September 18, 2017 edition— The third electricity auction will draw better offers; Pemex is searching for a hydrogen supplier; and the Salina Cruz refinery was closed.
Last Week in a Minute or Less
Renewables & Electricity. The Oaxaca-Mexico City power line auction was postponed; the third electricity auction will receive better offers; and wind generation stopped in Oaxaca.
Natural Gas & Liquid Fuels. Cenagas will auction US cross-border pipeline capacity; Pemex is looking for a hydrogen supplier; and fuel supplies remained stable despite the earthquake.
Oil & Gas Upstream. Salina Cruz will be closed for a month and Mexico plans to expand its oil hedges.
Money & Power. The Finance Ministry worried about NAFTA; AMLO questioned the energy reform; and Mexico’s inflation reached its ceiling.
Déjà vu all over again. Last week’s readers were particularly interested in CRE’s new regulations (Spanish); NAFTA’s energy negotiations (English); and Mexico’s natural gas dependence (English).
The NAFTA negotiations
Finance Ministry issues its growth forecast; NAFTA results could factor in… The Finance Ministry forecasts an economic growth of between 2% and 3% and an average exchange rate of 18.10 pesos per dollar. Results obtained in the NAFTA renegotiations and the Federal Reserve policy can affect that growth (Spanish).
…and Meade says NAFTA renegotiations are going well. The Finance Minister believes the North American Free Trade Agreement’s renegotiation talks have been going well (English). The discussions are evolving as predicted and the three parties said they aim to finish talks by the end of 2017.
Trudeau and Canadian labor partnered up for NAFTA. Jerry Dias, the head of Canada’s largest private-sector union, met with Canada’s chief negotiator and he is at the forefront of Prime Minister Justin Trudeau’s renegotiation strategy. Dias hates NAFTA and Trudeau is pushing for stronger labor rights (English).
Ross threatened to withdraw again. Commerce Secretary Wilbur Ross says “fixes” are needed because the agreement “has not worked the way it was intended” (English). His remarks came after the end of the second round of negotiations which closed on an optimistic tone.
The Road to Reform
The CFE postponed the Oaxaca-Mexico City power line auction. The state-owned company delayed the auction for the first direct-current line with capacity to transport 3,000MW (Spanish). The auction is scheduled for the end of 2017, after a year’s delay in the US$1.7bn project.
The third electricity auction will yield better offers. On Nov. 22, the third electricity auction will attract more “realistic” offers, bringing US$3bn in additional investments in clean energies, according to the development bank representatives (Spanish). Progress has been made on finance schemes for at least seven projects from the previous auctions (Spanish).
Cenagas will auction US cross-border pipeline capacity. The National Gas Control Center will auction 2.3Bcf/d of capacity in five US cross-border pipelines on CFE’s behalf (English). The capacity will be auctioned under a one-year contract from Oct. 1, 2017 until Sept. 30, 2018.
Pemex is choosing a hydrogen supplier for Cadereyta and Madero. Pemex started the process to choose a hydrogen supplier for the Cadereyta and Madero refineries (Spanish). The partnerships will cut costs and improve the reliability in hydrogen generation in order to reduce risks in fuel processing and unscheduled stoppages.
Political Economy
A massive earthquake killed 90 people in Oaxaca and Chiapas. A magnitude 8.1 earthquake on Sept. 7 killed 90 people in southern Mexico. Houses and schools had been damaged and hundreds of thousands of people do not have access to water service (English).
A blackout hit four states. The CFE said on Sept. 10 that a technical failure affected the San Jerónimo Substation in Monterrey, followed by power cuts in Chihuahua, Coahuila, Nuevo León and Tamaulipas (Spanish). Industries were affected for several hours.
Pemex and CFE work on large budgets for retirees. Both state-owned companies proposed spending MXN118.7bn in pensions and benefits for nearly 146,000 retirees in 2018 (Spanish). Pemex plans to maintain the same budget for 2018, and CFE plans a 16.5% increase (Spanish).
López Obrador questioned Mexico’s energy reforms. In an event hosted by the Dialogue, the leftist candidate Andrés Manuel López Obrador, the front runner in Mexico’s presidential elections next year, said the reform has failed to increase investment and oil production. He vowed to review oil contracts (English).
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Market Trends
Carstens trusts inflation has reached its ceiling. Mexico’s central bank governor, Agustín Carstens, believes inflation has reached its highest level and in 2018 will meet the bank’s 3% goal (Spanish). The minimum wage could be increased if there is a decrease in inflation based on a new methodology used last year by the Commission of Minimum Wages (Spanish).
Hurricanes Irma and Harvey will hit oil demand. Oil demand likely will fall by 900,000 barrels per day in September due to the impact of hurricanes Harvey and Irma, according to Goldman Sachs (English) (Spanish). Irma will negatively affect oil demand but not oil production or processing.
Despite the earthquake, fuel supplies remained stable. Mexico’s state oil company said fuel supplies were not interrupted by the magnitude 8.1 earthquake (English). Pemex said it established a strategy to secure gasoline, diesel, and jet fuel from other markets so inventories could cover demand.
Mexico plans to expand its oil hedges. Finance Minister José Antonio Meade said Mexico is likely to expand its oil hedge for 2018 as it liberalizes gasoline prices (English). Meade believes the Oil Revenue Stabilization Fund and reduced reliance on oil revenue will help keep the government’s price tag from rising as the program expands.
Strategy & Operations
Empalme’s mayor shut down CFE’s plant after Peña Nieto opened it. According to the mayor of the municipality, the state-owned company did not pay for the construction permits for the Central Empalme 1, inaugurated three weeks ago by President Enrique Peña Nieto (Spanish). He said the Empalme 2 plant being built by CFE in Cochorit will be finished soon.
Querétaro cuts the ribbon on the nation’s biggest solar plant. Fomento Queretano and Grupo Q opened the Microparque Industrial Q. Park and the Súper Q Solar park with an investment of MXN150m (Spanish). The power generated will supply energy to 120 Super Q stores in the Bajío region.
The earthquake shut down Salina Cruz for a month… Pemex expects to reopen the Salina Cruz refinery in three to four weeks once the electrical systems affected by the earthquake are fixed (Spanish). Power generators need to be realigned; there was no structural damage to the refinery (Spanish).
…and stopped wind generation in Oaxaca. All the wind parks in the Tehuantepec Isthmus were shut down due to the earthquake, which affected the transmission grid in Chiapas and Oaxaca (Spanish), according to Acciona Energía México, which operates four wind parks in Oaxaca, three to supply CFE and one for Cemex.
Old School Social
Events in the world beyond your screen – go see and be seen!
The Midstream Missions is Sept. 21-22 at the Hilton Mexico City Reforma in Mexico City.
The British Chamber of Commerce-Mexico’s 16th annual Energy Day is Oct. 3 at the Camino Real Hotel in Mexico City.
The Platts 21st Annual Mexican Energy Conference is Nov. 12-14 at the Hilton Mexico City Reforma.
Lateral Thinking
Artificial intelligence will help Guanajuato’s tourists. Utrip is partnering with the state of Guanajuato to use artificial trip-planning intelligence to provide travelers with curated content (English). The program matches a traveler’s interest with the location’s dining options, sights, and activities.
Quote of the Week
“El indulto es para los criminales, no para los defensores de la patria.”
“The pardon is for criminals, not for the defenders of the homeland.”
-Miguel Hidalgo y Costilla (1753-1811), Mexican Catholic priest and a leader of the Mexican War of Independence.
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