MADRID (Reuters) – Mexican tycoon Carlos Slim said on Tuesday that the best wall between Mexico and the United States was investment and job opportunities, referring to the U.S. President Donald Trump’s promise to build a border fence between the two countries.
“The best wall is investment and creating opportunities in Mexico,” Slim said during an strategy conference for the Spanish builder FCC (MC:FCC), of which he is the main shareholder, in Madrid.
Slim also noted that the United States and Central American countries need to make deals on investment and not just for trade.
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Mexico’s incoming president has begun fleshing out his rescue plan for the country’s long-neglected oil sector.
Andrés Manuel López Obrador’s proposals include a $4bn capital injection for state oil company Pemex to boost exploration, a new refinery to slash reliance on US fuel imports and a 600,000 barrel-a-day increase in crude production in two years.
But analysts warn that his nationally focused energy policy risks putting unsustainable pressure on the world’s most indebted oil company. In particular, they point to plans for a 160bn peso ($8.6bn) refinery to be built in his home state of Tabasco over the next three years — an investment equal to the size of Pemex’s loss in the second quarter.
Mr López Obrador has not spelt out how he would fund his proposals but has named Octavio Romero Oropeza, a long-time confidante and agronomist from Tabasco, to take the helm of Pemex. “We are estimating overall investment to rescue the sector of 175bn pesos next year,” said the president-elect, who takes office on December 1.
The cash injection comes as Pemex has seen output fall from a peak of 3.4m barrels a day in 2004 to 1.866m in the second quarter this year.
Mr López Obrador said output was plunging because “the energy sector and oil industry were abandoned”, and has pledged to lift production to 2.5m b/d in two years.
He has yet to make clear whether he intends to continue with oil tenders that have seen more than 100 contracts awarded to 73 companies since 2015 under a landmark reform designed to lift Mexico’s oil output from a four-decade low. The new administration wants at least a temporary pause to oil tenders.
“Four billion dollars is a significant amount, there’s no doubt. But it is important to put it in perspective . . . One single tender round can inject more investment,” said Pablo Zárate at think-tank Pulso Energético.
Mr López Obrador has promised to achieve energy self-sufficiency by spending 49bn pesos upgrading Pemex’s six lossmaking refineries, where output has halved since May 2013, and building two new ones to halt dependence on US gasoline imports, which have increased by a third in the past two years.
But investors are alarmed at the potential for snowballing costs. The price tag for the first new refinery, to be built in Dos Bocas, has already risen from the $6bn Mr López Obrador’s team had previously indicated. “I don’t know of a single refinery that’s ever been done to budget,” said an investor at a large fund who follows Pemex closely.
Pemex, a monopoly for eight decades, has spent the past two years putting its finances in order and making huge outlays on new refineries could be a serious risk, say analysts.
“Pemex today does not have the cash or free cash flow to take on the construction of new refineries, and if the company decided to finance such an investment with debt or shift capital from exploration and production to refining, its credit metrics would weaken,” cautioned Moody’s Investors Service.
Ramping up refinery capacity could lead to Pemex halving the value of lucrative oil exports, it added.
But Mr López Obrador has said his government would keep its promise of halting gasoline imports in three years and would lower fuel prices.
Pemex has net debt of about $106bn and is expected to post earnings before interest, tax, depreciation and amortisation of approximately $25bn this year. With the state taking about 70 per cent of profits in tax, Pemex could bump up its debt to pay for refineries — but it already has hefty debt repayments due in 2019 and 2020.
Mr López Obrador’s team has indicated that it wants to halt oil tenders while it reviews contracts awarded to date and decides on whether and how fast to continue auctions.
Indeed, the government has delayed two upcoming tenders, which include joint ventures with Pemex, until next February.
Adrián Lajous, a former Pemex chief executive, has called for a moratorium on oil auctions until 2020 but said joint ventures with Pemex should resume next year.
Even if oil tenders are put on ice, analysts are urging the new administration to allow Pemex to continue forging joint ventures.
