The Weekly Brief: Mexico


September 24, 2018 edition—Another upstream block returned; Chevron’s storage; and NAFTA negotiations continue.




Last Week in a Minute or Less


Renewables & Electricity. The CRE backs the financial rules for power interconnection; businesses and regulators are on board to discuss tariffs; and the Oaxaca-Mexico line will be awarded by the next administration.


Natural Gas & Liquid Fuels. The CRE opened up Yucatan and Baja California’s fuel markets; Chevron will also use IEnova’s terminal; and the land for the new refinery is being cleared.


Oil & Gas Upstream. Consorcio Petrolero 5M del Golfo returned part of an upstream block; the new administration will respect oil contracts; and Pemex is behind on its projects.


Money & Power. The NAFTA negotiation between the US and Canada continues; Mexico has already covered part of its 2019 oil hedges; and Moody’s trusts Mexico.


Déjà vu all over again. Last week’s readers were particularly interested in the Maya train (Excelsior – Spanish); the tariffs to compete with CFE (Reforma – Spanish); and the Cenace’s new capacity (El Financiero – Spanish).



NAFTA Negotiation


Mexico expects to sign NAFTA with the current administration. Eduardo Sánchez Hernández, Federal Government spokesperson, believes the new NAFTA could be signed with the current administration (El Financiero – Spanish). The spokesperson did not know if President Peña Nieto will meet President Trump in the next UN general assembly.


The US and Canada met again to discuss NAFTA. Chrystia Freeland said negotiations with Robert Lighthizer will continue this week as negotiators near their next deadline (Bloomberg – English) (El Financiero – Spanish).


American businesses want to keep Canada in NAFTA… US businesses asked the Trump administration to retain Canada in the NAFTA deal (WSJ – English). The US Chamber of commerce, the Business Roundtable, and the National Association of Manufacturers said that sidelining Canada, the largest export market, “would be unacceptable.”


…and Nancy Pelosi agrees with them. The US House of Representatives Democratic Leader Nancy Pelosi said the NAFTA trade deal should remain a trilateral pact between the US, Mexico, and Canada (Reuters – English). Any deal reached in negotiations will be reviewed by the next Congress, which convenes in January after the midterm elections.



The Road to Reform


Consorcio Petrolero 5M del Golfo returned part of an area. Consorcio Petrolero 5M del Golfo returned one-third of an onshore area won in a 2015 round bidding (Reuters – English) (El Economista – Spanish). The small company did not find profitability in 38% of the Benavides-Primavera onshore block in Nuevo León.


The Oaxaca-Mexico line will be awarded by the next administration. The state-owned company delayed the ruling (El Economista – Spanish) to award the direct power line connecting Ixtepec, Oaxaca and Yautepec, Morelos, until December 14. The line will transport 3,000MW with an estimated investment of US$1.2bn.


The CRE backs the financial rules for power interconnection. The Energy Regulatory Commission (CRE) approved the methodology used by the National Center of Energy Control (Cenace) to estimate the financial guaranties of interconnection (El Economista – Spanish). The goal is to support compliance with interconnection and connection projects.


The new administration will respect oil contracts. The next chief of the Presidency Office, Alfonso Romo, announced a meeting with the winners of the oil rounds to provide certainty that no contract will be eliminated and to offer them support on how to simplify processes to speed up investments (Excelsior – Spanish).


All on board to discuss tariffs. The Business Coordinator Board and the involved authorities will discuss how to estimate the power price without reflecting generation inefficiency (El Financiero – Spanish). Companies will ask the CFE for transparency and cost standardization (El Financiero – Spanish).


The CRE opened up Yucatan and Baja California’s market. The Energy Regulatory Commission (CRE) approved the open season for the hydrocarbons storage terminal in Southeast Progreso, Yucatán (Reforma – Spanish). The CRE handed the distribution permit to Sonigas and Baja Gas and Oil de México, allowing more competition (El Financiero – Spanish).



Political Economy


The Energy Minister said refining is no longer good business. The Energy Minister noted that the refining sector has generated losses of MXN100bn since 1990 (Excelsior – Spanish). The Energy Minister said that to stop the drop in production and to increase reserves, US$30bn in investments is required in Mexico, well above Pemex and Mexico’s budgets.


Mexico considered the US proposal on deportation funding. Mexico’s current government was analyzing the US State Department’s proposal to help fund the deportation of migrants from Mexico (Reuters – English). Mexico’s incoming government rejected the proposal, as López Obrador promised on the campaign that Mexico “wouldn’t do the dirty work” of foreign governments (The Guardian – English).


