Juan Carlos Machorro, Santamarina y Steta, Mexico
On August 11, 2014 the Federal Executive Branch issued decrees implementing at the federal law level the reforms to the Political Constitution of the United Mexican States, integrating historic changes in the manner in which the energy industry will be developed in Mexico, generating an increase in investment by allowing private participation, the transformation of the state-owned companies that currently manage the sector, and the strengthening of the institutions that govern the activity of that industry.
The reforms emphasize the oil and gas and electric power sectors. In both cases, the active participation of the private sector is encouraged, allowing participation in activities that were previously reserved to the State through its state-owned companies, Petróleos Mexicanos (“Pemex”) and the Federal Electricity Commission (“CFE”). In addition, the powers of the governmental institutions to regulate the new market niches created with this process are reinforced, through the institutional strengthening of the regulatory bodies of the sector, the creation of independent operators and the redistribution of powers among the relevant authorities.
With this new regulatory framework positive consequences are expected for the sector, among which are: (i) an increase in the production of oil and gas and derivative products, (ii) the strengthening of the energy security of the country; (iii) the eventual decrease of electricity rates and gasoline prices; (iv) an increase in investment in the power industry and; (v) an increase in the Gross Domestic Product of the country estimated at 1% (one percent) annually, among others.
On December 20, 2013 the “Draft decree reforming and adding articles 25, 27 and 28 of the Political Constitution of the United Mexican States in energy matters”, was approved by the Senate of the Republic, in general and in particular, with 95 votes in favor and 28 against.
This decree, in addition to reforming the above-mentioned articles, included 21 transitory articles that specify the guidelines that should be reflected in the legislation that would implement it, and the time periods for carrying out certain actions in relation to the corresponding process.
On April 30, 2014 the Federal Executive Branch sent energy reform bills to the Senate of the Republic. The package of secondary legislation in energy matters was composed of 21 laws grouped in 9 blocks, of which 9 were new laws and the remaining 12 were laws that would be amended.
The Senate began debating in extraordinary sessions. Four rulings containing the proposed laws were formulated. The rulings were discussed and approved by the Senate and subsequently sent to the Deputies Chamber, where the legislative process continued. Once the rulings were approved by both chambers (including additional rulings on revenue laws), an extraordinary period was opened for the comprehensive approval of the Energy Reform.
The secondary legislation of the energy reform was finally approved in full and issued by the Federal Executive Branch on that date.
2. Secondary Legislation
The changes made by the energy reform will be implemented through a profound modification of the legal framework that will govern the development of the energy industry in the country. As previously indicated, the changes will involve the entry of new laws and the amending of current laws.
The new laws are listed below:
1. Oil and Gas Law
2. Electric Industry Law
3. Geothermal Energy Law
4. Petróleos Mexicanos Law
5. Federal Electricity Commission Law
6. Energy Regulatory Bodies Law
7. National Industrial Safety and Environmental Protection Law of the Oil and Gas Sector
8. Mexican Petroleum Fund for Stabilization and Development
9. Oil and Gas Revenue Law
Additionally, 12 laws were amended in order to unify their content with the new regulatory framework.
The following are the amended laws:
1. Foreign Investment Law
2. Mining Law
3. Private Public Partnerships Law
4. National Water Law
5. Federal Law of Government-Owned Entities
6. Public Sector Acquisitions, Leases and Services Law
7. Public Works and Related Services Law
8. Organizational Law of the Federal Government
9. Federal Fees Law
10. Fiscal Coordination Law
11. Federal Budget and Treasury Accountability Law
12. General Public Debt Law
3. Relevant Points of the Secondary Legislation of the Energy Reform
Oil and Gas
In relation to oil and gas, the secondary legislation attempts to replicate proven development and private investment schemes successfully undertaken in the international sphere, so that Mexico is able to reach important objectives, including, in relation to energy security, the strengthening of the infrastructure and the increase of industrial activity in the sector. To implement these changes, the Oil and Gas Law and the Oil and Gas Revenue Law were created, and the Foreign Investment Law and the Public Private Partnership Law were amended. Some relevant points include the following:
- Incorporation of the so-called Zero Round giving Pemex preference in selecting those projects it will continue to develop based on the proven capacity of the company. Pemex has requested certain fields for their development; that request is being evaluated by the Energy Ministry (“SENER”), aided by the National Oil and Gas Commission (“CNH”) and, tentatively, in mid-September (or sooner as announced by the Federal Executive Branch) the relevant fields will be decided, which may be: (i) retained by Pemex for their development; (ii) developed by Pemex, together with another company from the private sector or (iii) not granted to Pemex, and assigned for development by the private sector, under one of the contractual schemes established in the Oil and Gas Law.
