The Weekly Brief: Mexico


September 23, 2019 edition—CFE’s cogeneration plants; Talos and Total go exploring; and a fourth power auction soon?





Last Week in a Minute or Less


Renewables & Electricity. A fourth power auction is on its way; Holbox’s substation will be half price; and the IFC will boost green projects.


Natural Gas & Liquid Fuels. The Texas-Tuxpan is up and running; the 2020 budget had a MXN46bn gift for Dos Bocas; and the US is sending oil into Mexico by truck.


Oil & Gas Upstream. A wide-azimuth survey began in Campeche; the CNH okayed Total’s and Talos’ change of plans; and new people were appointed at the CRE and Pemex.


Money & Power. Fitch and S&P said the 2020 forecast is too optimistic; the White House trade advisor is sure of the USMCA ratification; and power generation FDI fell 69%.


Déjà vu all over again. Last week’s readers were particularly interested in CFE’s combined-cycle plant in Baja California (El Financiero – Spanish); Canacintra’s opinion on natural gas supply in Yucatán (El Financiero – Spanish); and Pemex’s service contracts in December (El Financiero – Spanish).



NAFTA Negotiation


The Trump administration’s response to Democrats showed “significant flexibility.” The administration agreed to solve problems on how disputes are resolved, binational inspection teams to follow up on Mexico’s labor commitments, and a reduction in intellectual property protection for medicines is being discussed (Politico – English).


USMCA can help farmers hit by China trade war… Midwest farmers are feeling the strain of the US-China trade war with bankruptcies skyrocketing, and farmers are expecting the USMCA ratification to bring some stability (Fox News – English). Reaching a deal with the two neighboring countries will open up a much-needed avenue.


…and representatives from other sectors agreed. Representatives from the automotive, agriculture, dairy, and trucking sectors agree that delaying the USMCA ratification prolongs economic uncertainty (The Hill – English). The USMCA includes provisions guaranteeing free international data transfers.


The White House trade advisor is sure of the USMCA ratification. Peter Navarro trusts 100% that the USMCA will be ratified. House Speaker Nancy Pelosi said negotiations with the administration continue, discussing the language to be used (El Financiero – Spanish), and said Democrats are on “a path to yes” (CNBC – English).




Editorial Interlude


Our website just got a makeover, including an all-new archive for The Weekly Brief: Mexico. Subscribers can now search individual blurbs from past editions and filter the results by date, topic, sector, and source.


We think it’s pretty nifty, but check it out here for yourself!

  • The Weekly Brief: Mexico team ___________________________________________________________________________________________________



The Road to Reform


New people are coming to the CRE and Pemex. The name of the new head of the Energy Regulatory Commission is expected in the next days (El Financiero – Spanish). The Senate ratified Rafael Espino as the new independent advisor for Pemex (El Financiero – Spanish).


The 2020 budget had a MXN46bn gift for Dos Bocas. The 2020 budget included MXN$46bn from the Energy Ministry to capitalize Pemex to build the Dos Bocas refinery (El Financiero – Spanish). In 2020, Pemex requested funds for MXN523bn, 8.8% more than the previous year.


Texas-Tuxpan is up and running. The Sur de Texas-Tuxpan pipeline started operations after the dispute concluded (Reuters – English) (El Financiero – Spanish). Injections to the pipeline had slowed down to an average of less than 1MMcf per day from a previous level of 45MMcf per day (Platts – English).


The CNH and the CRE asked for more money. The National Hydrocarbons Commission and the Energy Regulatory Commission requested budgets of MXN219.8m and MXN252.9m, respectively (El Financiero – Spanish). The amounts are MXN4m and MXN5m more than the previous year’s budget.


A fourth power auction is on its way. Energy Minister Rocío Nahle announced that a fourth power auction will be held where it is needed and transmission capacity limitations were to blame for the earlier cancellation (El Financiero – Spanish). The Cenace estimates the previous three auctions generated US$9bn in investments (Reforma – Spanish).



Political Economy


Fitch and S&P said the 2020 forecast is too optimistic. Fitch and S&P described the 2020 economic growth forecast of 1.5% to 2.5% as too optimistic, and their growth projections are expected to be more conservative (Reuters – English) (El Financiero – Spanish). Fitch did recognize the government’s efforts to maintain a prudent fiscal policy (El Economista – Spanish).


