Issue 8

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Mexico Energy News
Issue 8, January-February 2019
TABLE OF CONTENTS
I. Editor’s Note
II. Articles
“Pessimism in the Energy Sector” by David Shields
“Desabasto” by Philip L. Russell
III. Sparks
Masthead photo: Boquillas, Coahuila
  I. EDITOR’S NOTE
The world premiere of “Energy in Mexico” in Austin went well—almost too well. Even after extra chairs were brought in, people were turned away due to a lack of space.*
In Mexico, President López Obrador (AMLO) continues to enjoy unprecedented levels of popularity. He has used the early months of his administration to undermine the energy reform of his predecessor just as surely as President Trump is undermining the legacy of his predecessor.
López Obrador’s piecemeal dismantling of the energy reform has not had a political cost, so far. In part, that is due to Pemex’s stature as a nationalistic icon. Also, it is due to excess optimism shown by those promoting the energy reform during the previous administration. Two key pledges, lower fuel prices and increased oil production, have yet to materialize, souring the public on the notion of energy reform.
Philip L. Russell
russell@mexicoenergynews.com
*Presentations can be scheduled by contacting the above email.
II. ARTICLES
Pessimism in the Energy Sector
by David Shields
Deep pessimism has gripped Mexico’s energy industry. It can be felt at every meeting of investors, of analysts, of financiers. Almost every day we hear about ideological rancor, President López Obrador’s confrontational tone, accusations, defamation, the denigration of regulators, and the cancelation of auctions and projects. Pemex and Mexico are close to losing their investment-grade rating. The net result is uncertainty and distrust.
The president and his team are plotting against certain interests, creating a self-inflicted perfect storm, which puts at risk supply and investment. They don’t listen to well intentioned advice. They are at odds with credit-rating firms, and now they want to dispense with regulators. This last move is the worst possible message for investors because judicial security for private capital is in the hands of the regulators. López Obrador claims that he “wants reconciliation, not confrontation” in every aspect of national life, except in the energy sector. The conciliatory statements that Mexico needs now are absent.
In their analysis of Pemex’s financial solvency, the banks and rating agencies are not just considering if investment is sufficient to arrest the decline in production and proven hydrocarbon reserves. Increasingly, they are rejecting the old model, Pemex’s business plan, and also implicitly, the government’s energy plans.
Investors and creditors are worried. There have been some harsh comments, including those from J. P. Morgan. But the truth is equally harsh—investors no longer have a favorable opinion of Mexico. In the Western Hemisphere, they will be seeking oil investments in the United States, Brazil, Colombia, and, if Guaidó replaces Maduro, Venezuela. Meanwhile, Mexico and Pemex will be left out in the cold because the government has blocked investment options.
López Obrador is right to blame previous governments and, in particular, the Peña Nieto administration for Pemex’s current state. Everyone is in favor of combatting fuel theft (
huachicoleo
), but will the ones who are really plundering Pemex ever be brought to justice? It is strange that López Obrador takes legal action against the regulators but not against current and former Pemex officials, who are presumably responsible for the most embezzlement.
López Obrador is convinced that if corruption is eliminated, Pemex will once again be successful. However, it’s not that simple. Proven reserves have declined. There is no money for exploration, and much will depend on oil prices—the key factor to understanding the decline of Pemex and the limits of the energy reform in recent years.
Now, López Obrador is attempting to take control of Pemex via changes in the proposed Petróleos Mexicanos Law, which will give power and autonomy to the director general. If these changes are passed, it will lower the odds that Pemex and Mexico will maintain investment-grade ratings by giving power to a single person in Pemex. It makes no sense and is contrary to corporate best practices. It will accomplish nothing in exchange. Furthermore, this legal change is unnecessary because a majority of the board of directors support López Obrador and the Pemex director general. Thus, they can make whatever decisions they want.
Pemex needs to change direction, sharply and quickly, in everything—in its vision and philosophy, in its administration, in its operations, and in its labor and trade-union relations. But now that the opening has been closed, what mechanisms can Pemex use to gain access to private partners’ capital and technology and establish strategic partnerships? Given its debt and financial problems, it would seem inevitable that Pemex should associate with private capital and establish functional alliances.
Soon, the Mexican economy will begin to decelerate. This could lead to recession, unemployment, and fiscal and social pressure. Thus, it is prudent to take steps that favor investment in Pemex, supporting it financially and thus maintaining its investment grade, if it’s not already too late for that.
Originally published in Spanish in the Feb. 19, 2019, issue of
Reforma.
David Shields is an energy analyst. 
‘
Desabasto
’
by Philip L. Russell
Mexico’s word of the year will almost certainly be
desabasto
—shortage. That term jumped into prominence when President López Obrador, making good on his campaign promise to eliminate corruption, shut down Pemex fuel pipelines in an effort to eradicate theft of fuel, a practice known colloquially as
huachicoleo
.