- Redefinition of the concept of oil and gas permits, clarifying aspects such as the authorities responsible for granting and regulating them, causes of rescission, and activities allowed under this right.
- Incorporation of contractual models for activities of exploration and exploitation of oil and gas that admit the participation of the private sector: (i) shared production contracts; (ii) profit-sharing contracts; (iii) licenses and (iv) services contracts, and combinations of these. The compensation for these contracts is defined in the Oil and Gas Revenue Law.
- Development of new niches in the industry such as the exploration and exploitation of deep and ultra-deep water oil and gas fields and shale fields, including shale gas and shale oil, currently inaccessible due to Pemex’s technological and financial limitations.
- Granting of permits to carry out the allowed activities, including storage, transportation and distribution by petroleum pipelines and other petroleum products, as well as ethanol, propane, butane and naphthas; the regasification, liquefaction, compression and decompression of natural gas; as well as petroleum treatment and refining, processing of natural gas, and exporting and importing of oil and gas, according to Official Mexican Standards, tariff methodologies and model contracts for providing the applicable services.
- Creation of the National Center for Control of Natural Gas (“CENAGAS”) responsible for operating the national system of transport and storage pipelines. Pemex and its subsidiaries must transfer funds for CENAGAS to acquire and manage the corresponding infrastructure, as well as the contracts they have signed.
- Amendment of the Foreign Investment Law in order to: (i) adapt it to the new definitions of the Oil and Gas Law and the Electric Industry Law, in relation to the functions reserved exclusively to the State; (ii) exempt the retail sale of gasoline and liquid petroleum gas distribution from the economic activities and companies that are reserved exclusively to Mexicans or Mexican companies with a clause excluding foreigners; and (iii) exempt ship owners engaged in providing services for the activities of petroleum and other oil and gas exploration and extraction, the activities of pipeline construction for the transport of petroleum and its derivatives, and the drilling of oil and gas wells, from the requirement of obtaining a favorable resolution of the National Foreign Investment Commission for foreign investment to participate in a percentage greater than 49% in companies related to those activities.
- Amendment of the Mining Law in order to: (i) be consistent with the new definitions of the oil and gas sector; (ii) establish that the preferential nature of the mining industry will not affect the activities of the oil and gas industry and the public service of transmission and distribution of electric power; (iii) adjust the powers of SENER in mining matters, considering the new provisions in the oil and gas sector; (iv) include the oil and gas exploration and extraction contracts within the premises for execution of mining construction and works; and (v) establish reporting obligations in case of finding any oil or gas in the area subject to a mining concession.
- Amendment of the Public Private Partnerships Law in order to expressly prohibit carrying out activities related to the exploration and extraction of oil and gas under this concept.
As a result of the energy reform, the electricity sector will become a chain of activities vertically integrated in a partially privatized sector, open to private investment. Although the CFE will keep control, the possibility of private sector investment will be increased through a more flexible regulatory scheme that permits the execution of contracts to carry out various activities and the creation of new markets in the electricity sector. Among the most significant changes are the following:
- Participation opened to the private sector in the generation of electricity through a permit granted by the Energy Regulatory Commission (“CRE”). Private parties may also sell the energy generated and transmitted by CFE.
- Participation of the private sector, together with CFE, in the activities of transmission and distribution through contracts.
- Participation of the private sector in activities of financing, maintenance, management, operation and expansion of the power infrastructure through service contracts with CFE, with adequate compensation.
- Transformation of the National Center for Energy Control (“CENACE”), currently under CFE, into a decentralized public body responsible for the operational control of the National Electric System (“SEN”). This body is an impartial third party and not the CFE that operates the wholesale electricity market, guaranteeing open access to the SEN, for both transmission and distribution of electric power.
