On July 26, 2022, the Energy Regulatory Commission (“CRE”) published a preliminary draft of new “General Administrative Provisions that establish the requirements for the filing of applications, updates, modifications and obligations for the activities of commercialization of petroleum products or petrochemicals, and distribution by means other than pipelines of petroleum products, except liquefied petroleum gas for both activities” (the “Preliminary Draft”).1
General Description of the Preliminary Draft
The purpose of the Preliminary Draft is to regulate the activities of: (i) the commercialization of petroleum products; (ii) the commercialization of petrochemicals; and (iii) the distribution of petroleum products by means other than pipelines. Particularly, the Preliminary Draft seeks to regulate, for the aforementioned activities (i) the requirements to obtain the corresponding permits; (ii) the compliance of obligations by the permit holders; and (iii) the scenarios and requirements to modify and update the permits granted.
Relevant aspects of the requirements to apply for new permits
The Preliminary Draft provides that those interested in obtaining permits for the activities regulated by the Preliminary Draft must comply with several legal, technical and financial requirements, among which the following stand out (not exhaustive):
- Prove its legal constitution and capacity of its legal representative.
- Submit information on its shareholding or capital stock structure, up to the level of individuals.
- Indicate other permits that have been obtained by the economic interest group of the applicant.
- For commercialization permits, submit a letter regarding social impact stating that infrastructure will not be developed.
- For distribution permits, submit the acknowledgement of receipt of the submission of the social impact evaluation.
- Describe the products to be commercialized or distributed, indicating estimated purchase and sales volumes.
- Deliver letters of intent to cover the inventories required to comply with SENER´s storage policy.
- For distribution permits, submit a description, address, geographic location, technical specifications, technical-descriptive report, design plans, description of the construction and works program, among other aspects of the project
- Submit an opinion of compliance with tax obligations.
- For commercialization permits, submit a letter stating that no petroleum or petrochemical products have been previously commercialized or, if they have been previously commercialized, submit audited financial statements for the last fiscal year.
- For commercialization permits, submit a commercialization study and a certain written statement regarding cross-shareholding (participación cruzada).
- For distribution permits, submit the estimated amount of the investment supported by an investment study and submit a business plan
The deadlines for admitting and processing permit applications are in line with those currently set forth in the Regulation of the Electricity Industry Law, except for applications for permits for distribution by means other than pipelines of petroleum products, whose analysis and evaluation deadlines are reduced from 90 business days to 64 business days.
Relevant aspects of permit holders compliance with their obligations
The Preliminary Draft foresees the existence of certain obligations to be complied with, prior and after the beginning of operations of the relevant permit. Among such obligations are the following (non-exhaustive):
Obligations prior to the beginning of operations
- Notify the estimated date of commencement of operations.
- For commercialization, to begin operations within a period of two months as of the notification of the granting of the permit.
- For distribution, to start operations within a period of 18 months as of the notification of the granting of the permit.
- For distribution, submit insurance policies, a description of the telemetering system, a report of the amount of investment actually made, the issuance of the social impact resolution, etc.
Obligations after the beginning of operations
- Submit statistical reports on a daily, weekly, monthly and/or annual basis as applicable to distribution and commercialization permits.
- Submit information on its shareholding structure and capital stock on an annual basis.
- Comply with the petroleum products storage policy established by the Ministry of Energy.
- Submit certain “organizational control” manuals (codes of ethics, operational, accounting and third-party information control mechanisms, organization and procedures manual, control, monitoring and auditing procedures, etc.).
Relevant aspects of permit updates and modifications
The preliminary draft establishes the scenarios that will give rise to permit updates and modifications, the deadlines and procedure for their attention and the requirements for their processing.
Permit modification scenarios
- Among the scenarios for modifying permits are assignment, succession, changes in shareholding structure of the permit holder involving a change of control and, in the case of distribution permits, technical modifications of the distribution system.
Permit update scenarios
- Among the scenarios for updating permits are the change of name, denomination or corporate name of the permit holder, its partners or shareholders, changes on the address data of the distribution system (except for commercialization), corrections to permits due to omissions or minor errors, addition or deletion of products to be commercialized as long as they belong to the same group of products, change of the type of petroleum product in the tanks covered by distribution permits, changes in the corporate structure that do not imply change of control, and changes in the amounts invested on the projects.
Particular considerations of the Preliminary Draft
A noteworthy aspect of the Preliminary Draft is that marketers (holders of commercialization permits) that purchase the product from another marketer (holder of commercialization permit) would only be allowed to sell such products either to distributors, service stations or end users; if this obligation is breached, then the commercialization permit could be revoked. The Preliminary Draft establishes that permit holders will have a term of 90 calendar days from the entry into force of the Preliminary Draft (if applicable) to comply with its provisions.
Finally, it is important to mention that the Preliminary Draft constitutes only a draft regulation in the aforementioned matters; therefore, the final version of the regulation may have changes with respect to what has been published by the CRE, as part of its regulatory improvement process.
1 Available at: https://cofemersimir.gob.mx/portales/resumen/54009.