“Partnerships will be needed to grow output — international companies bring capital and technical expertise,” said Ruaraidh Montgomery at Wood Mackenzie.
Above all “Pemex should start partnering with companies that specialise in enhanced oil recovery, given the maturity of its portfolio”, to allow it to squeeze more oil from existing fields, said Pablo Medina at Welligence Energy Analytics.
One radical revamp for Pemex could be to follow the “China model”, said Juan Carlos Zepeda, head of Mexico’s oil regulator, keeping the parent company in state hands, but spinning some assets into a partially listed unit, as China National Petroleum Corp has done.
“I would like us to do the same with Pemex but that would require changing the constitution,” he said.
This article has been amended to correct the amount of oil Pemex plans to increase production by in the next two years.
PUERTO VALLARTA, Mexico (Reuters) – U.S. President Donald Trump spoke warmly of Mexico’s incoming leftist president on Monday, saying he expected to get “something worked out” on NAFTA, while a top Mexican official said there was scope to revive the trade talks this week.
“We’re talking to Mexico on NAFTA, and I think we’re going to have something worked out. The new president, terrific person,” Trump said in a speech at the White House about American manufacturing.
“We’re talking to them about doing something very dramatic, very positive for both countries, he said, without giving more details.
Talks to reshape the 1994 trade accord have been underway since last August. But they stalled in the run-up to the July 1 presidential election in Mexico, which produced a landslide victory for veteran leftist Andres Manuel Lopez Obrador.
The United States, Mexico and Canada have been at odds over U.S. demands to impose tougher content rules for the auto industry, as well as several other proposals, including one that would kill NAFTA after five years if it is not renegotiated.
Mexican Economy Minister Ildefonso Guajardo, who last week expressed hope an agreement in principle on NAFTA could be reached by the end of August, is due to hold talks with U.S. Trade Representative Robert Lighthizer at the end of the week in Washington.
He will be accompanied by Jesus Seade, the designated chief NAFTA negotiator of the incoming Mexican administration.
“There’s clearly a window of opportunity to be able to bed down a series of open issues which are not numerous, but are very complex,” Guajardo said on the sidelines of a summit of the Pacific Alliance trade bloc in the western coastal city of Puerto Vallarta.
Guajardo is due to meet his Canadian counterpart Chrystia Freeland on Wednesday, also to discuss NAFTA.
After the election, top officials from both the outgoing and new Mexican governments met in Mexico City with senior Trump administration officials led by Secretary of State Mike Pompeo.
Seade said the visit had sent out “excellent” signals.
“We hope these signals translate into a willingness to move forward,” Seade told reporters in Puerto Vallarta.
The talks have been clouded by tit-for-tat measures over trade after the Trump administration slapped tariffs on U.S. steel and aluminum imports.
The United States is also exploring the possibility of imposing tariffs on auto imports, though Guajardo said it was too early to speculate on how that would play out.
Mexico’s foreign ministry said on Monday that South Korea had initiated the process of seeking associate membership in the Pacific Alliance, which comprises Colombia, Chile, Mexico and Peru and is seeking to deepen free trade.
Singapore, Australia, New Zealand and Canada were last year admitted as associate members by the alliance. For Mexico, the expansion is part of a push to diversify its trading partners in the wake of Trump’s previous threats to pull out of NAFTA.
Guajardo indicated that despite his optimism about reaching a deal, risks still exist.
“The biggest risk is that instead of moving forward with an agenda of opening and integration, we move backwards, closing our economy and really undoing what we’ve built in the last two and a half decades,” Guajardo said.
A California energy company is moving ahead with a $150 million fuels terminal in the Mexican state of Sinaloa.
Sempra Energy of San Diego is building the fuels terminal in Topolobampo, Mexico through its Mexican subsidiary Infraestructura Energética Nova, S.A.B. de C.V. or IEnova after the company secured a 20 year contract with the Topolobampo Port Administration.
The first phase of the project will have a storage capacity of 1 million barrels for fuels including gasoline and diesel. Sempra Energy expects operations to start in the fourth quarter of 2020.