- Creation of the Wholesale Electricity Market (“MEM”), operated by the CENACE, in which the participants may carry out electric power purchase and sale transactions through contracts between the participants in the MEM. The CENACE will be responsible for managing the supply and demand of the MEM participants, carrying out transactions and generating prices continuously. The price that will be paid in the MEM transactions will be a competitive price, reflecting the costs of generation and other operating costs of electricity, as well as the volume of electric power demanded and supplied in the MEM.
- Creation of the trader, under the new Electric Industry Law, as the holder of a market participant contract the purpose of which is to carry out trading activities (execution of contracts for purchase and sale of electricity within the MEM, among others). The traders may sign contracts with qualified users (through the supplier trader), or execute such contracts with other traders (non-supplier trader).
- The permits granted by the CRE under the now repealed Electric Power Public Service Law (“LSPEE”) will continue in force under its terms. The holders of those permits that choose to remain under the LSPEE rules may, at any time, transfer to the new rules.
- The Geothermal Energy Law (“LEG”), the purpose of which is to regulate the recognition, exploration and exploitation of geothermal resources for the use of underground thermal energy within the limits of Mexican territory, in order to generate electricity or use it otherwise.
- The activities regulated by the LEG are considered to be in the public interest and their development will have preference over activities of other sectors when there is a conflict.
- The activities pursued under the LEG will be carried out through different registries, permits, authorizations and concessions granted by the competent authorities applicable for each case. For exploration activities a permit will be sufficient, while for exploitation activities a concession will be required.
- Amendment of several articles of the National Water Law, for the purpose of: (i) adapting certain definitions of that law to the new definitions introduced by the LEG; (ii) including geothermal fields under regulated, prohibited or reserved zones and; (iii) establishing the obligation of requesting the relevant permits, authorizations and concessions from the National Water Commission in order to engage in the activities of geothermal fields exploration.
Although it is expected that several bills focused specifically on renewable energy will be published soon, the energy reform will generate the following relevant effects in this area:
- The privatization of activities of generation and commercialization set forth in the reform will give great impetus to the development of renewable energy projects under the more flexible scheme that is expected, where the self-supply companies will disappear and individuals and entities can freely generate and deliver energy.
- The concept of sustainability is included at the constitutional level in article 25, with which it is inferred that the promotion of renewable energy will become a primary objective in economic activities regulated by the State. In this regard, public policies should contemplate sustainability as a primary objective, making the development of renewable energy more accessible and attractive.
- In a term of 365 days from the date of issuance of the reform, the legal framework must be adjusted in order to promote environmental protection, through various mechanisms such as: (i) efficiency in energy use; (ii) decrease in the generation of greenhouse gases; (iii) efficiency in the use of natural resources; (iv) decrease of waste and emissions; and (v) a lower carbon footprint.
Transformation of State Companies
It is important to mention the transformation that will occur within the state-owned bodies of the energy sector (Pemex and CFE), which currently conduct the majority of the activities of the industry, exercising a monopoly role under the legal framework in effect until the passage of the energy reform. This transformation will consist of transforming Pemex and CFE into State Production Companies (“EPEs”) in a term of 2 years, in order to insert them into the new competitive schemed that is expected with the implementation of the reform.
The transformation of Pemex and CFE into EPEs implies a change in their corporate governance, the insertion of a business mentality, the decentralization of functions, the granting of new powers as well as the reorganization of their structure, among other things. The most important aspects are mentioned below:
- The Petróleos Mexicanos Law and the Federal Electricity Commission Law, which regulate the organization, management, functioning, operation, control, evaluation and accountability of the state production companies, establish their special regime in the areas of: (i) subsidiary production companies and affiliates; (ii) remuneration; (iii) acquisitions, leases, services and works; (iv) assets; (v) liabilities; and (vi) state dividend.
- Both laws establish that the purpose of the EPEs is to have business, commercial, economic and industrial activities of various kinds, different from those they carry out now. Similarly, they establish the respective purposes and activities of the EPEs under the new dynamic of the industry, which may be carried out by them or through their affiliate companies.
