Mexican Senate and House of Representatives Approve Constitutional Energy Sector Reform

by Holland & Knight LLP
Contact

  • A constitutional reform approved by Mexico's Senate and House of Representatives will transform the country's energy sector, pending expected approval by the majority of state congresses.
  • The reforms involve the exploration and exploitation of oil and gas, and the generation of electric power, and would bring about an end to the Mexican State's energy monopoly.

A constitutional reform was approved yesterday by the Mexican Senate and today by the Mexican House of Representatives modifying articles 25, 27 and 28 of the Mexican Constitution. It will transform the country's regime involving the exploration and exploitation of oil and gas, as well as the generation of electric power. The reform must now be accepted by the majority of the state congresses to become law.

An End to State Monopoly?

The reform and its temporary provisions have set the standard by which the secondary laws of the energy sector will be modified, with the aim of ending the monopoly of the Mexican State in the hydrocarbon field and in the generation and commercialization of electricity.

The current state monopoly is controlled by two state-owned companies, PEMEX (Petroleos Mexicanos) and CFE (Comisión Federal de Electricidad). Under the reform, CFE will be limited to the control of the national electric grid, as well as the supply of the public service of transmission and distribution of electricity. PEMEX will not hold a monopoly in exploring, exploiting and refining oil, gas and hydrocarbons, since both domestic and foreign private investment would be allowed in these areas.

Key Provisions

Within 120 days of the law taking effect, the Mexican Congress will issue all the secondary laws. Key features are as follows:

  • A contractual regime for the participation of private investment on the upstream sector will be established for: (1) services, (2) revenue and production share agreements, and (3) licenses. In each case, the Ministry of Energy will determine the best model to be used in order to maximize profitability for Mexico.
  • The compensation structures approved for these contractual models will: (1) be in cash-for-services contracts, (2) include a percentage of the revenue or production obtained, (3) include the transmission of hydrocarbons once they have been extracted from the underground (license regime), and (4) combine such compensation structure models.
  • The private investors that enter into an agreement with either the Mexican government or PEMEX will be allowed to report for accounting and financial purposes the awarding of the contracts, and will be able to record the benefits of the projects as forecasted.  
  • The Ministry of Energy will be in charge of granting authorizations for industrial oil-related activities, such as crude oil refinery and gas processing.
  • The reform will establish a special regime for the awarding of permits for the storage, transportation and distribution of crude oil and its derivatives by pipelines, as regards basic chain petrochemicals such as ethane, propane, butane and white gasoline (naftas).
  • The reform will establish a legal system for the participation of private investment in the generation and commercialization of electricity by any source except nuclear energy. In addition, a new regulatory entity will be created for providing non-discriminatory access to power-generating companies within the transmission industrial process.

Written by:

Holland & Knight LLP
Contact
more
less

Holland & Knight LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!