Mexico slashes energy investment portfolio

  • Market: Crude oil, Oil products
  • 06/04/20

Mexico's government cut its estimate for the worth of a portfolio of long-awaited energy investment plans amid the lowest crude prices in years and the coronavirus pandemic.

The country will next week announce energy investment projects to include "collaboration with the private sector" worth up to Ps339bn ($13.4bn), President Andres Manuel Lopez Obrador said in a quarterly address to the nation today.

The value of the plan declined from the government's initial estimate of $100bn given late last year. Officials have provided few details about the initiative. More information was to be announced last in late February.

Lopez Obrador closed many avenues for private-sector energy investment, opened under a 2014 reform, after he took office in December 2018.

The president for the second time since late last week insisted that Mexico's state-owned refineries will take advantage of low global crude oil prices by refining an additional 400,000 b/d, which would almost double their current level of processing. The country's six refineries have struggled to increase output after decades of low investment.

The six refineries were running at 36pc capacity in the week ended 20 March.

The president vows to continue work to repair and refurbish the refineries, as well as build a controversial new 340,000 b/d refinery in Tabasco state.

Refining more would avoid "cheapening the national crude," the president said. Mexico's crude basket, which is a representative price of its export grades, fell to $10.40/bl on 30 March.

On 3 April, the price increased by 51.5pc from the previous day to $16.05/bl, after US president Donald Trump said he expects and "hopes" Saudi Arabia and Russia will cut their oil output by 10mn-15mn bl. Mexico has also called on the two countries to reach agreement.

The low crude prices put Mexico's finances and those for state-owned oil company Pemex in jeopardy, ratings agencies have said.

The president confirmed that the government will go ahead with a tax cut for Pemex approved since October.

But the president gave few specifics of how the country's economic recovery will begin soon, as he promised. He said that he will not resort to "gasolinazos," or raising fuel taxes or prices.

Mexico's fuel demand has fallen by roughly 20pc as the country in late March began coronavirus mitigation efforts in earnest.


