September 30, 2019 edition—Private investment for the grid; Petrofac’s sale; and refineries at 50%.
Last Week in a Minute or Less
Renewables & Electricity. The CCE suggests opening the grid for private investment; Grupo Mexico is after geothermal projects; and the Energy Ministry is considering nuclear power.
Natural Gas & Liquid Fuels. BP and Shell multiply their gasoline imports; Mexican refineries are working now…at 50%; and Mexico’s fuel demand dropped 12%.
Oil & Gas Upstream. Fracking will be discussed in the Senate’s Energy Commission; Petrofac sold its interest in Mexico’s operations; and how much new oil production is needed to declare the upstream rounds a success?
Money & Power. Mexico’s growth numbers changed again; AMLO answered the Financial Times and the OECD; and Banxico is almost surely cutting interest rates.
Déjà vu all over again. Last week’s readers were particularly interested in CFE’s combined cycle plants (El Economista – Spanish); SNG Group’s partnership with Fermaca (El Economista – Spanish); and the new head of the CRE (El Financiero – Spanish).
Democrats moved a step forward to ratification. The USTR and a group of Democrats agreed to intensify the negotiations to ratify the USMCA (El Economista – Spanish) (Reuters – English). The meetings between both groups increased and new progress is being made.
The CCE gave the ratification a 50% chance. The coordinator of the CCE’s international negotiations board said the probability of the USMCA’s ratification in October is 50% (El Financiero – Spanish). US Trade Representative Robert Lighthizer and nine Democrats met to modify the USMCA.
The USMCA ratification might get caught in the impeachment crossfire. If Democrats proceed to impeach president Trump, the USMCA ratification could be delayed or further talks put on hold (Market Watch – English). Business groups such as the US Chamber of Commerce expected a final vote next month.
The Road to Reform
The CCE suggests opening the grid for private investment. The Business Coordinator Board (CCE) said that to end the lack of available capacity in the transmission grid, the sector should allow private investment to improve its infrastructure (El Economista – Spanish) (El Financiero – Spanish).
The Energy Ministry is considering nuclear power. Energy Minister Rocío Nahle said that Mexico should consider increasing nuclear energy production (Forbes – Spanish) (El Financiero – Spanish). Currently 4.3% of Mexico’s energy is produced by nuclear energy, and Nahle mentioned the fear of nuclear power after the accidents in Russia and Japan.
Bancomext is happy with the cancellation of power auctions. The National Bank of Foreign Trade (Bancomext) said the cancellation of the last power auction was positive as it will transform the scheme for the next auctions with a more local focus (El Financiero – Spanish).
The CRE will review the transmission tariffs. Luis Guillermo Pineda, a commissioner at the Energy Regulatory Commission (CRE), said the transmission tariffs that private generators pay to the CFE will be reviewed (La Jornada – Spanish). Private generators pay lower tariffs, so the state-owned company faces unfair competition.
Fracking will be discussed in the Senate’s Energy Commission. The ban on fracking proposed by Senator Martí Batres may not be approved in the Senate commission (El Financiero – Spanish). The proposal must first be approved in the commission before being discussed in the Senate for final approval.
What will it take to bring back the oil rounds? Pulso Energético estimated the amount of production that could prove that the new energy model is offering results. The goal seems to be 50,000 barrels per day, and the industry seems to be close to it (Pulso Energético – Spanish) (Pulso Energético – Spanish).
Asolmex wants to change the solar generation rules. The Mexican Association of Solar Energy will produce a legal proposal to ease the permits to generate solar power through solar roofs. The goal is to increase the capacity that does not require permits from the Energy Regulatory Commission (CRE) (El Economista – Spanish).
Mexico’s growth numbers changed again. According to Citibanamex’s survey, analysts lowered Mexico’s growth outlook from 0.5% to 0.4% for 2019 (El Economista – Spanish) (El Financiero – Spanish). Moody’s Analytics said the GDP could grow between 0% and 0.3% this year (El Economista – Spanish).
AMLO answered the Financial Times and the OECD. President López Obrador said the 2020 budget is enough to guarantee the Mexican population’s well-being after the Financial Times questioned the budget (El Financiero – Spanish). AMLO also questioned the OECD’s growth forecast (El Financiero – Spanish).