Fuel theft in several impoverished rural areas is carried out by a variety of actors. Some individuals tap into pipelines and steal fuel for their own use or to sell along roadsides. The practice became so lucrative that drug cartels moved in, loading entire tanker trucks with fuel which then would be supplied at cut rates to gas stations or be sent into the United States using false documents. Young people in some areas, such as rural Guanajuato, rather than looking to political parties or education as a route to personal advancement, aspire to fuel theft. As was the case with Appalachian moonshiners during Prohibition, communities developed a reliance on illegality. Cartels stealing fuel would sometimes leave taps open for locals to fill jerry cans, thus cementing the loyalty of nearby populations.
Preventing huachicoleo is a daunting task, given Pemex’s 8,883 kilometers of pipeline. To protect a valued source of income, local residents sometimes build barricades and pelt police and army troops with stones to prevent the apprehension of fuel thieves. Soldiers charged with preventing theft are sometimes paid off to look the other way. As is the case with drug traffickers, fuel thieves sometimes responded to law-enforcement efforts with armed force. In one such incident, a clash in Puebla left six presumed thieves and four soldiers dead. (1)
By volume, the majority of fuel theft, roughly 80 percent, is an inside job. (2) What began decades ago with petty theft by Pemex employees mushroomed into a massive plundering of the company involving unionized employees, management, gas-station owners, industrialists, and truck drivers. False paperwork allowed entire truckloads of fuel to be driven out of Pemex facilities to be sold on the black market. In 2018, fuel theft averaged 65,000 barrels a day, 5.25 percent of Pemex supply. (3) During 2018, thieves tapped into Pemex pipelines 14,894 times. (4) Fuel theft is estimated to have cost $3 billion in 2018. (5) 
On December 27, newly inaugurated President López Obrador announced a plan to combat fuel theft that included shutting off pipelines delivering fuel. Nine hundred soldiers and 4,000 military police were deployed to vulnerable points in the supply chain. The sales records of gas stations were audited to determine if they were selling more fuel than they had legally purchased. 
Since three-quarters of fuel is normally distributed by pipeline, severe fuel shortages occurred in Mexico City and broad areas to the west and north of the capital. Long lines of motorists formed at the few gas stations with fuel. Despite the hardship imposed for weeks, López Obrador’s efforts reinforced his already high approval rating, since most people saw fuel theft as impoverishing the publicly owned Pemex.
Available trucks proved insufficient, so the government placed an emergency order for 571 new tanker trucks at a cost of $85.3 million. The import of fuel by the private sector, legalized by the energy reform of the previous administration, could do little to alleviate the shortage. Given the lack of necessary infrastructure, private importers only imported an average of 49,700 barrels a day during the first nine days of 2019. (6)
On January 18, amidst the annoyance caused by fuel shortages, huachicoleo resulted in tragedy. In the impoverished village of Tlahuelilpan, Hidalgo, the effort to tap into a pipeline that had been put back into use resulted in a geyser of gasoline shooting high into the air. Some 600 to 800 residents arrived with jerry cans, jars, and buckets to obtain free fuel. The atmosphere was festive.
Faucet-like valves generally control taps. However, in this case, gasoline simply spurted into the air. Thus those obtaining fuel became thoroughly soaked in gasoline. Then a spark from an unknown source set the gasoline ablaze, killing some 135 people, who died either at the site or later in hospitals.
Finally, by the latter part of February, the shortages vanished as additional trucks delivered fuel and as pipelines were put back into operation. The administration claimed victory. Pemex Director General Octavio Romero reported that theft of fuel had declined to 15,600 barrels a day—only 28 percent of last year’s average. (7) López Obrador optimistically declared that, as a result of his administration’s policies to eradicate poverty, “No Mexicans will have to dedicate themselves to such activity [fuel theft] since they will have jobs and wellbeing.” (8)
The costs of López Obrador’s approach to combatting fuel theft are hard to calculate. Eleven days after the closing of the pipelines, a business group estimated that losses had already totaled 11 billion pesos (roughly $580 million dollars). (9) Costs mounted because shortages not only gripped Mexico’s three largest cities, Monterrey, Guadalajara, and Mexico City, but the booming four-state area of San Luis Potosí, Aguascalientes, Guanajuato, and Querétaro—Mexico’s version of the Pearl River Delta. In addition to the costs produced by economic disruption, there were charges for ships that were unable to unload fuel due to closed pipelines. By the end of January, there were 35 tankers idly waiting to unload their fuel. These charges amounted to $5 million a week.
It remains to be seen just how the fleet of hastily ordered trucks will be deployed. If they are put into continuous use, costs will mount. The figure frequently cited is that delivery by truck is 14 times as expensive as delivery by pipeline. No one knows if trucking costs will be added to the price of gasoline, given the political sensitivity of fuel price increases.
It also remains to be seen if the effort results in decreased criminality. As the experience with the drug trade indicates, once lucrative, but illegal, activity becomes entrenched, it is notoriously difficult to eradicate. Furthermore, if the effort to suppress fuel theft remains successful, thieves may well turn to other illegal activity. Increased plundering of trucks on Hidalgo’s highways has already been reported as thieves can no longer survive by stealing pipeline fuel.
 