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20/05/24

Q&A:Shipping needs cultural shift to decarbonise: Total

Q&A:Shipping needs cultural shift to decarbonise: Total

Amsterdam, 20 May (Argus) — A cultural change in buying behaviour and supply patterns is necessary for the shipping sector to meet its decarbonisation targets and may be the biggest hurdle to overcome, strategy and projects director for TotalEnergies' marine fuels division Frederic Meyer told Argus. Edited highlights follow: What is the biggest challenge standing in the way of the maritime industry in meeting decarbonisation targets and the fuel transition ? A cultural change is required — for decades the maritime sector has relied on by-products with high energy density from the crude refining process such as fuel oil. The industry will now have to pivot its attention towards fuels developed for the purpose of consumption within the maritime industry. This will also require time as the sector looks to level up, and it remains to be seen whether there will be enough time to meet the International Maritime Organisation (IMO)'s net-zero by or around 2050 targets. But we have seen some good progress from cargo owners who are seeking scope 3 emissions related documents. How does TotalEnergies see marine biodiesel demand moving in the short term? In the short term, there is little incentive for the majority of buyers in the market. This is due to a lack of any regulatory mandates, as well as limited impact from existing regulations such as the IMO's carbon intensity indicator (CII) and the EU's Emissions Trading System (ETS). Despite providing a zero emission factor incentive for biofuels meeting the sustainability criteria under the EU's Renewable Energy Directive (RED), EU ETS is still on a staggered implementation basis beginning with only 40pc this year, rising to 70pc next year and 100pc in 2026. Further, EU ETS prices have been quite low, which also weighed on financial incentives for marine biodiesel. Therefore, many buyers are currently waiting for further incentives and signals from the regulators before purchasing marine biodiesel blends. Another point impacting demand is the current edition of ISO 8217, which does not provide much flexibility when it comes to marine biodiesel blend percentages and specifications. The new 2024 edition will likely provide greater flexibility for blending percentages, as well as a provision for biodiesel that does not meet EN14214 specifications. This will provide greater flexibility from a supply point of view. However, there remains stable demand from buyers who can pass on the extra costs to their customers. And how do you see this demand fluctuating in the medium to long term? If the other alternative marine fuels, such as ammonia and methanol, that are currently being discussed do not develop at the speed necessary to meet the decarbonisation targets, then marine biodiesel demand will likely be firm. Many in the market have voiced concerns regarding biofuel feedstock competition between marine and aviation, ahead of the implementation of sustainable aviation fuel (SAF) mandates in Europe starting next year. With Argus assessments for SAF at much higher levels than marine biodiesel blends, do you think common feedstocks such as used cooking oil (UCO) will get pulled away from maritime and into aviation? With regards to competition among different industries for the same biofuel feedstock, suppliers may channel their feedstock towards aviation fuels due to the higher non-compliance penalties associated with SAF regulations as opposed to those in marine, which would incentivise greater demand for SAF. An area that can be explored for marine is the by-product when producing SAF, which can amount to up to 30pc of the fuel output. This could potentially feed into a marine biodiesel supply pool. So it's not necessarily the case that the two sectors will battle over the same feedstock if process synergies can be found. Regarding fuel specifications, market participants have told Argus that the lack of a marine-specific fuel standard for alternatives such as marine biodiesel is feeding into uncertainty for buyers who may not be as familiar with biofuels. What impact could this have on demand for marine biodiesel blends from your point of view? Currently, mainstream biodiesel specifications in marine biodiesel blends are derived from other markets such as the EN14214 specification from road diesel engines. But given the large flexibility of a marine engine, there is room to test and try different things. For "unconventional" biofuels that do not meet those road specifications, there needs to be a testing process accompanied by proof of results that showcase its safety for combustion within a marine engine. Some companies may not have the means or capacity to test their biodiesel before taking it into the market. But TotalEnergies always ensures that there are no engine-related issues from fuel combustion. Suppliers need to enact the necessary testing and take on the burden, as cutting out this process may create a negative perception for the product more generally. Traders should also take on some of the burden and test their fuels to ensure they are fully compatible with the engine. With many regulations being discussed, how do you see the risk of regulatory clashes impacting the industry? The simple solution would be an electronic register to trace the chain of custody. In the French markets, often times the proof of sustainability (PoS) papers are stored onto an electronic database once they are retired to the relevant authority. This database is then accessible and viewable by the buyer, and the supplier could also further deliver a "sustainability information letter" which mirrors the details found in the PoS. It is important for the maritime sector to adopt an electronically traceable system. What role could other types of fuels such as pyrolysis oil potentially play in the maritime sector's decarbonisation targets? We have teams in research and development at TotalEnergies which are studying the potential use of other molecules, including but not limited to pyrolysis oil, for usage in the maritime sector. It may become an alternative option to avoid industry clashes, as pyrolysis oil would not be an attractive option to the aviation sector. We are currently exploring tyre-based pyrolysis oil, but have only started doing so recently so it remains an untapped resource. We need to figure out the correct purification and distillation process to ensure compatibility with marine engines. For the time being we are specifically looking at tyre-based pyrolysis oil and not plastic-based, but we may look at the latter in a later stage. The fuel would also have to meet the RED criteria of a 65-70pc greenhouse gas (GHG) reduction compared with conventional fossil fuels, so we are still exploring whether this can be achieved. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Iran's president dies in helicopter crash


20/05/24
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20/05/24

Iran's president dies in helicopter crash

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17/05/24
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17/05/24

Houston refiners weather hurricane-force winds: Update

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Brazil's Rio Grande do Sul reallocates gas supply


17/05/24
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17/05/24

Brazil's Rio Grande do Sul reallocates gas supply

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Houston area refiners weather hurricane-force winds


17/05/24
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17/05/24

Houston area refiners weather hurricane-force winds

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