September 13, 2021 edition—Zama’s fight; natural gas imports; and power demand.
Last Week in a Minute or Less
Electric Power & Renewables.
Distributed power is on demand; the CRE froze out private power generation projects; and power generation capacity is needed for Mexico’s growth.
Natural Gas Mid-Downstream & LNG. Mexico can’t get enough of US natural gas; Mexico’s natural gas production is falling short; and natural gas prices reached new heights.
Liquid Fuels Mid-Downstream. The Finance Ministry will keep helping Pemex; and Pemex discovered illegal taps on LP gas pipelines.
Oil & Gas Upstream. Talos will fight for Zama; and the CNH explained Article 4 of the technical rules for secondary and improved recovery.
Government & NGO. Mexico wants to open US border activity; analysts expect 6.8% growth in 2021; and the 2022 budget will be limited by growth.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s LNG opportunities (Platts – English); Yucatán’s natural gas demand (Milenio – Spanish); and Mexico’s air rating (Reuters – English).
Geopolitics & Trade
Mexico wants to open US border activity. Mexico’s Foreign Relations Minister Marcelo Ebrard argued that Mexico has managed the COVID-19 pandemic well and there is no reason to maintain the closure of activities on the border as most citizens are vaccinated (Forbes – Spanish).
Mexico and the US reactivated their economic dialogue. The Finance, Economy, and Foreign Relations Ministries announced the relaunching of the High Level Economic Dialogue between Mexico and the US (El Financiero – Spanish). The meeting will focus on reconstruction; promoting economic, social, and sustainable development in Mexico’s south and Central America; and securing tools for future prosperity.
Mexico asked the US to invest in the region to fight migration… The government pressed the US to commit funds for the economic development of Central America to contain the increase in migration at the US-Mexico border (Reuters – English).
…and AMLO said Mexico takes care of migrants. President López Obrador said the National Institute of Migration and the National Guard are guaranteeing the security of migrants. AMLO said that “Mexico is not being pressured by any government” to control migrants (Forbes – Spanish).
The Finance Ministry will keep helping Pemex… The head of the Finance Ministry pledged to continue supporting the state-owned company, and there will be an open dialogue to develop projects that generate additional resources (El Financiero – Spanish). Analysts expected greater support for the energy sector and AMLO’s emblem projects (El Financiero – Spanish).
…but the 2022 budget will be limited by growth. The 2022 economic package increased public expenditures by 0.8%, considering a lower economic growth and its impact on tax collection (El Financiero – Spanish). Analysts expect less oil income and difficulties to increase oil production.
Analysts expect 6.8% growth in 2021. According to Mexico’s central bank survey, analysts expect 6.18% growth in 2021, a 0.08% increase from the previous forecast (El Financiero – Spanish). For 2022, analysts expect 2.90% GDP growth.
Legal & Regulatory
The CRE froze out private power generation projects. The Energy Regulatory Commission (CRE) has stopped permits for private sector companies to generate electricity since October 2020 (El Financiero – Spanish). Since that date, the CRE has rejected five requests to generate power.
Talos will fight for Zama. Talos submitted a Notice of Dispute to Mexico’s government over the decision taken to designate Pemex as the operator of the Zama field (OGJ – English) (El Economista – Spanish). Talos argued the decision is damaging to the company and constitutes a USMCA violation.
Experts trust Mexico’s energy sector opportunities despite legislation. According to the Woodrow Wilson International Center’s Duncan Wood, Mexico’s energy sector “still offers extraordinary opportunities” with the services sector “doing good business” and the private sector making discoveries (Natural Gas Intel – English).
The CNH explained Article 4 of the technical rules for secondary and improved recovery. The National Hydrocarbons Commission (CNH) published the interpretation for administrative purposes of the fourth article of the technical rules in secondary and improved recovery (DOF – Spanish).
Mexico can’t get enough of US natural gas… Mexico’s pipeline imports from the US reached a new record of 194,753 million cubic feet in June (Milenio – Spanish) (EIA – English). Natural gas imports increased 3.03% compared to the previous month.
…and natural gas prices are getting up there. Due to storms and accidents, Mexico’s natural gas prices have reached new heights: US$4.140/MMBtu (Natural Gas Intel – English). Mexico gas production fed into the Sistrangas rose week/week to 1.344 Bcf on September 1 from 1.281 Bcf.
Mexico’s natural gas production is falling short. According to the National Hydrocarbons Commission (CNH), the Ixachi and Quesqui natural gas fields are producing below their targets (Natural Gas Intel – English). Ixachi was expected to reach peak production of 638.5 MMcf/d by 2022 and Quesqui 410MMcf/d by 2021. As of July, Ixachi produces 200 MMcf/d and Quesqui, 254 MMcf/d.
Pemex discovered illegal taps on LP gas pipelines. According to Pemex’s data, LP gas theft from pipelines in Puebla has increased significantly since the current federal government took office (Mexico News Daily – English). In the first half of 2021, 846 illegal taps were found in Puebla compared to 717 in the same period of 2020.
Strategy & Operations
GE expects Mexico’s renewables progress to return. According to the head of Mexico’s General Electric, Vladimiro de la Mora, the stop in new renewable energy projects is temporary, as the country belongs to the global manufacturing chain of companies devoted to energy transition (El Economista – Spanish).
Distributed power is on demand. Power generation below 0.5MW installed close to the area of demand without using the grid multiplied by 8,000 in 10 years, reaching 975MW through 129,893 signed contracts (El Economista – Spanish). Solar energy through solar roofs in homes and big industries led the sector.
Mexico could be a hydrogen leader. According to the Mexican Association of Hydrogen, the country is in a privileged position to turn to green hydrogen to push decarbonization. Mexico needs to develop national policy strategies to include hydrogen in the energy transition (El Economista – Spanish).
Power generation capacity is needed for Mexico’s growth. An investment of US$160bn in new power generation capacity is needed to make Mexico’s economy grow at 3% (El Economista – Spanish). The government has no capacity to make these investments, and the participation of the private sector is required.
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!)
Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.
Mexico Assembly will be held in May 2022 in Mexico City.
Solar power heats water in Mexican homes. Mexico is number 9 worldwide in solar thermal energy, with approximately 2 million homes with solar boilers (Forbes – Spanish). These solar boilers represent an alternative to the most popular LP gas boilers and the pressure of higher LPG prices.
Quote of the Week
“Si no hubiera conflicto no habría películas, ni toros, ni periodismo, ni política, ni lucha libre, ni nada.”
“Without conflict there would be no movies, no bullfighting, no journalism, no politics, no wrestling, no nothing.”
– José Clemente Orozco (1883-1949), Mexican caricaturist and painter.
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