October 21, 2019 edition—An oil round decision in December; Sener’s CELs; and Deschamps is out.
Last Week in a Minute or Less
Renewables & Electricity. Bartlett accused the CRE of handing out too many permits; the Sener is after new CELs; and Yucatán’s industry pays a high price for power.
Natural Gas & Liquid Fuels. Mexico’s first private refinery will start construction in 2020; Targa Fuels will have two gas stations in Mexico City and León; and Pemex bought more gasoline from China.
Oil & Gas Upstream. The fate of oil rounds will be decided in December; oil companies do not care for Pemex’s new contracts; and Pemex’s plans depend on 20 fields.
Money & Power. Deschamps resigned and is under investigation; Bloomberg and the World Bank forecast slower growth in Mexico’s economy; and Democrats are after cheaper medicines in the new NAFTA.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s infrastructure (Reuters – English); CFE’s natural gas supply to thermoelectric plant (La Jornada – Spanish); and four clean energy certifications (Reforma – Spanish).
Democrats are after cheaper medicines in the new NAFTA. US Democratic lawmakers are including a shorter protection of biological medicines from 12 to 10 years (El Economista – Spanish) as a condition for USMCA ratification. The decision will allow generic medications to appear faster.
Some doubt that USMCA will ever be ratified. When asked about the USMCA ratification, experts pointed to the deep divisions in the US Congress, the impeachment process, and the trade war with China as the issues delaying the ratification (The Dialogue – English).
Trudeau hoisted USMCA as a big win. Justin Trudeau said that the renegotiation of NAFTA is a “critical victory” for his administration (Forbes – Spanish). Trudeau argued that the administration remained strong facing Donald Trump’s steel and aluminum tariffs.
Lawmakers are fighting a tech liability shield in the new NAFTA. A bipartisan group of lawmakers is fighting to eliminate a legal liability shield that tech companies push to keep in new agreements, including the USMCA (Bloomberg – English). Tech executives said that a change in the legal shield would hurt the market.
The Road to Reform
The fate of oil rounds will be decided in December. In December, President López Obrador will meet with 107 companies that won oil production and exploration contracts (El Financiero – Spanish). The goal is for all commitments to be achieved while guaranteeing that the next oil rounds will occur soon (El Financiero – Spanish).
Bartlett accused the CRE of handing out too many permits. The head of the state-owned company warned that the Energy Regulatory Commission (CRE) handed dozens of permits to private companies, leaving the CFE’s grid in risk of collapse due to their surplus (El Financiero – Spanish).
The Sener is after new CELs. The Energy Ministry plans to issue new clean energy certificates (CELs) for CFE’s plants that were already operating before the regulation started (El Financiero – Spanish). Up until now, the certificates were only for power generated in new power plants through renewable energy.
Oil companies do not care for Pemex’s new contracts. According to analysts, big oil companies are looking to acquire rights over new fields or exploratory plays, and to be in charge of their administration, exploration, and crude commercialization (El Financiero – Spanish). With Pemex’s contracts, the state-owned company maintains the property of the assignments.
Bloomberg and the World Bank have a say in Mexico’s growth… Bloomberg predicts growth of 2% by 2021, while growth will remain at 0.5% in 2019 and at 1.3% in 2020 (El Financiero – Spanish). The World Bank forecasted a growth of 1.5% in 2020 (El Economista – Spanish).
…and so did Moody’s and the IMF. Moody’s cut Mexico’s growth outlook for 2019 to 0.2% (El Economista – Spanish). The International Monetary Fund lowered Mexico’s growth outlook from 0.9% to 0.4% in 2019 (El Financiero – Spanish) (IMF – English).
Bartlett is working on saving CFE. The head of the state-owned company said CFE will maintain 55% of electric power generation and the rest will be produced by the private sector (El Economista – Spanish). Bartlett also announced Pemex will produce clean energy with CFE (Forbes – Spanish).
Pemex was involved in alleged bribes. Former Energy Minister Pedro Joaquín Coldwell said that he was not involved in bribes related to Pemex and Oro Negro (El Financiero – Spanish). According to recordings, Coldwell received part of the bribes.
Pemex’s plans hang on the fate of 20 fields. Specialists believe that the state-owned company’s plan depends on the future of 20 fields with which Pemex plans to increase production (El Financiero – Spanish). If production does not reach the promised goal, it would be a bad sign for markets and rating agencies.
Deschamps resigned and is under investigation. Carlos Romero Deschamps resigned as leader of Pemex’s union after a 26-year tenure (WSJ – English) (El Economista – Spanish). President López Obrador said Deschamps faces formal accusations of wrongdoing (Reuters – English) (Forbes – Spanish).
Pemex bought more gasoline from China. The state-owned company increased its imports of Chinese fuel while cutting US gasoline purchases (Forbes – Spanish). Pemex imported 1.1 million barrels from China, a 480% increase in September 2019.
The IMF did warn Mexico of the dangers of uncertainty. The International Monetary Fund warned Mexico that political uncertainty weakened investors’ and consumers’ trust in the country (El Economista – Spanish). The deceleration in the auto industry has contributed to the economic moderation.
The Finance Ministry exchanged bonds. The Finance Ministry improved its short-term debt profile by cancelling debt for MXN41.1bn due in 2020 and 2021 and substituting it for debt with a maturity in 2023 and 2050 (El Financiero – Spanish). The goal was to improve market liquidity of local debt.
Strategy & Operations
Targa Fuels will have two gas stations in Mexico City and León. Grupo Enermex received the first two gas stations from Ukraine to be installed in Mexico City and León, Guanajuato (El Economista – Spanish). Targa Fuels will sell Pemex fuel in those gas stations.
Yucatán’s industry pays a high price for power. Yucatán’s National Chamber of Industry said high power prices are strangling Yucatán’s industry, with power prices increasing 70% in the last year (El Financiero – Spanish). Local governments have difficulty paying for public lighting and power in public buildings (El Financiero – Spanish).
Mexico’s first private refinery will start construction in 2020. Refmex and Caxxor Group plan to start building the first private refinery in Mexico by June 2020 with an investment of US$800m (El Financiero – Spanish). The refinery will be located in Soto La Marina, Tamaulipas.
Mexico will answer Oro Negro’s lawsuit. President López Obrador said that his administration will respond to Oro Negro’s lawsuit, which alleged corruption at Pemex (Reuters – English). AMLO said he does not see much of a difference between defendant and plaintiffs because “the owners of the company came from the government” (Aristegui Noticias – Spanish).
Old School Social
Events in the world beyond your screen—go see and be seen!
S&P Global Platts 23rd Annual Mexican Energy Conference is scheduled for November 13-14 at Hyatt Regency Mexico City. Join over 300 executives at the meeting place for energy professionals in the region. Network with representatives from a wide range of companies from Mexico, the US, and worldwide. Visit the website or download the brochure to learn more.
Aztecs knew the volcanic belt was a shaking land. Scientists are studying Aztec codices and accounts of missionaries to learn the shaking past of the volcanic belt (National Geographic – English). The origin of the volcanic belt is the subduction of the Rivera and titanic Cocos tectonic plates diving beneath the North American plate.
Quote of the Week
“Las ideas nacen grandes. Se desfiguran y achican al conformarlas el hombre a su persona.”
“Ideas are born big. They lose their shape and size as they are knocked into shape by men.”
– José María Vigil (1829-1909), Mexican writer.
We hope you have a productive week. Please send any news, comments, or codices to figure out future earthquakes to MexicoWeekly@energynarrative.com.
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