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What are the primary laws and regulations governing the oil and gas industry in your jurisdiction?
On December 12 2013 the Permanent Commission of the Mexican Congress approved amendments to Articles 25, 27 and 28 of the Constitution, which were subsequently approved by a majority of Mexico’s state legislatures and signed into law by the executive. On December 20 2013 these amendments were published as the Energy Reform Decree in the Federal Official Gazette and took effect on December 21 2013. The decree includes transitional articles that set forth the general framework for the secondary legislation or implementing laws.
Some of the key laws and regulations that make up the principal legal framework regulating oil and gas activities include:
- the Constitution;
- the Hydrocarbons Law and its regulations;
- the Hydrocarbons Revenues Law and its regulations;
- the Coordinated Energy Regulators Law;
- the Petróleos Mexicanos (PEMEX) Law;
- the National Agency of Industrial Safety and Environmental Protection of the Hydrocarbons Sector Law;
- the Mexican Oil Fund Law;
- the National Hydrocarbons Commission Law; and
- the General Provisions and Guidelines issued by the Ministry of Energy, the National Hydrocarbons Commission, the Energy Regulatory Commission and the National Agency of Industrial Safety and Environmental Protection for the Hydrocarbons Sector.
What government bodies are charged with regulating the oil and gas industry and what are the extent of their powers?
The Ministry of Energy, on behalf of the executive power, conducts the national energy policy. Its objective is to guarantee the competitive, sufficient, high-quality, economically viable and environmentally sustainable supply of fuel needed for the development of the nation. Pemex oversees its own oil activities, which are subject to review by different government agencies. For everything related to liquefied petroleum gas, the Energy Regulatory Commission is the regulating authority.
As a result of the 2008 energy reform, the National Hydrocarbons Commission was created as an independent agency which is part of the Ministry of Energy in charge of regulating and supervising the exploration and production of hydrocarbons, as well as all hydrocarbon storage, transportation and processing activities.
As a result of the Energy Reform Decree, the Ministry of Energy, the National Hydrocarbons Commission and the Energy Regulatory Commission have been granted additional technical and administrative authority over the energy sector generally:
- The Ministry of Energy, with the National Hydrocarbons Commission’s technical assistance, has the authority to grant assignments, select the areas that will be subject to public tenders, establish the technical guidelines for the tender process, as well as for the contracts themselves, and issue permits for oil refining and natural gas processing.
- The National Hydrocarbons Commission is responsible for conducting the public tender process and executing the corresponding contracts, as well as supervising oil and gas production activities.
- The Energy Regulatory Commission regulates and grants permits for the storage, transportation and distribution through pipelines of oil, gas, petroleum products and petrochemicals. It also regulates third-party access to transportation pipelines, as well as to the storage of hydrocarbons and their derivatives, and regulates the first hand sale of these products.
The National Hydrocarbons Commission and the Energy Regulatory Commission have been vested with their own legal status and technical and administrative autonomy. In addition, the Ministry of Finance and Public Credit, as well as other government entities, have been entrusted with establishing the economic terms for contracts assigned pursuant to the public tender process.
The National Agency of Industrial Safety and Environmental Protection for the Hydrocarbons Sector has been created to regulate and supervise activities and facilities related to the hydrocarbons industry, with respect to industrial safety and environmental protection. This new entity will operate as an administrative body of the Ministry of the Environment and Natural Resources and will, among other things, supervise the decommissioning and abandonment of facilities. Companies participating in the hydrocarbons sector will be subject to regulations intended to reduce greenhouse gas emissions and help ensure that energy and natural resources are used efficiently.
The National Control Centre of Natural Gas was created as the independent operator and manager of the National Transportation and Storage Integrated System of Natural Gas and will be in charge of its management and operation.
In addition, the Ministry of Agrarian, Territorial and Urban Development is in charge of monitoring the surface occupation and use processes. The Ministry of Economy is in charge of determining national content goals, establishing the methodology for the calculation of national content percentages and verifying their compliance in energy projects.
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