The CIEP said the budget became a political document. The Center of Economic and Budget Research said the 2020 budget is a political document that prioritizes the projects chosen by President López Obrador (El Financiero – Spanish). The CIEP said the budget presents a responsible macroeconomic framework.


The Central American Development Plan will follow NAFTA’s example. The plan to end migration in Central America is to build an economic space similar to the one created with NAFTA (El Financiero – Spanish). Improvements in strengthening tax administration and ending privileges are also recommended.


The 2020 budget punishes the states. The 2020 budget includes the smallest increase of federal allocations in the last eight years due to a fall in collection next year (El Financiero – Spanish). States will receive MXN944.2bn, a 1.8% increase compared to the previous estimate.



Market Trends


The US is sending oil into Mexico by truck. US exporters have increased the use of trucks to carry fuel into Mexico (Reforma – Spanish). As Mexico struggles to cover demand, Windstar and NuStar are using trucks and developing a distribution center to manage fuel export (El Financiero – Spanish).


Power generation lost 69% of FDI. From January to June, Mexico received 68.5% less foreign direct investment to generate and distribute power energy than in the same period in 2019 (El Norte – Spanish). The data was published by the Economy Ministry.


AMLO pledged no changes in fuel prices after the attack on Saudi Arabia. President López Obrador said fuel prices and gasoline supplies will remain stable despite the attacks on Saudi oil sites (Reuters – English) (Forbes – Spanish). AMLO said prices and supply are “protected.”


Pemex placed US$7.5bn of bonds. The state-owned company placed US$7.5bn worth of bonds to refinance its debt (Reuters – English) (El Economista – Spanish). The placement was oversubscribed more than five times with total demand reaching US$38bn, becoming the biggest transaction in Pemex’s history.



Strategy & Operations


The CFE okayed three combined cycle plants. The board of the state-owned company approved the construction of three combined-cycle plants with a capacity of 1,720MW in the center and northeast regions (El Economista – Spanish) (Reforma – Spanish). The amount is 2.2% of the total capacity in the country from CFE and private companies.


Holbox’s substation will only need half of its budget. Holbox will have a substation by 2020 with an investment of MXN115m, 41% of the budget estimated by the National Center of Energy Control (Cenace) for the construction (El Financiero – Spanish).


The IFC will boost green projects. The International Finance Corporation (IFC) offered a US$100m loan to Banco Sabadell to finance green projects in the next ten years (El Financiero – Spanish). The goal is to fund clients with sustainable projects such as hotel developments and green buildings.


Mexican ports will increase their capacity with new terminals. Caxxor and Acxesa will develop three new marine terminals in Puerto Chiapas, Veracruz, and Soto la Marina (El Financiero – Spanish). Investment for each of these projects amounts to US$264m, US$230m, and US$450m, respectively.


SNG Group and Fermaca will partner up on gas distribution. SNG Group and Fermaca will join forces to distribute natural gas from Waho, Texas in Aguascalientes, Ciudad Juárez, Chihuahua, San Luis Potosí, Jalisco, and Zacatecas (El Economista – Spanish). The project will require an investment of US$3.5m.


A wide-azimuth survey began in Campeche. A wide-azimuth (WAZ) survey covering 5,080 sq km began in the Salina del Istmo basin in Campeche, providing the first 3D coverage over the shallow water area (OGJ – English). The multiclient project hired WesternGeco to complement the current WesternGeco WAZ coverage.


The CNH okayed Total’s and Talos’ change of plans. The National Hydrocarbons Commission (CNH) granted a two-year extension and approvals for additional exploration activities on Block 7, located in the Sureste Basin (Euro-petrole – English). The CNH approved Total’s modification on its exploration plans, where the company will invest US$22m (Reforma – Spanish).



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.



Lateral Thinking


Tortillas may be to blame for a folate deficiency. Columbia University and the National Institute of Public Health, Mexico, studied folic acid fortification in stable foods made from wheat and corn and found that a large proportion of women’s folic acid intake is below the levels recommended by the World Health Organization (Eurekalert – English).



Quote of the Week


“El afán de grandeza y el orgullo han extraviado al hombre.”


“The eagerness for greatness and pride have lost mankind.”



– Juan José Arreola (1918- 2001), Mexican writer and academic.



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