   Notes:
  1. Expansion.mx, June 2, 2017.
  2. Reforma, Dec. 28, 2018, p. 1.
  3. Reforma, Jan. 15, 2019, p. 6 negocios.
  4. ADN Político, Jan. 29, 2019.
  5. El País, Jan. 22, 2019.
  6. El Financiero, Jan. 21, 2019.
  7. Expansion.mx, Feb. 21, 2019.
  8. Aristegui Noticias, Jan. 23, 2019. 
  9. La Jornada, Jan. 14, 2019.
III. SPARKS
Oil
An IEA report specifically mentioned Mexico as a likely location for tight-oil development. However, the report noted that major obstacles remain:
“Outside the United States, shale remains a relatively high-cost, poorly understood resource that poses challenges stretching from access to land and availability of water to bureaucratic hurdles. A critical mass of activity and learning is necessary to generate economies of scale and bring down break-even prices. But getting the momentum going for this is tough.”
Gould & McGlade (2019).
                                           
An Energy Policy Research Foundation report noted that even with the recent decline in oil prices and production, the petroleum sector still comprises 8% of the Mexican economy and directly employs 130,000 workers and about 500,000 more indirectly. Payments to the federal budget by oil producers in 2017 were $46 billion.
Lynch (2018: 1).
Talos Energy expects to complete its appraisal program in the Zama discovery by midyear. Its goal is to achieve initial production by the second half of 2022.
Oil & GasJournal,
Feb. 4, 2019, p. 29.

Gas

At the end of 2018, imports supplied 78% of Mexican natural-gas consumption. In November 2018, imports averaged 5.754 bcfd, 17.5% above the corresponding month in 2017. Pemex imported 1.263 bcfd, while the Federal Electrical Commission (CFE) imported 4.490 bcfd. This increase in imports was primarily due to a decline in domestic oil production and thus of associated gas.

Reforma
, Jan. 21, 2019, p. l
negocios
.

Mexico’s production of natural gas declined from 6.480 bcfd in January of 2013 to 4.857 bcfd in December of 2018.
Arena Pública
,
Feb. 14, 2019.

In January, Pemex produced 4.648 bcfd of natural gas, 5.3% below the corresponding month of 2018.

El Financiero
, Feb. 22, 2019.