In April Sempra Energy announced that IEnova would build a $130 million, 1 million barrel fuels terminal at Ensenada, a city in the Mexican state of Baja California.
San Antonio refiner Valero Energy Corp., the largest independent refiner in the U.S., signed a deal in August with IEnova to export refined product into Mexico. The gasoline, diesel and jet fuel would ship to new $155 million storage terminals IEnova will build in the Gulf of Mexico port city of Veracruz. Other storage terminals will be constructed in Puebla, southeast of Mexico City, and in Mexico city itself, to the tune of $120 million.
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The United States launched five separate World Trade Organization dispute actions on Monday challenging retaliatory tariffs imposed by China, the European Union, Canada, Mexico and Turkey following U.S. duties on steel and aluminum. The retaliatory tariffs on up to a combined US$28.5 billion worth of U.S. exports are illegal under WTO rules, U.S. Trade Representative Robert Lighthizer said in a statement.
“These tariffs appear to breach each WTO member’s commitments under the WTO Agreement,” he said. “The United States will take all necessary actions to protect our interests, and we urge our trading partners to work constructively with us on the problems created by massive and persistent excess capacity in the steel and aluminum sectors.”
Lighthizer’s office has maintained that the tariffs the United States has imposed on imports of steel and aluminum are acceptable under WTO rules because they were imposed on the grounds of a national security exception.
Mexico said it would defend its retaliatory measures, saying the imposition of U.S. tariffs was “unjustified.”
“The purchases the United States makes of steel and aluminum from Mexico do not represent a threat to the national security,” Mexico’s Economy Ministry said in a statement.
“On the contrary, the solid trade relationship between Mexico and the U.S. has created an integrated regional market where steel and aluminum products contribute to the competitiveness of the region in various strategic sectors, such as automotive, aerospace, electrical and electronic,” the ministry added.
Lighthizer said last month that retaliation had no legal basis because the EU and other trading partners were making false assertions that the U.S. steel and aluminum tariffs are illegal “safeguard” actions intended to protect U.S. producers.
The U.S., Canada, and Mexico say talks on the North American Free Trade Agreement (NAFTA) will press ahead despite Washington’s steel and aluminum tariffs. But recent tensions between the U.S. and Canada are casting doubt on whether a deal is possible.
At Allen Russell’s warehouse in the border city of El Paso, materials are processed for shipment to factories in Mexico. His company depends on those shipments being tariff-free under NAFTA, so he rejects President Trump’s claim that the trade deal is the worst ever made.
“It is not the worst trade deal. It has done more for North America than could even have anticipated.”
Russell’s business provides U.S. corporations with manufacturing facilities employing around 8,000 people in Mexico, where labor costs are lower. He fears that without NAFTA, his cost of doing business will rise.
“The American consumer is going to pay the bill,” according to Russell. “The product is just going to be more expensive. It doesn’t mean anybody is going to move from Mexico to the US to produce the product.”
The US-Mexico border region is one of the largest in the world. Its population exceeds 2.5 million, with an economy to match. Mexico is Texas’ largest export market, with cross-border trade worth hundreds of billions annually.
More than 1/5 of that trade crosses the border in El Paso.
Thomas Fullerton, a professor at the University of Texas at El Paso, studies the region’s economy and the potential impact should NAFTA talks fail.
“It will throw a monkey wrench into how things operate rather seamlessly at this point,” he explained. “Existing operations will probably remain in place, but the level of investment and business formation will plummet.”
But not everyone is so sure. Nicole Grado’s company sells packaging. Up to 90 percent of her customers ship internationally. She’s looking for ways to diversify her business and says she’s confident other US companies could thrive without NAFTA.
“There would be changes, but I think it’s like everything: you adjust to those changes and you adapt,” the CEO said. “You figure out ways to continue moving forward.”
While the outcome of the NAFTA talks remains far from certain, business on the border continues. El Paso’s economy is projected to grow two percent in 2018.
But most here hope a long-term deal can be reached soon, to avoid the lingering uncertainty hanging over this region’s economy.