Mexican refineries are working now…at 50%. Pemex’s refineries are working at a processing capacity of 50%, a significant increase from 38% (Reuters – English). Pemex would need to import more oil or export less crude if the state-owned company plans to supply the seven refineries that will be operating by 2024 (Forbes – Spanish).
Pemex’s production is expected to reach 1,800,000 by New Year’s. The head of the state-owned company, Octavio Romero Oropeza, expects Pemex’s production to close the year with a production above 1,800,000 barrels per day (El Financiero – Spanish). Pemex production increased slightly in August, reaching 1,683,000 per day (El Financiero – Spanish).
US natural gas exports to Mexico are at a record high. US natural gas prices remained unchanged as demand predictions stayed steady. Exports to Mexico increased to a record high of 5.6 Bcfd this past week as gas started to flow through the Sur de Texas-Tuxpan pipeline (Reuters – English).
Banxico cut interest rates… as expected. After the US Fed decision Mexico’s central bank lowered interest rates to 7.75% (El Financiero – Spanish). Even with the cut, Mexico still offers a high interest rate compared to other countries (El Economista – Spanish).
Pemex repurchased US$5bn in debt. The state-owned company completed its debt repurchase for US$5bn with maturities between January 2020 and September 2023, offering more liquidity to the company during this period (En24 – English) (El Economista – Spanish). Pemex’s total debt amounts to US$106bn.
Mexico’s fuel demand dropped 12%. The volume of fuel purchases from abroad fell 12.25% between January and July to 527,411 barrels per day (El Economista – Spanish). The drop is not related to an increase in national production but to a continuous fall in the national demand.
Strategy & Operations
BP and Shell multiply their gasoline imports. In the first half of the year, private companies doubled their gasoline and diesel imports from 13.49m barrels to 30.44m, a 126% increase in a year (El Financiero – Spanish). Pemex’s imports decreased by 9.4% in the same period.
Iberdrola wants to conquer industrial clients. The Spanish company is looking to offer solutions to the Mexican industrial sector. The goal is to build renewable plants and sell power to final industrial clients (El Financiero – Spanish).
Grupo Mexico is after geothermal projects. Grupo Mexico, through its subsidiary Perforadora México, plans to boost the development of geothermal projects in the country (El Financiero – Spanish). Grupo Mexico is also interested in developing wind and solar generation projects.
Petrofac sold its Mexico’s operations. Petrofac signed an agreement to sell its 51% interest in its operations in the country to Perenco (Oil Field Technology – English) (Reuters – English). The sale includes the Santuario, Magallanes, and Arenque contracts. Petrofac will use the US$276m from the sale to cut debt.
Half of Zama will return to Mexico. The National Hydrocarbons Commissions (CNH) started the process to return 50% of Zama to the state, a process that could last between six and nine months (Reforma – Spanish), after the CNH offered Talos Energy two additional years to finish its exploration plan in the area.
IEnova will power up Liverpool and Circle K. IEnova will sell electricity to Comercializadora Círculo CCK and the department store Liverpool through a solar plant in Juárez, Chihuahua, which will start operations in the second half of 2020. The 150MW project will require an investment of US$160m (El Financiero – 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.
An experiment that genetically modified mosquitos may have gone wrong. A biotech company released genetically modified mosquitoes to reduce the number of disease-carrying mosquitoes using strains from Cuba and Mexico. Instead of dying, the mosquitoes have passed genes from the Cuban and Mexican strains to the local population, creating a potentially stronger hybrid (Live Science – English).
Quote of the Week
“La Revolución Mexicana fue la Revolución perfecta, pues al rico lo hizo pobre, al pobre lo hizo pendejo, al pendejo lo hizo político, y al político lo hizo rico.”
“The Mexican Revolution was the perfect Revolution, as it made the rich man poor, the poor man stupid, the stupid man a politician, and the politician rich.”
– Adolfo López Mateos (1909- 1969), Mexican politician who served as President of Mexico from 1958 to 1964.
We hope you have a productive week. Please send any news, comments, or genetically modified mosquitos to MexicoWeekly@energynarrative.com.
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