Mexico: Energy Reform Means Business Growth

by / Wednesday, 20 August 2014 / Published in Strategic Partnership

2600-pemexMexico’s Petroleos Mexicanos (Pemex) faces the task of determining areas where it wants to bring in partners under the sweeping energy reform that President Enrique Pena Nieto signed into law to open Mexico’s oil and gas exploration and production to private and foreign companies for the first time since 1938.

Attorneys for Mayer Brown issued a legal brief saying the executive branch has to issue the regulations under the hydrocarbons law within 180 calendar days from its enactment, which ended a monopoly on Mexico’s oil and gas activities. The law was signed on Aug. 11.

Pemex had first choice of the projects that it wanted to keep under the reform’s Round Zero, and Mexico’s Ministry of Energy (SENER) on Aug. 13 announced Pemex would be granted all of its requested producing and probable reserves, estimated at 83% of Mexico’s total producing and probable reserves.

Pemex was granted 21% of Mexico’s prospective resources instead of the 31% it had requested, Mayer Brown said.

The Round Zero decision was accelerated in efforts so that the first private contracts might be revealed during the 2015 first quarter, Pena Nieto said in a speech earlier this month. Mexico’s senate approved the reform legislation on Aug. 6 (OGJ Online, Aug. 7, 2014).

“The energy reform opens a great opportunity for Mexico, and we need to seize it with complete and fast implementation,” he has said. “I’ve told different areas of the government to accelerate all of the measures necessary to put this reform into action for the good of Mexico.”

Mayer Brown partners Dallas Parker, Jose Valera, and Pablo Ferrante wrote a legal update for clients. Mayer Brown associates Gabriel Salinas and John Furlow helped write the update.

“It is through the entitlement regime that Pemex has historically received areas for E&P activities in Mexico,” Mayer Brown attorneys said. “However, the entitlements to be granted to Pemex pursuant to the new legal framework will have stricter terms than the entitlements granted to Pemex in the past, including relinquishment and termination events.”

The law provides Pemex request SENER’s approval for migration of entitlements into exploration and production contracts. In the migration process, the Ministry of Finance will establish the fiscal terms, and SENER will establish the technical terms related to the migrated contracts, Mayer Brown attorneys said.

“The hydrocarbons law further provides that SENER will seek Pemex’s favorable opinion with regard to the experience and the technical, financial, and operational qualifications that bidders would need to meet in order to participate in the bidding process,” they said.

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