Mexico Energy Monitor

CFE and Engie start construction of Mayakan pipeline expansion

  • Mexico’s state-run utility CFE and France-headquartered ENGIE Mexico announced the start of construction work to expand the Mayakan natural gas pipeline. The expansion of the pipeline would increase natural gas availability in the Yucatán peninsula using supply that would come from the recently-announced Gate to the Southeast (Puerta al Sureste) pipeline project.
  • Even though the completion of the Cuxtal I project, which connects the ENGIE-owned Mayakan pipeline to the national Sistrangas grid, is estimated to have increased the amount of gas transported to the peninsula to approximately 120-140 million cubic feet (mcf)/day, this expansion responds to larger future demand of natural gas and to satisfy the operational needs of the newly-developed nearby power generation plants Valladolid IV and Merida IV.
  • The combined cycle plants in the cities of Mérida and Valladolid in the Yucatán peninsula are scheduled to start commercial operations on 1 November 2024 and 3 January 2025, respectively, according to CFE executives. The two plants have a combined investment of around $1.2 billion. The combined cycle plant in Mérida is planned to have a generation capacity of 499MW while the one in Valladolid is planned to have a 1.02GW capacity.
  • CFE is focusing on increasing the gas supply to the Yucatán peninsula, which maintains among the highest power generation costs due to deficient natural gas pipeline infrastructure as well as fewer transmission lines.
  • CFE is also building a solar plant in Mérida. The Nachi Cocom plant would have a total capacity of 7.5MW once built. CFE has said the main goal of the Nachi Cocom solar plant in the southeast state of Yucatán is to provide energy for the new electric public transport system of the city of Mérida.
  • In previous announcements, CFE had said that the plant would serve to power some aspects of the Tren Maya intercity railway, President Andrés Manuel López Obrador (AMLO)’s flagship infrastructure project.
  • CFE is also connecting Holbox island to the national SEN grid through 10.5km of submarine cables as well as rehabilitating an additional 6.5km of submarine cables connecting Isla Mujeres island with Cancún.
  • Despite the stated progress with these projects, state-run and private sector companies have not always shown an ability to complete projects on time, often for reasons out of their control. Natural gas infrastructure projects included in Mexico’s 2020-2024 long-term planning document known as Plan Quinquenal have been delayed.

CFECapital to pay dividends to shareholders

  • CFECapital, the newest branch of public utility CFE that manages its investment trust focused on energy and infrastructure projects Fibra E securities, will pay around $50 million to shareholders, the company announced. The payments are dividends connected to the financial results of the second quarter (Q2) of 2024. CFECapital is operating since 2017, focused on managing investment trusts in energy and infrastructure in Mexico.
  • CFECapital Fibra E securities produce significant investment returns of at least 12% for its shareholders. CFECapital officials said that there is a robust budget for maintenance and expansion of the transmission grid during 2024. Officials did not provide further details on this matter.
  • CFECapital said that currently it is investing in various projects that will increase the firm’s installed generation capacity by 9GW. The utility did not provide further details but it said that it is committed to building new combined cycle plants in strategic areas, improving its renewable generation capacity and investing to modernize its hydroelectric plants. CFECapital added that during the next few months there will be new projects coming online with new technology and improved efficiency protocols, which will elevate the profitability of the firm.

PEMEX reduced its debt by 23% – Romero Oropeza

  • The Ministry of Finance and Public Credit (SHCP) granted Petróleos Mexicanos (Pemex) an additional month to pay the Shared Profit Duty (DUC) for May. The new deadline is now set for July 31, extending the original deadline from the end of June.
  • Credit rating agency Moody’s recently downgraded PEMEX’s rating category to B3 with a negative outlook. Moody’s said that its decision reflects PEMEX’s increasing liquidity needs due to higher capital requirements and the high debt burden it will face in the next two to three years. The firm anticipates that PEMEX will face greater business risks as it continues to expand its refining capacity and seek to increase production. Moody’s concluded that its decision also considers that PEMEX is not proactively seeking to improve its ESG standards, which is leading some banks to limit their exposure to the company.
  • President Andrés Manuel López Obrador (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 major declines in oil production, but it has failed to significantly meet its forecasts. 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.



Mexico and US gas – Wilson Center report

Mexico needs major investment in energy production and infrastructure to boost energy security, according to a recent report published by the Wilson Center in Washington DC.

While natural gas is Mexico’s most-consumed energy source, accounting for 44% of total primary energy demand, Mexico is not among the world’s top 20 natural gas producers, and its natural gas production has declined by 47% since it peaked in 2010. The country’s current production levels are nowhere near sufficient to meet its increasing domestic need. In 2022, gas demand in Mexico reached 8,397 million cubic feet per day (MMcf/d), of which only 32 percent was met with domestic production. The remainder of that demand was met with imports comprised almost exclusively of piped gas from the US.

Mexican domestic natural gas output entered a steady decline after it peaked in 2010, falling by 47% to only 2,661 MMcf/d in 2022. Based on Mexico’s limited gas reserves of around 30 Bcf and state producer Pemex’s challenging financial situation, Mexico’s National Hydrocarbon Commission expects stagnant production to persist through 2028. Output in that year would be able to meet the equivalent of 40 percent of today’s gas demand at best.

Theoretically, domestic production is enough to cover around 30% of Mexico’s dry gas demand. However, Pemex itself is an enormous consumer of natural gas, which it uses for its exploration and production activities, refineries, gas processing centers, and petrochemical facilities. When consumption by Pemex’s own operations are excluded, domestic production accounts for less than 15 percent of available gas volumes in Mexico for power generation, industry, and other end-uses.