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Enbridge Inc. (ENB – Free Report) recently started construction work on its Valley Crossing natural gas pipeline’s border crossing offshore part, per Reuters. The $1.6 billion pipeline that lies between Mexico and Texas is scheduled to come online in October.
The energy infrastructure company is currently working on a 305-meter part of the pipeline’s offshore section, while the rest 165-mile onshore and offshore section is ready for operation. The company has plans to start the pipeline’s commissioning process soon.
Significance of the Pipeline
The Valley Crossing pipeline has a shipping capacity of 2.6 billion cubic feet of natural gas per day (Bcf/d). It will transport gas from Texas to Mexico’s growing energy market. Following the energy reform in Mexico, the country witnessed a rising interest from international oil and gas companies.
Energy-related imports have risen in the country over the past few years. Mexico’s year-to-date average gas import from the United States currently stands at 4 Bcf/d.
The pipeline is designed to supply clean burning gas primarily to the Mexican state-run utility company, Federal Electricity Commission aka CFE, which has around 37 million clients. Moreover, the pipeline is expected to open new market opportunities for the gas producers in Texas. As a result, Enbridge’s cash flow is expected to benefit immensely.
There’s More
The Valley Crossing pipeline would to be connected to the Sur de Texas-Tuxpan pipeline in the Gulf of Mexico, and is expected to create a huge pipeline network between the United States and Mexico. The Sur de Texas-Tuxpan pipeline is currently being built by a joint venture between Sempra Energy (SRE – Free Report) and TransCanada Corp. (TRP – Free Report) .
Price Performance
Calgary Canada-based Enbridge has lost 14% in the past year compared with 7.4% decline of its industry.
Zacks Rank and One Stock to Consider
Enbridge Energy carries a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for a better-ranked stock like Delek US Holdings, Inc. (DK– Free Report) that sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Brentwood, TN-based Delek is an energy company. The company’s top line for 2018 is anticipated to improve 39.2% year over year, while its bottom line is expected to increase 230.2%.
Mexican Economy Minister Ildefonso Guajardo said on Monday the only way countries re-negotiating the North American Free Trade Agreement (Nafta) will find a solution is through “sufficient flexibility” to narrow differences.
Guajardo said US, Mexican and Canadian negotiators will be “engaging strongly” in July to reach an agreement that is “feasible, workable and benefits the three nations involved.
“The only way we will find that solution is if countries involved have sufficient flexibility to be able to find that narrow strip where we have to land,” he said.
“An agreement that does not give us certainty, does not give us rules that have to be obeyed and mechanisms to settle disputes will not be of help for the business community.”
He said there was a “high chance” there will be an agreement on renegotiating Nafta, but the timing depends on how flexible each country can be.
The United States, Canada and Mexico have been in months of negotiations to rework Nafta, which President Donald Trump says harms his country.
White House economic advisor Larry Kudlow has said Trump will seek to replace Nafta with bilateral deals with Canada and Mexico, something both countries say they oppose.
US trading partners have been furious over Trump’s decision to impose tariffs on steel and aluminum imports from Canada, the European Union and Mexico as part of his “America First” agenda.
Fears of a global trade war come as Trump’s decision to back out of the G7 joint communique torpedoed what appeared to be a fragile consensus on a trade dispute between Washington and its top allies.
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NSAI Oil & Gas Property Evaluation seminars coming to London, Singapore and Mexico City this summer
Netherland Sewell & Associates (NSAI) has again expanded the reach of its popular Oil & Gas Property Evaluation Seminars for financial professionals, with the new addition of a seminar in Mexico City on September 5-6, 2018.
“We are very excited to introduce the NSAI Oil & Gas Property Evaluation seminars to Mexico,” said NSAI SVP & CFO Scott Frost. “With the country opening its hydrocarbon sector to foreign investors and international partners, the time is right for NSAI to host a seminar in Mexico.”
