December 16, 2019 edition—Pemex’s field; new fuel storage rules; and Enel’s solar.
Last Week in a Minute or Less
Renewables & Electricity. Another court stopped the CEL changes; Enel will make Hidalgo shine; Engie signed an alliance with Tokyo Gas; and Sargasso could power up Quintana Roo.
Natural Gas & Liquid Fuels. The Sener modified the fuel storage rules; Mexico will need more US natural gas; and the six refineries are making progress on their modernization.
Oil & Gas Upstream. Pemex confirmed a 500 million-barrel field; the CNH suggests Pemex continue onshore fracking; and Pemex acquired seven oil platforms.
Money & Power. Canada, the US, and Mexico signed a modified USMCA; China may invest in Mexico’s infrastructure and trade; and Pemex said rating agencies are going to celebrate the new oil discovery.
Déjà vu all over again. Last week’s readers were particularly interested in the private power auction (El Financiero – Spanish); Fibra E Orión (El Economista – Spanish); and Red Girasol’s funding (El Economista – Spanish).
This week’s edition will be the last for 2019 as our hard working team takes a well-deserved break with friends and family. We wish you a peaceful and contemplative end of the year, and an invigorating start to the new. Our next edition will be issued on January 6, 2020. See you then!
– The Weekly Brief: Mexico team
Canada, the US, and Mexico signed a modified USMCA. The negotiators of Mexico, Canada, and the US signed a modified protocol of the USMCA in Mexico (Reuters – English) (El Financiero – Spanish). After the signing of the modifications, the agreement must be approved by the congress of each of the three countries.
The USMCA signing brought certainty. Mexico’s economic minister said that the signing of the USMCA modifications will bring certainty to investors who have been waiting for the approval (El Financiero – Spanish). According to the minister, the uncertainty surrounding the trade deal was the main reason for the low investment levels.
Banxico is still cautious regarding the USMCA ratification… Mexico’s central bank’s general director of economic research said the protocol signing has not eliminated the uncertainty regarding the agreement as it still needs to be ratified (El Financiero – Spanish). Even after the ratification, Mexico needs to boost public policies to create the infrastructure needed from the sectors devoted to exports.
…and so is the Mexican Exchange Market. The Mexican Exchange Market is not celebrating yet as certainty to invest in the country has not yet returned (El Financiero – Spanish). All the global elements that threaten market stability will continue in 2020.
The Road to Reform
The CNH suggests Pemex continue onshore fracking. The National Hydrocarbons Commission (CNH) advised the state-owned company to continue fracking activities in an onshore area that the Mexican government assigned to Pemex (Forbes – Spanish). Pemex drilled three exploratory wells in the area: Maxochitl, Kaneni, and Pankiwi.
The new CFE contracts force Mexican companies to partner up. As the state-owned company made harsh contract requirements, Mexican companies can only rely on alliances with other companies to obtain the financing required to face the new cancellation clauses (Forbes – Spanish).
The Sener modified the fuel storage rules. The Energy Ministry modified the fuel storage rules to reduce the obligations of private companies and the state-owned company Pemex (DOF – Spanish) (El Financiero – Spanish). The companies will need to have a minimum fuel storage of five days of sales in the next six years (2020-2025).
Pemex acquired seven oil platforms. The Mexican government, through the state-owned company, purchased seven exploration platforms (Excelsior – Spanish). President López Obrador explained that the platforms are 100% built by Mexican companies.
The six refineries are making progress on their modernization. The Energy Ministry explained that there is work being done in 23 plants and that work in five plants has already been completed (El Economista – Spanish). In March, the work is expected to be completed.
Another court stopped the CEL changes. A Mexico City court awarded a total halt to the change in the CEL’s rules. The new decision applies to all companies across the country and puts a stop to the proposed changes on a grand scale (El Financiero – Spanish).