U.S. natural-gas exports to Mexico are expected to total more than 3 trillion cubic feet in 2019, 15.1% above the 2018 figure.
Oil & Gas Journal
,
Feb. 4, 2019, p. 54.
Nuclear
As of June 30, 2018, the Laguna Verde nuclear facility accounted for 2.11% of Mexico’s installed generating capacity. It generated 4.02% of Mexico’s electricity during the first half of 2018.
SENER (2018: 11).
Renewables
“The renewable energy industry, which has been growing rapidly in one of the countries with the best potential on the planet, has reacted to the cancelation of the fourth renewable energy auction with a mix of worry and perplexity. This decision can derail the potential of green energy and the greenhouse-gas reduction targets which Mexican authorities have committed themselves to.”
 Jon Martín Cullell,
El País
, Feb. 13, 2019.
As of June 30, 2018, renewables provided 27.09% of Mexico’s generating capacity. Hydro plants provided 16.55% of total capacity, wind provided 5.74%, PV 2.16%, and geothermal 1.22%.
(p. 9)
During the first half of 2018, renewable sources generated 17.29% (29,027 GWh) of Mexico’s electricity. Hydro provided 10.31% of total generation, while wind provided 3.63%, geothermal 1.59%, and PV 0.72%
(p. 10)
During the first half of 2018, 21.71% more clean energy was generated than during the first half of 2017.
SENER (2018: 12).
The National Center for the Control of Energy (CENACE) announced that the fourth clean energy auction, which had been suspended in December, had been canceled. The Center stated that firms would not be reimbursed for expenses incurred while preparing bids.
Reforma
,
Feb. 2, 2019, p 11.
The Business Coordinating Council (CCE) commented, “Canceling these auctions could restrain future private investment in renewable energy.”
El País
, Feb. 13, 2019.
For the canceled auction, 34 firms had made 400 offers that would have produced between $4 billion and $5.2 billion of investment.
Energía a debate
,
Jan.-Feb. 2019, p. 46.
The three clean-energy auctions have resulted in nine solar farms and five wind farms, which together have a generating capacity of 7,451 MW. These systems will increase renewable capacity from less than 4% of Mexico’s generating capacity in 2012 to 11%. They represent an investment of $9 billion.
Energía a debate
,
Jan.-Feb. 2019, p. 46.
Wind
In 2018, wind generated 7% of Mexico’s energy. That year, 935 MW of wind capacity went on-line. The state with the most wind capacity is Oaxaca, with 2,756 MW. Nationwide, wind capacity totals 4,935 MW.
Reforma
,
Jan. 31, 2019, p. 3
negocios
.
Solar
As of December 2018, there were 39 solar farms in commercial operation in Mexico. None were south or east of Mexico City. Eleven of those farms, including the largest in Latin America, resulted from energy auctions.
Petróleo y Energía
,
Feb.-March 2019, pp. 16-20
. The farms represent $6.3 billion of investment. As of December 2018, installed solar capacity was 3,000 MW. During 2018, installed capacity increased by 1,800%, according to the Mexican Solar Energy Association (ASOLMEX). This increase was due not only to auctions, but to the repeal of the 15% tariff on imported solar panels.
PV Magazine-México,Jan. 18, 2019.

Between mid-2017 and mid-2018, PV capacity almost tripled. Newly added capacity totaled 1,200 MW.
SENER (2018: 7).
Geothermal
In 2017, Mexico ranked sixth worldwide in installed geothermal capacity with 0.9 GW.
2017 Renewable Energy Data Book
, p. 74.
Electricity
“We don’t want auctions that oblige us to buy electricity. They are contrary to the interests of the company.”
 
