiero – Spanish).
Everyone expects another interest rate cut. After Banxico cut the 2019 economic forecast, analysts expect another interest rate cut in Mexico in September (Reuters – English). Banxico is concerned with slowing growth, domestic demand, and private investment.
AMLO bragged about crude production. President López Obrador said his administration stopped the fall in Pemex’s crude production for the first time in 14 years (El Financiero – Spanish). AMLO said that in 2004, Pemex’s average production was 3,400,000 barrels, dropping to 1,700,000 barrels in 2018.
The CNH expects Mexico’s dependence on US natural gas to go up. The National Hydrocarbons Commission (CNH) forecasts a 25% increase in Mexico’s imports of US natural gas by 2024 (Natural Gas Intel – English). The resolution of the pipeline discussion will mean an increase of US natural gas supply in Mexico (Power Mag – English).
Strategy & Operations
Stabilis may plan an LNG plant in Nuevo León. The Texan company is considering building its first LNG plant in Monterrey. The goal is to receive natural gas from Eagle Ford Shale at the plant, cool the gas, and transport it to remote clients (El Financiero – Spanish).
Veracruz is open to new hydrocarbon businesses. The state government and Oil and Gas Alliance, a group of hydrocarbon services businesses, signed an agreement to boost business opportunities in the state (El Financiero – Spanish). Members of the group would have access to a schedule that starts by the end of September.
Siemens and CFE discuss smart meters. The German company is negotiating the sale of new smart power meters with the state-owned company (El Financiero – Spanish). The meters can provide details of each of the grid’s transformers.
G500 bets on better fuel performance. G500 said its gasoline is different from other gas stations due to additives that obtain better engine performance (El Financiero – Spanish). G500 gasoline has the TOP TIER certificate, an international program developed by nine auto producers.
Baja California municipalities suffered a blackout. Four municipalities in Baja California, Rosarito, Ensenada, Tijuana, and Tecate suffered blackouts due to technical flaws in two generation units in the Mexicali combined-cycle plant (El Economista – Spanish). The CFE worked to reestablish power to all clients.
BP, Gulf, Fullok, Exxon, and Pemex fight over the fuel market. In Nuevo León, seven companies compete to control the fuel market while at the national level, 29 brands, including Pemex, fight over the market (El Financiero – Spanish). Some companies are importing gasoline, but most purchase it from Pemex.
Old School Social
Events in the world beyond your screen—go see and be seen!
Energy Day 2019 is scheduled for October 8 at the Hotel Hilton Mexico City Reforma, in Mexico City.
The XLIII National Week of Solar Energy ANES will be held October 14-18 in Nuevo Vallarta, Nayarit.
A Mexican cave has the world’s largest crystals. In 2000, two miners discovered a subterranean chamber, approximately 98 feet long and 33 feet wide, filled with 500,000-year-old selenite crystals (Interesting Engineering – English). In 2017, NASA researchers found bacteria in some of the crystals that is not related to any known genetic database.
Quote of the Week
“El conocimiento no debe comenzar por la puerta falsa de la inteligencia, sino por la de los sentidos.”
“Knowledge must not begin with the false door of intelligence, but with that of the senses.”
– Daniel Cosío Villegas (1849-1873), Mexican writer focused on poetry.
We hope you have a productive week. Please send any news, comments, or selenite crystals to MexicoWeekly@energynarrative.com.
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