Barclays trusts AMLO’s power plans. Barclays celebrated Manuel Barlett’s nomination and the decision to make CFE a more competitive company (El Financiero – Spanish). Barclays pointed to the uncertainty regarding the new administration, the interest rate, and the new tariffs for 2019.


Mexico will spend more in 2019. Total public sector expenditures for 2019 will increase by 7.5% to MXN5.6 trillion (El Financiero – Spanish). The goal is to have a responsible budget, respecting the macroeconomic balances, without burdening the country with debt.


AMLO starts working on public sector pay cuts. The Lower House of Congress passed a law to limit all salaries for officials at the president’s wage or below (Reuters – English). President-elect López Obrador vowed to cut his salary to 40% of what President Peña Nieto earns, to US$5,718 per month.



Market Trends


Industrial power tariffs are up again. In the area of Valle de México Norte, CFE’s September power tariffs for the industry increased 9.6% compared to August (Reforma – Spanish). The total year-to-date increase has reached 69.6%.


Mexico has already covered part of its 2019 oil hedges. Mexico has contracted a part of 2019 oil hedges guaranteeing export prices and revenues (English – Reuters) (La Jornada – Spanish). Mexico maintains the flexible line with the International Monetary Fund for US$88bn that will expire by November 2019.


Moody’s trusts Mexico…for now. Moody’s considers Mexico’s tax situation favorable, but delicate (El Economista – Spanish). The rating agency considers AMLO’s plan to be “pretty ambitious” and the goal is not to affect public finances with the readjustment of expenditures.



Strategy & Operations


Chevron will also store fuels in IEnova’s terminal. The Sempra subsidiary signed a long-term contract with Chevron for the storage and delivery of fuel in the Topolobampo terminal, which will start operations in 2020 (El Economista – Spanish). The agreement will allow Chevron to use 50% of the terminal’s capacity.


The land for the new refinery is being cleared. Pemex contracted a company that started clearing the land where the new administration plans to build the new refinery (El Financiero – Spanish). Trees have been cut and the land has been leveled on the property located beside the Dos Bocas Maritime Terminal.


The SME returns to provide power services. After nine years, the Mexican Union of Electricians returned to the power market to offer power services and compete with other suppliers in the same area in which it was displaced (El Universal – Spanish). The Energy Regulatory Commission (CRE) okayed Subace, of SME, to provide power in the Central region.


Pemex is behind on its projects. Four years after the state-owned company received 83% of Mexico’s probable reserves, Pemex has only set three farmouts: Trión, Ogarrio, and Cárdenas Mora (El Financiero – Spanish). Pemex plans to drill a new well in deep waters, named Kili-1 EXP (Pulso Energético – Spanish).


The CFE will power up the US. The international subsidiary of CFE, CFE International, was awarded a permit from the Federal Energy Regulatory Commission (FERC) to participate in the international fuel and power market in the United States as a new competitor (Reforma – Spanish).


Delayed pipelines are behind rising power prices. At least six pipelines in Mexico are still under construction and the delay has increased the imports of liquefied natural gas (Reforma – Spanish). As a consequence, consumers will pay more for power.



Old School Social


Events in the world beyond your screen—go see and be seen!


The Energy Storage International is scheduled for September 24-27 at the Anaheim Convention Center in California.


The Solar Power International 2018 will be held September 24-27 at the Anaheim Convention Center in California.


The Global Wind Summit is scheduled for September 25-28 at the Hamburg Messe und Congress, in Hamburg, Germany.


The CMP Congreso Mexicano del Petroleo will be held September 26-29 at the Expo Mundo Imperial, in Acapulco, Guerrero.


The 31st World LPG Forum is scheduled for October 2-4 at Hilton Americas-Houston, Houston, Texas.


The Petroleum Economist Mexico Energy Strategy Forum 2018 will be held October 3 at the Marriott Reforma Hotel, in Mexico City.


The S&P Global Platts 22nd Annual Mexican Energy Conference is scheduled for November 8-9 at the St. Regis Mexico City Hotel. This conference is the leading event for Mexico’s energy industries. Meet with senior officials, regulators, and entrepreneurs and learn the latest about Mexico’s energy reforms. For more information including a full agenda and confirmed speaker line-up, visit



Lateral Thinking


Ikon Science helped out ITPE. Ikon Science donated 12 of its RokDoc geoscience software licenses to the Technological Institute of Oil and Energy in Merida, Mexico (World Oil – English). The 66 students enrolled in the undergraduate programs will now use the latest software technology in geophysics, seismic inversion, and pressure prediction.



Quote of the Week


“La rebeldía es la vida: la sumisión es la muerte.”


“Rebellion is life: submission is death.”



– Ricardo Flores Magón (1874-1922), Mexican anarchist and social reform activist.



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