China may invest in Mexico’s infrastructure and trade. A high-level delegation of company and government representatives traveled to Mexico to discuss foreign investment, cooperation, and trade (El Economista – Spanish). Due to the trade war between the US and China, Mexico could be an attractive destination for Chinese companies.
CFE and Pemex did not spend as much as they thought they would. By October 2019, both state-owned companies only used half the budget they were assigned and approved by the Finance Ministry in 2019 to invest in public works (Reforma – Spanish).
Mexico agreed to boost clean energies. As part of Energy Day, the Mexican Association of Wind Energy (Amdee) and the Mexican Association of Solar Energy (Asolmex) signed an agreement to support the development of clean energies in the country (Reforma – Spanish).
CFE is considering strengthening its nuclear energy. The state-owned company is considering increasing nuclear energy generation in Laguna Verde, Veracruz. There is a possibility of installing two new units with a capacity of 1,400MW each (Reforma – Spanish).
Pemex thinks the rating agencies are going to celebrate the new oil discovery. The head of the state-owned company said that rating agencies are going to be happy about Pemex’s recent discovery of Quesqui, which could contain 700 million barrels of crude oil, as it will increase Pemex’s reserves (El Financiero – Spanish).
Pemex increased oil production after 15 years. The director of Pemex, Octavio Romero Oropeza, announced that in November the state-owned company produced 1,702,000 daily barrels, stopping the continuous fall in Mexico’s production (Excelsior – Spanish). Romero Oropeza emphasized the importance of the Xikin’s field in future production.
Mexico will need more US natural gas. Due to infrastructure upgrades and growth, US gas exports to Mexico are expected to increase in 2020. The biggest impact of lowering prices is expected to be noticed in the Los Ramones-Monterrey and Reynosa hubs (Platts – English).
Pemex will be looking for local loans soon. According to BlackRock, the state-owned company will return to the local debt market soon to place MXN5bn (El Financiero – Spanish). After more than a year without issuing debt in the local market, this could be considered a good sign.
Strategy & Operations
Pemex got an early Christmas present of a 500-million-barrel field… The state-owned company made a discovery on an onshore field which has 3P reserves of 500 million barrels of crude oil equivalent (El Economista – Spanish). Pemex expects to drill 11 new wells in 2020 and crude production is expected to reach 110,000 barrels per day by 2021 (Platts – English).
…but it could hit foreign investment. Pemex’s new oil discovery could justify the closure of opportunities for private investment in the country (Platts – English). The discovery could allow President López Obrador to insist on making the country energy self-sufficient.
Sargasso could power up Quintana Roo. G2E offered to install seaweed processing plants to generate power with Sargasso through hydrothermal carbonization (El Economista – Spanish). The cost of the plant installation would be between US$15m and US$80m.
Enel will make Hidalgo shine and Engie signed an alliance with Tokio Gas. Enel signed an agreement to build a 185MW solar park in Hidalgo, which will be operational by 2021 (Renewables Now – English). Engie created Heolios EnTG through an alliance with Tokyo Gas to develop renewable energy projects in Mexico (El Norte – Spanish).
Old School Social
Events in the world beyond your screen—go see and be seen!
Mexico WindPower will be held March 4-5 at Centro Citibanamex in Mexico City. Mexico WindPower is the premier wind energy event in Mexico with nine consecutive years showcasing the latest in innovations and technology for leading national and international decision-makers.
There were foreign prisoners of war in Uxul 1,400 years ago. Thanks to the isotope analysis of the bones of 20 people at the bottom of a water reservoir in Uxul, University of Bonn researchers have found that they belonged to people who grew up at least 95 miles from the site (Science Daily – English).
Quote of the Week
“En las aguas heladas del cálculo egoísta, eso es la sociedad, por eso el amor y la poesía son marginales.”
“In the frozen waters of a selfish calculation, that is society, that is why love and poetry are minor.”
– Octavio Paz (1914-1998), Mexican poet, diplomat, and the 1990 Nobel Prize in Literature winner.
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