CFE Director Manuel Bartlett,
El Universal
, Feb. 23, 2019.
Of the 300 terawatt-hours of electricity generated annually in Mexico, natural gas produces 160, fuel oil 40, coal 30, and hydro 30, while solar, wind, nuclear, geothermal, and biomass together generate another 40.
Energía a debate
,
Jan.-Feb. 2019, pp. 47-48.
In mid-2018, fossil-fuel plants accounted for 68.36% (52 GW) of Mexico’s generating capacity, while renewable plants provided 27.09% (20 GW) and other clean sources accounted for 4.56% (3 GW). Installed clean-energy generating capacity was 11.84% above the corresponding figure for 2017. During the first half of 2018, fossil fuels generated 75.88% (167,893 GWh) of Mexico’s electricity, while 17.29% came from renewables and 6.83% came from other clean sources.
SENER (2018: 7-8).
The average age of CFE generating facilities is 39 years.
Energía a debate
,
Jan.-Feb. 2019, p. 33.
In 2018, the demand for electricity increased by 5.3%.
Reforma
,
Feb. 21, 2019, p. 1
negocios
.
The 2019 budget for the CFE increased by 18% compared to 2018.
El Pais
,
Feb. 11, 2019.
It costs the CFE $141.21 per MWh to generate electricity, while the last contract with private providers was for $20.57 per MWh.
Reforma
,
Feb. 14, 2019, p. 1
negocios
.
The Energy Secretary (SENER) suspended bidding on the transmission line between the Isthmus of Tehuantepec and central Mexico—the main source of demand. Canceling the auction could stifle wind development in Oaxaca, where demand is limited.
El País
, Feb. 13, 2019.
CFE Finance Director Antonio Rojas reported that the CFE loses 30 billion pesos a year due to theft of electricity. In addition, it loses another 45,000 billion in unpaid bills. This latter figure did not include the 9.3 billion that CFE customers in Tabasco owed last year.
Reforma
, Feb. 23, 2019, p. 1.
In 2018, debt service cost the CFE 26.592 billion pesos. Since 2012, this figure has increased by 109% in real terms. Higher interest rates, increased debt, and a shift in the peso-dollar exchange rate contributed to this increase.
Arena Pública
, Feb. 25, 2019.
As noted in Issue 7, the Federal Electrical Commission (CFE) and the federal government are financial Siamese twins. This was apparent when the CFE claimed a profit of 27.273 billion pesos in 2018. This “profit” was achieved by virtue of the CFE’s having received 82.168 billion pesos of subsidy from the federal government. Energy analyst Ramsés Pech commented, “The financial balance considers subsidies from the Treasury Department to compensate for the inefficiency of CFE plants compared to private generating plants.”
El Financiero
,
Feb. 28, 2019.
Between January and October of 2018, only 13,925 electric and hybrid cars were sold in Mexico—1.2% of total sales. More than half of these sales occurred on Mexico City and the adjacent State of Mexico.
Reforma
, Jan. 29, 2019, p. 6negocios
.

PEMEX
“Pemex has long been characterized as an inefficient firm plagued with corruption. However, during the last administration, the financial indictors resulted in imbalances and deterioration that were hard to believe. One can no longer speak of corruption, but of crude plundering—the fruit of brazen theft.”
 
Luis Pazos,
El Financiero
, Jan. 23, 2019.
A Barclay’s report noted that Pemex’s fiscal burden is among the most onerous in Latin America. The report stated, “Pemex had an extremely unfavorable 2018 performance” and, “Looking to 2019, we see little reason for optimism…”
(p. 2).
Even with the increased capital-expenditure budget for 2019, the report stated, “We think it [the budget] will remain well below what is needed to stabilize and eventually grow production to 2.48 mbd by 2024”
(p. 7)
. Gross debt increased from $95.7 billion in 2016 to $106.5 billion today. At the current rate of production, Mexican crude reserves are sufficient to last eight years
(p. 10)
. Refineries ran at 32% of capacity.
Barclay’s (2019: 11). 
Production
During 2018, Pemex produced an average of 1.813 mbd of crude, 6.9% below 2017. December production was 1.71 mbd, 8.7% below the corresponding figure for 2017.
Reforma
,
Jan. 26, 2019.
In January, Pemex produced 1.623 mbd of crude, the lowest such figure since November of 1979. This figure was 15% below the figure for the corresponding month in 2018. Heavy crude constituted 61% of production in January.
Milenio
,
Feb. 24, 2019.
The Cantarell field, which produced 2.06 mbd in 2004, is now down to only 110,000 bd.
Barclay’s (2019: 16). 

More than 98% of Mexico’s crude is produced from fields that were discovered more than 25 years ago.

Pulso Semanal
, Feb. 12, 2019.

Refining
The
Wall Street Journal
reported that January’s gasoline shortages were aggravated by Pemex’s failure to import light crude. Light crude is mixed with domestically produced heavy crude before refining, thus increasing the amount of gasoline produced. The
Journal
quoted energy analyst David Shields: “The new government’s goal is to make Mexico self-sufficient in refined products using crude oil produced domestically. To them, importing crude seems to be a taboo. It doesn’t seem to go with their ideology.” Shields added that depriving refineries of light crude was like “shooting yourself in the foot.”
Wall Street Journal,Feb. 1, 2019, p. A16.

