On November 28, 2014, CNH’s Resolution CNH.11.001/14 regarding the Administrative Provisions for the Bidding of E&E Contracts (the Resolution) was published in the Mexican Federal Official Gazette. The Resolution provides generic rules on the actions and steps to be carried out in the bidding process for exploration and extraction contracts (E&E Contracts) in Mexico, as well as for the award and execution of said contracts.

Nevertheless, specific actions and steps complementing a large part of the Resolution’s content will be further regulated by the bidding rules for each tender (the Bidding Rules), as established in Article 24 of the Law on Hydrocarbons, published in the Mexican Federal Official Gazette on August 11, 2014.

Overview of the resolution

Execution of the bidding process

Each bidding process will be coordinated and executed by a bidding committee, composed initially of a coordinator and a secretary appointed by the National Hydrocarbons Commission’s (CNH) governing body. The bidding committee will be responsible for verifying and reviewing all documentation submitted by the bidders, assessing full compliance with the requirements set forth in the Bidding Rules, as well as other duties established in the Bidding Rules or by the CNH.

The Resolution calls for a bidding process in which all acts and stages will be conducted following the principles of economy, competitiveness, efficiency, legality, best-industry practices, transparency, impartiality, publicity, equality and good faith. The Bidding Rules will in no way negatively affect the competition among and concurrence of possible participants in the bidding process.

In addition, all acts and stages of the process will be published on CNH’s website. Also, the Resolution contemplates the possibility of submitting bids electronically or in person, or a combination of both, as allowed by the Bidding Rules.

Stages of the bidding process

According to the Resolution, the CNH will determine the stages of each bidding process, depending on the nature and characteristics of the tender. However, all bidding processes will comprise, at a minimum, the following stages: (i) publication of the call in the Federal Official Gazette; (ii) publication of the Bidding Rules; (iii) access to information contained in the data room; (iv) clarification of the Bidding Rules; (v) prequalification process; (vi) visits to the contract area, when appropriate; (vii) submission of proposals made by bidders; (viii) final ruling and announcement of the winning bidder; (ix) signing of E&E Contract; and (x) others required by law.

Content of Bidding Rules

The CNH will determine the Bidding Rules, which will contain, at a minimum, the following information on the bidding process: (i) object and contract area; (ii) general information on the CNH; (iii) schedule and stages; (iv) mechanisms to request clarification on the Bidding Rules; (v) prequalification criteria (defined by the Secretariat of Energy) and documentation to be presented to certify compliance with said criteria; (vi) fiscal terms applicable to the conduct of upstream activities under the E&E Contract; (vii) manner and procedures for the submission of proposals by prequalified bidders; (viii) reasons for rejecting proposals; (ix) draft of the E&E Contract to be awarded; (x) minimum work program for each contract area; (xi) required guarantees; (xii) mechanisms under which the CNH may request clarifications on documentation submitted by bidders; (xiii) mechanisms to determine the winning bidder; (xiv) provision to modify the Bidding Rules; (xv) reservations and duties of confidentiality to be observed; (xvi) others required by law or by the nature of the bidding.

Final ruling and award of an E&E Contract

The final ruling awarding an E&E Contract will be made by CNH’s governing board by means of a decision that will include, inter alia, the following information: (i) the results of the bidding process; (ii) the winning bidder; (iii) the second-place bidder; (iv) the deadline for the execution of the E&E Contract and presentation of guarantees.

E&E Contracts can only be executed by wholly owned state-owned companies or companies organized under Mexican law. Moreover, E&E Contracts will be executed on the date established by the Bidding Rules and following the presentation of all guarantees, powers-of-attorney, proof of address, as well as any other requirement established in the Bidding Rules.

Conclusion

In an attempt to provide legal certainty to those interested in participating in bidding for E&E Contracts, the Resolution regulates the stages of the bids. However, the provisions of the Resolution are simply very broad guidelines on the bidding process given that no specific dates, schedules, or prequalification criteria are to be found in its content. In this sense, further details on the bidding process are to be expected in the Bidding Rules that the CNH will define for each round.