Seminars deliver a basic understanding of the upstream oil and gas industry
The two-day seminars are designed to help energy finance professionals gain a deeper understanding of the various aspects of the evaluation of hydrocarbon reserves and learn how to use reserves reports and studies. Participants can expect to gain a basic understanding of the upstream oil and gas industry, including basic geology of different plays, reservoir evaluation basics, reserves and resources definitions, understanding hydrocarbons-in-place, recovery factors and rates, operating expenses and capital costs, and more.
The seminar speakers are NSAI professionals that have significant career expertise in reserves determination methods, the economics of hydrocarbon extraction, and petroleum geology. The seminars are popular with financial institutions that invest in energy development as well as banks that are involved in making lending decisions for oil and gas exploration and production projects.
Below is the 2018 NSAI Oil & Gas Property Evaluation seminar calendar:
May 7 & 8 and 9 & 10, 2018 – Dallas (Both sessions had record attendance with a waiting list)
NSAI encourages energy industry and oil and gas financial professionals to pass this information on to colleagues who may benefit from attending. “We are excited about the opportunity to meet again with petroleum industry financial professionals and would like to thank you for recommending our seminars to your colleagues,” said NSAI SVP Joseph Spellman.
Scott Rees, NSAI Chairman and CEO, told Oil & Gas 360® that the firm has graduated about 6,500 people during 38 cumulative years of seminars in Dallas, London and Singapore. “We are glad to be adding Mexico City to that list,” Rees said.
Interested parties may learn more and register at NSAI’s website.
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Contratar un seguro no basta para decir que una empresa está adecuadamente protegida contra los eventuales riesgos que pueda enfrentar; lo anterior, toda vez que un seguro sólo va a cubrir ciertos riesgos y a excluir otros. Por ello, la clave es contar con un programa integral de seguros.
Especificamente en el sector de hidrocarburos y sus derivados, la cadena de valor es amplia y compleja, abarca distintas actividades: Exploración, Extracción, Refinación y Procesamiento, Transporte, Almacenamiento, Distribución y Expendio al público.
Se trata de actividades que son altamente riesgosas por las características intrínsecas de los hidrocarburos (explosivos y flamables) las cuales les otorgan el potencial de causar daños y perjuicios. A dichos riesgos, se le suman aquellos que son particulares de cada actividad. Por ejemplo, en las actividades de extracción existe la posibilidad de un descontrol de pozo, lo que puede causar severos daños a personas y medio ambiente; los auto-tanques que transportan gasolina o gas licuado de petróleo pueden ocasionar pérdidas catastróficas en caso de una explosión pues transitan en zonas de alta densidad poblacional; los ductos son sujetos a actos vandálicos para sustraer los hidrocarburos, lo cual puede provocar contaminación a partir de los derrames.
Para evitar este tipo de eventualidades, las empresas generalmente implementan una serie de medidas de seguridad industrial y protección ambiental a través de un proceso de administración de riesgos, sin embargo la posibilidad de que alguna de éstas falle siempre existirá, por eso es sumamente importante contar con los mecanismos de transferencia de riesgos que otorguen respaldo económico en caso de siniestro.
Los seguros son instrumentos de transferencia del riesgo, que están diseñados para cumplir con objetivos específicos. Por ejemplo, un seguro de responsabilidad civil otorga cobertura por los daños y perjuicios que se causen a terceros en sus personas y bienes; un seguro de responsabilidad ambiental sirve para absorber los costos de remediación o compensación por contaminación ambiental; un seguro de control de pozos, como su nombre lo indica, está diseñado para asumir los costos que se deriven de un accidente en un pozo de perforación que provoque su descontrol.
La mejor manera de que las empresas de la industria de hidrocarburos estén debidamente protegidas es a través de un programa integral de seguros que abarque todas sus áreas de riesgo.
En el contexto actual de la Reforma Energética,en la que participan activamente nuevos operadores que han comprometido su capital, las empresas deben estar preparadas para actuar en un escenario de riesgo, donde deberán ajustar sus esquemas de aseguramiento a fin de evitar una reducción de la utilidad esperada o incluso un impacto negativo en su patrimonio.
En NRGI Bróker somos expertos en administración de riesgos y programas integrales de seguros. Acércate a nosotros, con gusto te atenderemos.
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