Page 5 - LatAmOil Week 30

LatAmOil COMMENTARY LatAmOil
 Gas yields averaged 3.634bn cubic feet (102.91mn cubic metres) per day between April and June, down by almost 1% on the gure of 3.664 bcf (103.76 mcm) per day posted for the January-March period. Dry gas output was more dramatically affected, sinking by more than 4% from 2.314 bcf (65.53 mcm) per day in the rst quarter to 2.218 bcf (62.81 mcm) per day in the second quarter.
Gas trends
These quarter-on-quarter declines are not exactly alarming, as they are fairly small per- centage-wise. But they are part of a long-term trend that saw Mexico’s gross total gas output drop from more than 7 bcf (198 mcm) per day in 2009 to about 4.8 bcf (135.9 mcm) per day in 2018.
At the same time, though, the country has become almost completely dependent on imported gas to keep up with rising demand. Its biggest source of supply is its northern neigh- bour, the US, and producers of unconventional gas in that country have been eagerly looking for ways to move larger volumes extracted from elds in the Permian Basin.
ese companies seem to have found ways to achieve their aims, given that they have signed a number of agreements for the construction of cross-border pipelines. is summer, though, they have run into a roadblock – namely, the national power provider CFE’s decision to le suit against several pipeline builders in a bed on the grounds that the latter had overcharged for
their services to the tune of $899mn.
ese legal actions against contractors have brought several midstream projects to a halt. Last month, for example, Canada’s TC Energy and California-based IENova had to postpone the opening of a nearly completed pipeline – Sur de Texas-Tuxpan, a link that was supposed to
pump gas from Texas to Mexico.
Running short
e delay is likely to exacerbate shortages of fuel on the Yucatan Peninsula in. In May, the national power transmission system operator (TSO) Cenace said it anticipated emergencies, widespread shortages and industrial outages this summer in the states of Coahuila, Nuevo Leon and Tamaulipas.
ese problems are likely to spread beyond the Yucatan – and beyond the end of the sum- mer. Mexico already depends on gas for 65% of its electricity generation, and most of the ther- mal power plants (TPPs) slated for future con- struction are gas- red.
It is too early to tell whether all of the prob- lems mentioned here truly constitute a crisis. But they do represent a formidable set of chal- lenges, and Mexico’s president cannot resolve them with magical or circular thinking. He can- not wish them away, and he ought to do more than suggest that there would be no problem if he could simply rede ne mountains as mole- hills. Instead, he ought to address the question of whether reversing his predecessor’s reforms has truly bene tted the country.™
Me “
president ought to do more than suggest that there would be no problem if he could simply rede ne mountains as molehills
PdVSA losing control over Citgo
A US court ruling has cleared the way for the NOC’s creditors to seize shares in the downstream operator to clear debts
WHAT:
PdVSA has failed to secure reversal of a lower court’s decision involving debts to Crystallex.
WHY:
As a result, the Canadian company is in a position to take Citgo equity as compensation.
WHAT NEXT:
Even if Interim President Guaido secures an asset protection order from the US government, PdVSA’s hold over its subsidiary is likely to weaken further.
VENEZUELA’S national oil company (NOC) PdVSA is looking increasingly likely to lose an irreplaceable asset: the US-based downstream operator Citgo Petroleum.
Such a loss would have unpleasant implica- tions for the state-owned company, which has su ered as a result of US sanctions and domestic turmoil.
Citgo has long been one of the NOC’s best-performing units and is still capable of attracting investors’ interest, despite the dete- rioration in its performance in the rst half of 2019. Just last week, Bloomberg quoted an anon- ymous source as saying that the company’s latest debt o ering, worth $1.9bn, had been oversub- scribed to the tune of $5bn.
Nevertheless, the bond between Citgo and its parent company appears to be fraying. Indeed, the PdVSA subsidiary’s executives apparently took pains to play up the growing distance between the two entities when they held meet- ings and phone calls with potential buyers of the
debt earlier this month.
ey told investors that they had blocked
telephone and email communications from the NOC in order to remain in compliance with US sanctions, Bloomberg explained. Additionally, they stressed that PdVSA had no way of access- ing Citgo’s funds.
Order in the court
On another front, the NOC has su ered a set- back in the US court system.
Earlier this week, PdVSA lost its bid to appeal against a federal court’s order allowing Crys- tallex International, a Canadian gold-mining company, to seize shares in Citgo.
Crystallex had won compensation worth $1.4bn for the expropriation of its assets in Ven- ezuela under the late President Hugo Chavez, and the 3rd US Circuit Court of Appeals in Philadelphia said that the lower court was right to attach PdVSA’s shares in Citgo’s parent rm to the original ruling..
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Week 30 31•July•2019 w w w . N E W S B A S E . c o m
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