October 28, 2019 edition—Renewables slowing; Maya crude’s new formula; and Sener fuel import permits.

Last Week in a Minute or Less

Renewables & Electricity. The IEA said renewables are slowing down in Mexico; FEMSA will go green; and congressmen are okay with CFE forgetting about municipalities’ debts.

Natural Gas & Liquid Fuels. Pemex announced new Maya crude and oil hedging formulas; Sener plans to cancel fuel import permits in 2020; and the Cadereyta refinery will work at 80% by 2020.

Oil & Gas Upstream. AMLO may point a finger at delayed oil investors; AMLO suggests Ángel Carrizales to lead the CNH; and the Senate named Leopoldo Vicente Melchi as CRE’s president.

Money & Power. Mexico plans to reduce its IMF credit line; Pemex’s expenditure was labeled; and CFE placed MXN7.5bn in bonds in BMV.

Déjà vu all over again. Last week’s readers were particularly interested in the first private refinery (El Financiero – Spanish); Bartlett’s opinion on CRE’s permits (El Financiero – Spanish); and Coldwell’s opinion on Pemex recordings (El Financiero – Spanish).

NAFTA Negotiation

AMLO makes big labor promises to boost ratification. President López Obrador pledged an increase in wages and funding for the implementation of labor reforms to convince US Democratic lawmakers to ratify the new NAFTA (Reuters – English) (El Economista – Spanish). A delegation of US lawmakers was satisfied with his promises.

Pelosi said lawmakers are getting closer to an agreement… US House Speaker Nancy Pelosi said lawmakers are making progress on an agreement with the Trump administration on revisions to the USMCA (Reuters – English). Pelosi insisted that the issue is still enforcement.

…and some expect a ratification soon. Despite the impeachment inquiry into President Donald Trump, the White House and House Democrats are confident the agreement could be amended and approved in Congress before Thanksgiving (Bloomberg – English). Trump economic adviser Larry Kudlow said lawmakers from both parties feel “this is an historic trade deal.”

Mexico and the US will work together to stop weapons trafficking. After a call between President Trump and President López Obrador, the Mexican Security Ministry said US authorities will confront weapons trafficking to Mexico (English). The efforts come after cartel gunmen caused chaos in Culiacán.

The Road to Reform

The Senate named Leopoldo Vicente Melchi as CRE’s president. The Senate approved the nomination of Leopoldo Vicente Melchi García as head of the Energy Regulatory Commission for the next four years (El Economista – Spanish). The position has been empty since June 2019, when Guillermo García Alcocer resigned.

AMLO may point a finger at delayed oil investors. President López Obrador said that he could publicly name oil companies whose investments are delayed (Reuters – English). AMLO said that “the majority of these companies” asked for extensions and that he would give a “Who’s Who” presentation at his news conferences.

AMLO wants Ángel Carrizales to lead the CNH. President López Obrador proposed Ángel Carrizales to lead the National Hydrocarbons Commission (CNH). Carrizales has been rejected by the Senate for a position in the energy sector four times (El Financiero – Spanish). The final choice will be discussed by the Senate.

Pemex will be busy in Nuevo León. The state-owned company has 25 onshore fields in Nuevo León. Among them, the Alondra and China fields stand out, with 61 and 20 square kilometers and dry gas (El Financiero – Spanish). Pemex expects the fields to generate jobs and economic development in the state.

Sener plans to cancel fuel import permits in 2020. The Energy Ministry is considering revoking fuel import permits to private companies that have not used them in 2020 (Forbes – Spanish). The Sener is reviewing the legal path to do it and is concerned with the number of unused permits.

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Political Economy

Mexico plans to reduce its IMF credit line… Finance Minister Arturo Herrera is negotiating a reduction of the flexible credit line with the International Monetary Fund (IMF) (El Economista – Spanish). Herrera insisted that the credit line will still be working in an orderly fashion, as was agreed upon last year.

…and the IMF will continue being a “strong partner” to Mexico. The International Monetary Fund will be a “strong partner” to Mexico, as the country continues working to deliver economic stability and prosperity for all Mexicans (Reuters – English).

Pemex’s expenditure got labeled. The state-owned company will have its expenses conditioned on improving its financial balance (El Economista – Spanish). Only if Pemex increases its income from higher fuel prices can the state-owned company increase its expenditures.

