The Weekly Brief: North American Integration

February 13, 2017 edition— CRE’s delayed pipeline opening; Dakota Access Pipeline okayed; and deregulation all around.





Last Week in a Minute or Less



Renewables & Electricity. The U.S. House and the Senate work on revoking Obama’s regulations and Mexico’s CFE will invest MXN250bn in five years.


Natural Gas & Liquid Fuels. The CRE delayed Mexico’s pipeline opening; the Dakota Access Pipeline is a go; and US FERC authorized a natural gas pipeline from Pennsylvania to Ontario.


Oil & Gas Upstream. OPEC’s production cut may have to be pushed past June and offshore Newfoundland and Labrador producers will offer nine crude oil cargoes for April.


Money & Power. NAFTA’s renegotiation is in the making; the Federal Reserve and the Banxico rates are heading in opposite directions; and Moody’s and Goldman Sachs worry over Mexico and Trump, respectively.


Déjà vu all over again. Last week’s readers were particularly interested in the US House’s ruling on Obama’s regulation (English); Mexico’s increasing remittances (English); and Mexico’s gas pipelines opening (Spanish).



Keeping Track of Trump


NAFTA renegotiation is in the making. Mexico started a 90-day dialogue with private sector groups to establish parameters for the renegotiation of NAFTA (English). The head of the US Chamber of Commerce believes President Donald Trump should renegotiate NAFTA to build upon, rather than hinder, the movement of products and people (English).


The House and Senate overturned Obama’s energy rules… The US Senate repealed the transparency rule, while the House revoked the rule that demanded federal land managers to consider climate change effects of proposed development (English) (English). The newly appointed Climate Leadership Council proposes a carbon tax to start at US$40 per ton (English).


…and Trump’s deregulation is considered “arbitrary”. Advocacy groups claimed that President Donald Trump’s order to kill two regulations for every new one adopted is “arbitrary”, harmful for Americans, and unconstitutional (English). They argue the order does not consider the benefit of “public protections” or new rules to reach a zero-dollar net cost.


Trump’s deregulation is a gift to Wall Street, but may harm small investors. President Donald Trump announced measures to end the Obama administration’s legacy on financial regulation (English). However, by attacking the retirement advice rule, small investors could be affected by brokers and insurance agents trapped in a conflict of interest (English).



Macro Trends


The Federal Reserve and Banxico rates diverge. The Bank of Mexico raised the reference rate by 50 basis points, reaching 6.25% (Spanish). The difference between the reference rates of the Federal Reserve and Banxico is now expected to widen in 2017 at a greater pace than previously thought (Spanish).


Moody’s worries over Mexico and Goldman Sachs, over Trump. Moody’s placed Mexico on a negative outlook  because of the increase in the federal deficit to 2.9% of GDP in 2016 (English) (Spanish). Goldman Sachs analysts consider the “balance of risks” is “less positive” due to the Obamacare struggle, the tension between political parties, and possible market disruptions (English).


US supplies and the dollar sank oil prices despite OPEC’s efforts… Oil prices slumped as US crude inventories increased and the dollar strengthened (Spanish) (English). Analysts said that investors are on the defensive and a reduction in Chinese demand produced a global oversupply despite OPEC efforts to cut output (English).


…so OPEC’s production cut may have to be extended. The Iran and Qatar oil ministers suggested that OPEC’s production cut may need to be extended beyond June (English). The comments followed the American Petroleum Institute’s report on the 14.227 million barrels of inventory, the second-largest ever crude oil inventory.



Cross-Border Flows


The US tech industry united against President Trump’s travel ban. More than 100 companies, including Apple, Google, and Microsoft, filed a legal brief against President Donald Trump’s travel ban (English) (Spanish). In a speech to Washington police chiefs and sheriffs, President Trump opined that the president has the authority to do whatever he wants on the matter (English).


The CRE delayed Mexico’s pipeline opening. The Energy Regulatory Commission (CRE) postponed the opening for private companies to use Pemex’s pipelines and storage terminals (Spanish). The due date for offers was February 15, but the CRE said it would be moved to sometime before March 30.


Canada may take a hit from a border tax. Investors worry over how a US border tax could affect Alberta’s oil and gas industry through higher export costs (English). ConocoPhillips, which hit record production levels in the last quarter of 2016, pointed to the uncertainty of the border tax’s impact on their market.


The cattle industry worries about NAFTA renegotiations. The biggest US cattle trade group is concerned about the NAFTA’s renegotiation after US beef output hit a six-year high (English). Exports to Mexico and Canada are needed to avoid a chronic oversupply, being the first and fourth largest export markets for American beef.



Infrastructure & Investment


The FERC okayed a natural gas pipeline from Pennsylvania to Ontario. The US Federal Energy Regulatory Commission (FERC) filed the approval for the construction of the natural gas pipeline of Energy Transfer Partners from Pennsylvania to Ontario (English). Although the agency lacks a quorum, the FERC delegated authority to its staff (English).


Eastern Canada offers nine crude oil cargoes for April. Offshore Newfoundland and Labrador producers will make available six Hibernia crude cargoes, two White Rose cargoes, and one Terra Nova cargo (English). The cargoes are two fewer than the ones offered for March.


The Dakota Access Pipeline is back in motion after US Army approval. The US Army Corps of Engineers approved the final easement needed to finish the Dakota Access Pipeline’s section underneath Lake Oahe, the focus point of the protest (English). The 1,170-mile pipeline costing US$3.8bn could begin operations in June (English).


Mexico’s CFE goes all in with MXN250bn in five years. The state-owned company will channel MXN250bn of public and private investment to new generation and transmission projects, reducing transmission losses in five years (Spanish). An investment of MXN170bn will create 8GW of capacity, helping meet the expected 3% annual growth in electricity demand.



Old School Social


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


The 2nd Annual Big Data, IOT & Machine Learning in Oil & Gas Canada 2017 is February 14-15 at Hotel Arts Calgary, Calgary.


The Mexico Energy Forum is February 15 at the Sheraton María Isabel Hotel, in Mexico City.


The NAPE Summit is February 15-17 at George R. Brown Convention Center, Houston, TX.


The Topsides, Platforms and Hulls is February 21-23 at the Ernest N. Morial Convention Center, New Orleans.



Lateral Thinking


A black hole has been at a star-buffet for a decade. University of New Hampshire researchers used X-ray telescopes data to study black holes feeding on stars (English). The data showed a specific black hole that began its eating spree in July 2005 and the binge could last another decade.



Quote of the Week


“And only the very courageous will be able to keep alive the spirit of individualism and dissent which gave birth to this nation.”


-John F. Kennedy (1917-1963), the 35th President of the United States



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