President-elect AMLO opposed fracking techniques to produce shale oil and gas, his nominations to conduct Mexico’s future energy policy have sparked controversy and PEMEX’s numbers are in red. Meanwhile, OPEC’s production levels reach new heights and BHP Billiton is selling its US shale portfolio.
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President-elect AMLO unveils energy agenda. During a press conference, President-elect AMLO unveiled a four-axis plan. First, allocate an additional MX$75 billion to explore, drill and increase production from 1.9 million b/d to 2.5 million b/d. Second, rehabilitate Mexico’s six operational refineries to operate at 100 percent of their capacity by 2020, requiring an additional investment of MX$49 billion. Third, start building a new refinery in Paraiso, Tabasco, requiring MX$160 billion. Fourth, increase power generation by modernizing CFE’s operational power plants, starting with the utility’s hydroelectric portfolio.
UPDATE on September 17, 2018: As President-elect López Obrador began his victory lap to thank his voters, starting in Nayarit, he said his administration will inherit a “very difficult” economic and social situation. According to López Obrador, this difficult situation may make some of his political promises difficult to achieve, but he stated that he and his team will make great efforts to accomplish this difficult task. “Let me be clear, we will comply with everything we offered during the campaign. That is the minimum, and from there onward we will work up to what the budget allows,” he stated. Later on, during a press conference he highlighted the precarious state of the Mexican oil and gas industry. “We are still producing oil like 40 years ago,” he said. With this in mind, it is still unclear if the President-elect and his administration will be able to increase Mexico’s oil and gas production up to 2.6 million b/d as López Obrador stated just a few days ago.
President-elect’s nominations for CFE and PEMEX under fire. Right-wing PAN and center-left PRI legislators members of the Energy Commission of Mexico’s Congress questioned President-elect AMLO’s nominees, Octavio Romero and Manuel Bartlett, to head PEMEX and CFE, respectively. The primary critic is their lack of experience and technical profiles required for both Productive Enterprises of the State. Gustavo de Hoyos, President of the Mexican Confederation of Business Owners (COPARMEX), asked President-elect to reconsider his nomination to head CFE considering Bartlett’s outspoken opposition to the Energy Reform.
Moody’s analyst emits warning over President-elect’s refining plans. Nymia Almeida, Senior Analyst of PEMEX at Moody’s, highlighted PEMEX’s 2017 investment in E&P amounted to US$6 billion, equaling the amount President-elect AMLO wants to allocate for a new refinery in Tabasco. This investment reallocation puts at risk PEMEX’s E&P activities, which remain the most profitable for the NOC.
BBVA expresses concern over refining investments. Carlos Serrano, Chief economist of BBVA Bancomer, outlined during a Regional Situation Conference that PEMEX suffers from inefficiencies in gasoline refining, losing around MX$100 billion per year in the process for this activity alone.
PEMEX’s earnings in red for 1H18. Despite cumulating its best sales numbers of the last six years period at MX$833.6 billion for the 1H18, the NOC reported net integral losses of MX$44.45 billion due to increased financial expenses and exchange rate pressures. The NOC also reported increased dependency in gasoline imports due to its refinery’s production decline. Among the measures taken to improve results, PEMEX Transformación Industrial absorbed PEMEX Cogeneración y Servicios, due to lack of investments and budgetary cuts. Meanwhile, the NOC’s operational wells totaled 7,698 during 2Q18, 4 percent less compared to 2Q17.
PEMEX concludes its eighth contract migration. CNH scheduled the E&P contract on Aug. 3, 2018 for the Ébano onshore field, to the benefit of DS Servicios Petroleros, a Grupo Diavaz subsidiary.
ASEA submitted to public consultation the guidelines for the integral prevention and control of methane gas emissions. The document establishes targets, action plans and mechanisms to prevent the emission of methane gas and was submitted through the National Commission of Regulatory Improvement (CONAMER). Civil society organizations, industry representatives, academia and other interested parties can take part and contribute with comments and observations through CONAMER’s website.
CNH’s licensing round model sparks global interest. Daniel Kaufmann, President and CEO of the Natural Resource Governance Institute, reported during a presentation in the regulator’s facilities that more than 50 countries are interested in learning and capitalizing on the lessons learned from the Mexican model, which showcases exemplary transparency levels.
Petrofac sells 49 percent of its Mexico operations. On July 30, Petrofac signed an agreement with Perenco National Limited to sell its Santuario, Magallanges and Arenque assets for an initial cash consideration of US$200 million, US$30 million payable upon signing the agreement and US$170 million upon completion of the deal. The transaction is subject to approval by Mexico’s Federal Competition Commission (COFECE).
CRE approves new tariff zones division for SISTRANGAS. Mexico’s energy regulator approved CENAGAS’ proposal for a new division of tariff zones for its National Natural Gas Integrated Transport and Storage System (SISTRANGAS), increasing from six to nine tariff zones. The tariff rezonification reflects the natural gas transport costs within each new zone, incentivizing natural gas production projects.
ENI to invest US$7.49 billion on Mexico assets. The Italian IOC obtained a shared production contract during Round 1.2 for the shallow water Miztón field. Added to its operations in the Amoca and Tecoalli fields, ENI will invest US$7.49 billion in the next 22 years. ENI is planning to produce a peak of 90,000 b/d by 1Q24. CNH approved ENI’s development plans to do so.
Coahuila’s Energy Cluster hopes unconventional contracts will be honored. Following President-elect AMLO’s declaration that fracking will no longer be considered to produce shale oil and gas, Rogelio Montemayor, president of Coahuila’s Energy Cluster, expressed his expectation over honoring the E&P contract between PEMEX and Lewis Energy to produce hydrocarbons using this controversial technique.
BHP Billiton sells Eagle Ford assets. British IOC BP and Dallas-based Merit Energy Co. will be the new owners of BHP Billiton’s US assets, purchased for US$10 billion in cash. BP will add to its US portfolio Eagle Ford Shale, Permian Basin and Haynesville assets, while Merit Energy Co. was sold Fayetteville basin assets. Both deals are expected to close in Oct. 2018 pending regulatory approval.
OPEC oil production reaches 2018 high. The Persian Gulf countries’ production increase and welcoming Congo to the organization allowed OPEC to reach its highest production levels since the beginning of the year.
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