Mexico Energy Monitor

PEMEX Releases Sustainability Plan

• State-producer PEMEX released on March 13^th its new sustainability plan. Under this new plan, PEMEX wants to cut greenhouse gas emissions and increase industrial security in its facilities. The company plans to reduce methane emissions by 30% over the next six years, stop all gas flaring by 2030, and reduce its total emissions to net zero by 2050. It will deploy 12% of its capex 2025-2030 to meet the emission targets.

• PEMEX said that it will prioritize environmental, social and governance (ESG) factors in its analysis of new investments. The oil company will commit to improving its emissions counting system and reinforcing engagement with international organizations to elevate its climate standards.

• PEMEX and US Environmental Protection Agency recently signed an agreement for cooperation in the global methane initiative and identification of opportunities to mitigate methane gas emissions in exploration and production activities. The company is still failing in areas such as gas flaring and accidents in many of its facilities. However, as PEMEX keeps facing a crushing debt burden, it has been trying to elevate its ESG score to attract new financing from ESG-constrained funds.

• PEMEX promised to reduce water use and curb Sulphur emissions, but it did not provide any specific policy to understand how this would become a reality. The oil company said it is considering electric mobility and green hydrogen projects. PEMEX remains in a challenging financial situation. It is unclear if the firm will have the financial resources and the know-how needed to make these improvements across all its business segments.

Leading Presidential Candidate Present Energy Proposals

• Leading presidential candidate Claudia Sheinbaum intends to stabilize state-producer PEMEX’s oil production during her administration, according to Sheinbaum’s campaign platform, as she proposed mostly a continuation of the policies of current President Andres Manuel Lopez Obrador (AMLO) of supporting state-controlled companies, such as PEMEX and public utility CFE.

• According to Sheinbaum’s platform, her administration would focus on avoiding higher energy prices for consumers, maintaining crude oil production levels, expanding the capacity of the refined products industry as well as reinforcing the market share of state-controlled agencies.

• Electric transportation, expanding power access to marginalized communities as well as focusing on the petrochemical sector will also be priorities in a potential Sheinbaum administration, the campaign said.

• Sheinbaum will have to address the current energy policies, which have failed to reverse the country’s decline in oil production, and left its petrochemical segment without the necessary feedstock it needs to run its plants at full capacity.
• AMLO made PEMEX the center of the country’s energy policy by freezing the energy reforms passed by the previous administration. Those energy reforms allowed companies other than PEMEX to bid on exploration and production leases. The intent of the reforms was to attract outside money and expertise to Mexico’s oil and gas market, which would speed up the recovery of energy production.
• While AMLO’s administration honored the contracts issued by the previous administration, it ceased issuing new exploration and production leases to non-PEMEX bidders. Pemex assumed nearly all of the burden of reversing Mexico’s decline in oil and petrochemical production.
• Pemex did halt further declines in oil production, but it has failed to significantly increase output let alone meet its forecasts for increases. Increasingly, PEMEX is posing a risk to the country’s credit rating, according to Mexico’s central bank. If unchecked, PEMEX could become a liability for the government by 2026, consuming more funds than it contributes, according to Fitch Ratings, a credit rating agency.

CFECapital To Pay Dividends to Shareholders

• CFECapital, the division of the public utility CFE tasked with managing its investment trust focused on energy and infrastructure projects, known as Fibra E, has announced that it will distribute approximately $30 million to shareholders. These payments represent dividends linked to the financial performance of December 2023 and January-February 2024.

• CFECapital has been in operation since 2017, with a focus on managing investment trusts in energy and infrastructure in Mexico. CFECapital has announced its current investment in various projects aimed at increasing the firm’s installed generation capacity by 9GW. While specific details were not provided, the utility emphasized its commitment to constructing new combined cycle plants in strategic areas, enhancing renewable generation capacity, and modernizing hydroelectric plants. Moreover, CFECapital stated that upcoming months will witness the launch of new projects incorporating advanced technology and improved efficiency protocols, ultimately boosting the firm’s profitability.

Sempra Infrastructure Takes FID in Wind Project

• Sempra Infrastructure announced that it took a positive final investment decision (FID) for the wind energy project Cimarron. Sempra will invest around $550 million in Baja California, Mexico. This project will have a capacity of around 320MW, and it already has a long-term offtake agreement with Silicon Valley Power to provide electricity to Santa Clara, California.
• This is one of the few renewable energy projects that have been able to progress during the administration of President Andres Manuel Lopez Obrador (AMLO).

• Other companies, such as Mexico City-based Zuma Energia, have been able to advance certain green energy projects. Zuma had to acquire the Potrero solar park in Jalisco. Potrero, which entered commercial operations in 2020, was previously owned by renewable energy solutions provider Fotowatio Renewable Ventures.

• Zuma Energia said that this move is part of a growth strategy of its umbrella company China-based State Power Investment Corp (SPIC) to increase overseas and green generation capacity. With this new acquisition, Zuma reached 1.1GW of generation capacity. SPIC, one of China’s top five power producers, bought Zuma Energia in 2020. At that time, Zuma had an installed capacity of 818MW from two solar plants in Sonora and Chihuahua and two wind farms in Tamaulipas and Oaxaca.

• Another example is Helax Istmo, a wholly owned subsidiary of funds managed by Copenhagen Infrastructure Partners, which signed in December 2023 a Memorandum of Understanding (MoU) with the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT) and Mexico’s national Ministry of Navy, the Secretaria de Marina (Semar). Under the MoU, the parties agree to collaborate to support the development of a large-scale, integrated renewable energy project in Oaxaca, Mexico.

Energy Ministry Cancels Clean Energy Certificates

• Mexico’s energy ministry SENER cancelled clean energy certificates (CELs) issued in favor of public utility CFE’s power plants built before 2014. SENER’s action complies with a 1 February ruling of a Mexican federal court.

• Even when SENER withdrew the issuance of CELs, Mexico’s energy regulator CRE recently approved a new methodology to issue such certificates. Under the new resolution, steam-generated energy in combined cycle plants will begin to be considered clean energy. COPARMEX said that this new resolution antagonizes the efforts Mexico is engaging in to combat climate change. According to the COPARMEX, this resolution will further hurt the image of Mexico as a destination for foreign investment in the energy sector.

• Civil society organizations Greenpeace, Mexico’s climate initiative and the Mexican center for environmental law have criticized this methodology, saying that it will slow down the country’s energy transition while releasing false information about clean energy levels in the country.

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