Congressmen are okay with CFE forgetting about municipalities’ debts. The House of Representatives approved the forgiveness of states’ and municipalities’ debt to CFE (El Financiero – Spanish). The measure was not part of the original 2020 budget of the Finance Ministry.

Inflation remained stable in October. Inflation remained at 3.04% in the first week of October despite the increases in power tariffs (El Economista – Spanish). Inflation increased slightly from 3.01% in the second half of September and from 2.99% in the first half of September.

Market Trends

Pemex announced new Maya crude and oil hedging formulas. The state-owned company announced new crude pricing formulas for Maya crude exports that will apply in December (Reuters – English) (Pemex – Spanish), increasing its margin on USGC after the announcement (Platts – English).

CFE placed MXN7.5bn in bonds in BMV. The state-owned company will place bonds for MXN7.5bn on November 7 (El Economista – Spanish) (Reforma – Spanish). The issuance will be developed in three sections, with a maturity of two, seven, and 10 years.

Pemex imports less fuel while Mexico considers a crude exchange. Mexico is considering the exchange of crude with the US to reach its refining goals (El Financiero – Spanish). While Pemex cut its imports, private companies’ imports reached 89,143 daily barrels in August (El Economista – Spanish).

Orión will bet on Fibra E. Orión, an energy and infrastructure investment trust, will be listed on November 19 as a Fibra E, focused on projects from both the energy and infrastructure sectors (El Economista – Spanish).

Questions surround Pemex’s LP gas distribution. Pemex has lost almost 40% of the LP gas importation and commercialization market since 2015 (El Financiero – Spanish). Pemex will lose MXN5.5bn in 2019 due to the LP gas stolen from the Cactus-Guadalajara pipeline (El Economista – Spanish). Private companies criticized CRE’s proposal to recharge tanks with the company that owns the cylinder (El Financiero – Spanish).

Strategy & Operations

The Cadereyta refinery will work at 80% by 2020. Thanks to investment and maintenance projects, the Cadereyta refinery is expected to work at 80% by 2020 (El Financiero – Spanish). The refinery requires a yearly investment of MXN2bn to receive proper maintenance.

Oro Negro may plan to bring the US into Pemex’s investigations. A former Pemex advisor, Paul Alejandro Sánchez, accused Oro Negro of leaking the recordings of bribes to involve US authorities and to discredit the state-owned company (El Economista – Spanish). Sánchez hopes the accusations could purge Pemex’s administration and make it more transparent.

Alfa lost some on its hydrocarbon and petrochemical units. Alfa reported revenue drops and lower net profit for the third quarter, with natural gas and hydrocarbon unit Newpek and petrochemical unit Alpek reporting lower sales (Reuters – English).

FEMSA will go green. The company from Nuevo León will supply 85% of its power needs in the country from renewables by 2020 (El Financiero – Spanish). FEMSA has increased its power efficiency generation, saving 110 million KWh per year.

The IEA said renewables are slowing down in Mexico. The International Agency of Energy cut the green energy expansion forecast in Mexico, as power auctions are not expected to restart until 2021 (Expansión – Spanish). The agency expects solar and wind capacity to slow in 2021 and 2022.

Old School Social

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

Summit Petroleum & Energy is scheduled for November 15-17 at Hotel Moon Palace in Cancún, Quintana Roo.

Encuentro Internacional de Energía México 2019 will be held November 20-21 at Espacio Virreyes in Mexico City.

Lateral Thinking

Sargassum may leave Mexico’s beaches to become fertilizer. University of Exeter scientists are working on plans to collect Sargassum seaweed to be transformed through hydrothermal liquefaction into biofuel and high-quality, low-cost fertilizer (Eurekalert – English). Seaweed growth has been partly fueled by fertilizers washing into the sea from farming activity.

Quote of the Week

“Amor es un cambio completo de naturaleza, inmenso goce en que se halla inmenso dolor, deseo de muerte en la vida, esperanza de vida en la muerte.”

“Love is a complete change of nature, immense joy in which immense pain is found, a wish of death in life, a hope of life in death.”

– Vicente Riva Palacio (1832-1896), Mexican liberal politician, novelist, journalist, intellectual, and military leader.

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