In 2009, gasoline production by Pemex refineries peaked at 472,000 bd. Production remained above 400,000 bd through 2014, when it averaged 422,000 bd. It then began a sharp descent, reaching 207,000 bd in 2018. Reduced budgets, in part, account for this decline. Investments in refining declined 25% in 2015 and another 36% in 2016.
Arena Pública
, March 3, 2019.
At their peak in 1994, Pemex’s refineries refined 1.36 mbd of crude. As late as 2013, its refineries averaged 1.22 mbd a year. In 2018, they only averaged 612,000 bd. Their production of gasoline fell from 257,000 bd in 2017 to 207,100 bd in 2018.
Excélsior,Feb. 4, 2019.

From October to December 2018, Mexican gasoline production averaged 186,300 bd while Mexican consumption averaged 756,000 bd.
El Universal
,
Jan. 16. 2019.
During January, Pemex produced an average of 153,500 bd of gasoline, the lowest such figure in 29 years. This figure was 18% below the corresponding figure for 2018. The production of refined products averaged 599,100 bd, 17.7% below the corresponding figure for 2018.
Milenio
,
Feb. 28, 2019.
Trade
In 2018, Mexico consumed 790,000 bd of gasoline, of which 525,000 were imported.
Proceso
,
Feb. 3, 2019, p. 14.
The United States receives 66% of Mexican crude exports, Europe 13%, and the Far East 21%.
Barclay’s (2019: 17).
In 2018, Pemex earned $26.512 billion from crude exports.
El Universal
,
Jan. 30, 2019.
In January, Pemex fuel sales averaged 706,800 bd, 7.5% below the corresponding figure for 2018.
El Financiero
, Feb. 22, 2019.
Worldwide, the two nations offering the least expensive gasoline are oil-rich Venezuela and Saudi Arabia. Prices range from $0.01 per liter in Venezuela to $2.06 in Hong Kong. Mexico’s average price of $0.99 a liter is below the world average of $1.09. However, given higher incomes where gasoline is more expensive, of the 61 nations analyzed by Bloomberg, Mexicans spent the highest percentage of their income on gasoline.
Excélsior
,
Feb. 7, 2019. 
Financial
“Pemex has the complete support of the government, and if more capitalization is needed, including this year, it will be provided.”
 Treasury Secretary Carlos Urzúa,
expansion.mx, Feb. 17, 2019
.
In 2018, Pemex lost $7.5 billion, 47% less than it lost in 2017. Losses declined in 2018, largely due to increased prices received for crude exports.
El País
,
Feb. 27, 2019.
The only year in the last decade in which Pemex has reported a profit was 2012.
El Economista
,
Feb. 27, 2019.
The government-auditing agency, known by its acronym ASF, commented on some of the causes of Pemex’s debt. It reported that Pemex’s fertilizer operations lost $665 million. In addition, the agency reported that the company had ignored the advice of consultants and had made high-risk investments.
expansion.mx, Feb. 22, 2019.
At the end of 2018, Pemex debt totaled $105.8 billion.
Reforma
, Feb. 28, 2019, p. 1
negocios.
Ten billion dollars of this debt will come due in less than one year.
El Financiero,Feb. 25, 2019.

It cost Pemex 122.57 billion pesos to service its debt in 2018. Since 2013, this figure has increased 207.4% in real terms. In 2013, such payments equaled 0.2% of GDP, while in 2018 they equaled 0.5%. Higher interest rates and shifts in the peso-dollar exchange rate contributed to this increase.
Arena Pública
,
Feb. 25, 2019.
Heavy taxes also contributed to debt accumulation.Reforma
, Feb. 28, 2019, p. 1
negocios
.

