MORENA’s legislative body is looking to install CRE and CNH under the Ministry of Energy, effectively endangering their technical, operative and administrative autonomy and President-elect López Obrador is conditioning future licensing rounds to the success of Mexico’s 107 already signed contracts. Meanwhile, ExxonMobil and Shell are betting on natural gas while the US is eyeing the Gulf of Mexico for future auctions.

 

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NATIONAL

 

MORENA Files Organic Law of the Federal Public Administration Modification to Reincorporate CRE and CNH to the Ministry of Energy. Should the legislative initiative pass in Congress, both CRE and CNH would be in the mantle of the Ministry of Energy instead of answering directly to the Executive branch, risking the regulator’s technical, operative and administrative autonomy.

 

Future Licensing Rounds Conditioned to the 107 Contracts Reaching Production Phase. While President-elect López Obrador confirmed the current licensing round contracts will be respected and Abel Hibert asserted they were well assigned, transparent and will be advantageous for the Mexican government, López Obrador considers no new contracts will be bid until the 107 contracts assigned so far start showing results. While on tour in Tamaulipas, López Obrador also announced that by 2019, a MX$4 billion investment will be allocated for the Ciudad Madero refinery to revamp its installed capacity.

 

Crude Oil Extraction Adjustments Can Hurt Sovereign Debt Rating. Mexico’s incoming administration’s plans to limit crude oil extraction to focus on refining activities is not without its set of risks, Moody’s says. This plan would limit the country’s crude oil exports, directly impacting federal oil income.

 

Petroleum Trade Union Election Results to be Announced Before the End of October. Utilizing a free and secret vote modality for the first time since its inception, the STPRM is collecting the votes from all of its 11 sections (Ciudad Madero, Minatitlán, Salamanca, Las Choapas, Poza Rica, Mexico City, Tula, Salina Cruz, Villahermosa, Ciudad del Carmen and Reforma) to announce the new Trade Union Leader.

 

Tampico-Misantla Basin with Potential to Increase Extraction Five-Fold. CNH revealed that the Tampico-Misantla basin can increase its current 76,000 b/d production rate to 252,000 by 2024 should the five-year exploration and production bidding plan set by the incumbent administration be maintained. Said plans include additional licensing rounds.

 

Financial Costs Increase Budget Pressure on PEMEX. The rise of interest rates in the NOC’s debt commissions and interest payments are tightening PEMEX’s available budged. From Jan. to Aug. 2018, PEMEX’s financial cost amounted to MX$87.9 billion, representing a 12.4 percent increase over that seven months period. The NOC is also still reeling from its fertilizer business. Added to a loss of MX$3.337 billion in 1H18, PEMEX is facing breach of contract lawsuits by Fertinal, claiming a failure from PEMEX to pay US$6.2 million in charter services. In a new development of the Odebrecht scandal, PEMEX took on the role of the accuser by filing a civil lawsuit against the Brazilian company in the order of MX$121.7 million for unjustified charges, added to cumulated interests since 2014.

 

MORENA Supports Petroleum Trade Union Leadership Handover. During the Chamber of Deputies First National Encounter of Petroleum, MORENA Deputy Susana Cano supported the candidacy of María de Lourdes Díaz Cruz in the trade union’s upcoming election. She is looking to replace Carlos Romero Deschamps, current leader of the Petroleum Workers Trade Union of the Republic of Mexico (STPRM).

 

Eliminating Gasoline Tax Under Scrutiny. To-be Energy Minister, Rocío Nahle, announced López Obrador’s transition team is evaluating removing the IEPS tax from gasoline prices, representing an impact of MX$250 billion in the country’s federal budget. Nahle specified this decision is conditioned by the possibility of restoring this loss from other tax collection sources.

 

Mexico’s Northern States Feel the Sting of Gasoline Price Liberalization. Since Sept. 2018, Mexico’s states showcased monthly increases in gasoline prices. While the national average reached a 1.42 percent increase, Tamaulipas, Baja California and Coahuila witnessed the highest upward variation with 2.78, 1.97 and 1.92 percent, respectively. Sonora is the only northern exception below the national average with a 1.16 percent increase.

 

25 States Overspent their 2017 Gasoline Budget. According to data from the Mexican Institute for Competitiveness (IMCO), Guerrero stands out from this list as it spent MX$89.3 million for gasoline while its approved budget was MX$43.7 million.

 

Talos Energy Enters a Transaction with Hokchi Energy.  The transaction is meant to cross assign Talos Energy Inc’s Participating Interest (PI) in Mexico’s Southeast Basin offshore Blocks 2 and 31, making Hokchi Energy the operator of both blocks. The transaction has yet to be approved by CNH.

 

 

INTERNATIONAL

 

IOCs Betting on Natural Gas as the Fuel of the Future. ExxonMobil and Shell are planning sizable new investments in large-scale Liquefied Natural Gas (LNG) amid rising demand for this fuel in transportation and electricity production.

 

US Oil Expansion Focused on Eastern Region of the Gulf of Mexico. Aligned to President Trump’s administration focus on auctioning blocks in the eastern part of the Gulf of Mexico, especially in the Norphlet basin, the US Senate and Congress are negotiating a plan to extend exploration limits in that region to 2022. The plan includes 19 tenders in Alaska’s federal waters, 12 in the Gulf of Mexico, nine in the Atlantic and seven in the Pacific.

 

Shell prepares US$2 Billion to invest in Upstream Activities up to 2025 in Brazil. Brazil’s second largest oil producers only behind Petrobras is preparing the necessary capital to enhance its upstream activities in the pre-salt province.

 

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