Outlook 2018: Mexico's energy sector to see big investments

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Tuesday, January 2, 2018

Mexico's energy industry will see major investments in 2018, both from the public and private sectors, as projects awarded in oil and gas and electric power auctions are developed, the country tenders transmission projects, and fuel and natural gas infrastructure is expanded.

A total of 199 contracts have been signed with 125 firms as a result of six oil and three electric power auctions, while 67 private oil companies have entered Mexico with the auctions.

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The country will see almost US$60bn of investments in oil and gas E&P as a result of contracts awarded to private companies in the auctions, the government said in October. In addition US$2bn will be invested by private firms in 39 fuel storage projects, adding an additional 24Mb of capacity, a 122% rise, of a total US$4bn expected in fuel infrastructure expansion.

State oil company Pemex said in June it would accelerate its farm-out plans to create strategic associations in all lines of its business to increase crude oil and petrochemical production, boost reserves and access new technology in its operational processes as part of the company's aim to up oil production to 3.4Mb/d. Total crude production for November, the most recent month for which data is available, averaged 1.87Mb/d, down from 1.90Mb/d in October.

In December, the energy ministry announced it will launch the country's first tender for the financing, installation, maintenance, management and operation of a transmission line in 2018 that will link Baja California state to the national grid, while the energy regulatory commission is also drawing up rules for a tender to build a transmission line connecting the southern part of the peninsula, Baja California Sur state, to the national grid. 

The latter line will be an undersea link to the northwestern state of Sonora and require investment of US$1.11bn.

Mexico will also see major investments in NCRE projects, with around 2GW of solar and wind power to be built in the country's northwestern region alone over the next 15 years. 

AT A GLANCE: Mexico's wind power expansion to 2020

Eleven solar projects were awarded in the country's first electric power auction in March 2016, and solar also dominated the second auction, held last September, in both the sale of electric power and clean energy certificates (CECs), while the third long-term power auction in November was also dominated by solar, and resulted in some of the lowest prices for electricity in the world at US$20.57/MWh. 

Five wind farm projects were awarded in the first auction, while wind accounted for 43% of the capacity awarded in the second auction.

State utility CFE announced plans earlier this month to launch a Fibra E investment security for the electric power sector on the local stock exchange (BMV), an instrument that offers tax benefits to investors and launched by the Mexican government in 2015 as a way to promote energy and infrastructure projects.