The credit-rating agency Fitch downgraded Pemex’s international credit risk from BBB+ to BBB-. It decided that the López Obrador administration’s having lowered Pemex’s tax burden by 5% was insufficient to restore Pemex’s credit worthiness.
Reforma,
Feb. 2, 2019, p. 5.
Reform
Mexico ranks fourth worldwide in the number of corporate power-purchase agreements, with 130. In Latin America, it is ahead of both Chile, with 126, and Brazil, with five.
PVTech Power
, February 2019, p. 48.
As a result of the energy reform, the CFE produces half of Mexico’s electricity, while private companies supply the other half.
El País
,
Feb. 13, 2019.
Thanks to the energy reform, private companies have invested $4.2 billion in the transport of refined products, $3.9 billion in their storage, and $12 billion in sales facilities.
Reforma
,
Jan. 18, 2019, p. 1. 
During 2018, 1,656 gasoline stations switched from selling under the Pemex brand to other brands. During the year, the number of Pemex stations fell from 11,586 to 9,930. Of these, 9,884 are privately owned and Pemex Transformación Industrial, which uses them for its own consumption, owns 46.
forbes.com.mx, Feb. 28, 2019.
Sales occur under 60 national and international brands other than Pemex. The private brand with the most stations is Oxxo, with 483 stations, followed by BP, with 352.
Reforma
, Feb. 25, 2019, p. 7negocios
. Pemex supplies many of these stations with gasoline. As a result, Pemex supplies 95% of gasoline sold in Mexico.
expansion.mx, Jan. 14, 2019. 

An Energy Policy Research Foundation report noted that the government has received $1 billion in bonus payments from those receiving oil-auction contracts. Their production should peak at nearly 400,000 bd, yielding $6 billion or more in royalties per year, depending on world oil prices.
Lynch (2018: 2).
Between February 2018 and January 2019, gasoline imports by private suppliers increased by 16.8% a month. However, by January, private companies only accounted for 6.1% of imports. Imports have increased slowly due to limited infrastructure in Mexico, the time necessary to build pipelines, and the lack of storage facilities.
El Financiero
, Jan. 21, 2019. 
AMLO

According to the Mexican Petroleum Institute (IMP), the refinery that the López Obrador administration plans to build in Tabasco will not be viable technically or financially. Even if there were no delays in construction, the Institute estimated that the refinery would cost $14.7 billion and would not recoup its investment costs even after 20 years.

Reforma
, Jan. 30, 2019, p. 1. 

AMLO declared that there would be no new farmouts until the three existing farmouts begin producing oil.
El Financiero
, Feb. 21, 2019.
Energy Secretary Rocío Nahle announced that Pemex would frack wells, thus contradicting López Obrador.
El Economista
, Jan. 30, 2019.
The AMLO administration organized a referendum on whether to put a 642 MW combined-cycle power plant in Huexca, Morelos, into operation. The $1 billion project is virtually complete, but its operation has been halted by vocal local activists who feared it would damage air and water quality. They also claimed that the proximity of the gas pipeline supplying it to the Popocatépetl volcano created an unacceptable risk. The voting was held on February 23 and 24 and was open to voters in the state of Morelos and residents of municipios through which the pipeline passed. Despite the efforts of some of the plant’s opponents to disrupt voting, 55,715 voters cast a ballot. A majority (59.5%) of them favored opening the plant, presumably in part due to a promise of lower electric rates in voting areas if the plant were approved. AMLO announced that, given the positive response, the plant would be put into operation.
ADN Político
, Feb. 25, 2019.
When he announced the referendum on putting the plant into operation, AMLO charged, without offering proof, that environmental groups that have opposed the plant were supplied by “foreign corporations that don’t want competition.”
El País
,
Feb. 13
,
2019.
These environmental groups, especially those formed by residents near the plant, rejected the results of the referendum, declaring that local matters should not be decided by voters in distant parts of the state. They feel that the 2,500 liters of water per second required to cool the plant would deprive them of water needed for irrigating their rice, zucchini, purslane, and sugarcane. Opponents vowed to continue with their protest encampment blocking the construction of a waterline necessary to operate the plant. They also expressed their displeasure with López Obrador’s having switched positions on constructing the plant, located near the hometown of a legendary hero of the Mexican Revolution, Emiliano Zapata. In 2014, when campaigning in the area, López Obrador commented: “Only a lunatic would think of building a thermoelectric plant in the land of Zapata. It would be like building a garbage dump in Jerusalem.”
Proceso
, Feb. 17, 2018, pp. 16-18.
Bibliography
Barclay’s (2019)
Petróleos Mexicanos (Pemex) Crude Awakening: Initiating at Underweight.
New York.
Gould, Tim and Christophe McGlade (2019) “Could Tight Oil Go Global?” IEA.
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