Rogelio López-Velarde March 11 2002 Legislative Update López Velarde Heftye y Soria | Energy & Natural Resources - Mexico Rogelio López-Velarde Energy & Natural Resources New Energy Plan Unveiled Natural Gas Regulations to be Amended New Energy Plan Unveiled On January 11 2002 the Ministry of Energy published the Energy Sector Plan 2001-2006. Although the energy sector has always been crucial to Mexico's economy, the energy policy has increasingly become the focus of attention and analysis from Congress, the press and the general public. The plan describes the industry's main policy strategies and emphasizes the need to increase production of electricity, hydrocarbons and, most importantly, natural gas. Despite the fact that Mexico ranks among the leading oil producers in the world, it currently imports more than 12% of its natural gas, 29% of its liquid propane, 26% of its petrol and 20% of fuel oil.In addition to general policy the following issues are addressed: the Mexican government's intention to encourage reforms that will open refining activities to private Mexican and foreign investment; the intention to stimulate private participation in dry gas production, under the current legal framework; the intention to grant budgetary and fiscal autonomy for Pemex. At present, Congress approves the Pemex budget and the federal government absorbs nearly all its revenues. As a result, a considerable delay in the necessary investment has occurred, which is expected to have an impact on oil production levels and booking of reserves; the intention to provide a similar autonomy scheme for CFE, the electricity power utility company, which must dramatically increase its installed power capacity and upgrade transmission and distribution lines; the promotion of liquefied natural gas (LNG) facilities that would meet the increasing demand for natural gas, which Pemex is unable to satisfy; and the promotion of additional self-consumption and co-generation power plants.Natural Gas Regulations to be AmendedThe Mexican Energy Regulatory Commission is soon to publish a decree by President Fox amending the Natural Gas Regulations. This reform is aimed at defining the rules for granting permits for installing LNG terminals in Mexico, a trend that is being pursued by several international energy companies. In addition, it will redefine the rules for the creation and operation of so-called 'natural gas consumption clubs'.Many end users have followed the consumption club structure rather than securing their gas supply through local distribution companies. The new rules for the consumption clubs appear to impose additional restrictions for the creation of such clubs, thus protecting the exclusive rights granted by the regulations to the local distribution companies. However, through the amendments the commission seeks to establish obligations for terminal owners and operators, including in relation to safety standards, open access to third-party shippers and users, regulation of rates, and the types of technology that can be used.The amendments have been reviewed by the Federal Commission on Regulatory Improvement, which has proposed certain revisions in the form of more relaxed rules for gas consumption clubs and the elimination of certain technical requirements for LNG terminals. The amendments are due to be published later this month. For further information in this topic please contact Rogelio López-Velarde at Lopez Velarde, Heftye, Abogados by telephone (+52 55 50 81 1424) or by fax (+52 55 50 81 1425) or by email ([email protected]).