- New provisions are established in corporate governance, with respect to the administration, the formation and functioning of the board of directors, as well as a liability regime for the board members, provisions regarding the committees and the oversight and auditing of both organizations. These provisions seek to transform the nature of Pemex and CFE, allowing them to function more efficiently.
- More freedom is given to both Pemex and CFE in relation to the remuneration they will pay their employees, generating a special regime for them, thereby allowing them to attract greater talent.
- Several provisions are established in relation to transparency and accountability for both EPEs, which will be subject to stricter controls and obligations intended to guarantee the proper carrying out of their functions.
- Due to the organizational changes to Pemex and CFE, the Federal State-Owned Entities Law is reformed so that the EPEs and their subsidiaries are excluded from the application of that law.
- The Public Sector Acquisitions, Leases and Services Law is also reformed, as is the Public Works and Related Services Law, for the same purpose of establishing that the state production companies and their subsidiaries will be excluded from the application of that law, due to the fact that they will have an exempt regime in relation to public procurement.
Due to the structural changes in the reform and the new market dynamic that will govern the industry, the institutional environment of the sector must be strengthened, in order to better regulate the development of the energy industry. For that purpose the energy sector regulators (CRE and CNH) are strengthened, and the following laws and institutions are created that respond to the new challenges of the industry:
- The Energy Regulating Bodies Law will regulate the organization and functioning of the CRE and the CNH in carrying out their tasks.
- The functions of both regulators are strengthened, being given new powers to address the new challenges and regulate the new activities in the industry, through the possibility of granting new permits, issuing regulatory instruments, assigning contracts and conducting bids, and to impose penalties.
- Organizationally, the regulators are also strengthened, their nature being changed in order to have greater autonomy, with their own legal capacity, technical, operating and management autonomy, and greater budgetary freedom. The regulators are also strengthened in relation to human resources, growing in structure and increasing their plenary body from five to seven Commissioners.
- The National Industrial Safety and Environmental Protection Agency is created as a decentralized body of the Environmental and Natural Resources Ministry; this agency will receive revenue from the contributions and fees established by the law for its services of regulation and supervision of facilities, oil and gas sector activities, the dismantling and abandonment of facilities, and comprehensive waste control.
- The Amendment of the Organizational Law of the Federal Government will include the new regulatory bodies in the administrative structure of the State, and to redistribute powers of certain agencies (such as the SENER).
The changes occurring in the regulatory framework resulted, among many other things, in the need to adjust the regime applicable to the energy industry in tax and revenue matters through the issuance and amendment of several laws. The following are among the most important elements:
- The Oil and Gas Revenue Law, the purpose of which is to establish: (i) the regime of the revenue that the Mexican State will receive from the activities of exploration and extraction done through the permits and contracts referred to in article 27, seventh paragraph, of the Political Constitution of the United Mexican States and the Oil and Gas Law, as well as the compensation that will be established for those contracts; (ii) the provisions on the management and supervision of the financial aspects of the contracts; and (iii) the obligations in relation to transparency and accountability with the resources referred to in the LIH.
- The concept of regulatory contributions is established in the Federal Fees Law, making it possible for the regulatory bodies to receive certain amounts paid to the State as fees for carrying out their regulatory activities.
- Chapter XII “Oil and Gas” of the same law is repealed, in order to harmonize its content with the Oil and Gas Revenues Law, which will go into effect as of December 1, 2015.
- Articles of the Tax Coordination Law are amended in order to exclude from taxable federal collection: (i) the activity of extraction of oil, (ii) the Income Tax from the contracts and permits for the exploration and extraction of oil and gas referred to in the Oil and Gas Revenue Law, and (iii) the tax on the activity of exploration and extraction of oil and gas set forth in the Fourth Title of the Oil and Gas Revenue Law. That law also establishes the obligation of using funds from the Mexican Petroleum Fund for Stabilization and Development (the “Mexican Petroleum Fund”) for the municipalities on the border or coasts through which the oil and gas materially leaves the country. The permit holders for the sale to the public and distribution of gasoline and diesel are also included under the law where previously there was only Pemex. Finally, the manner in which the Oil and Gas Extraction Fund will be formed is redefined, establishing that its resources will be transferred by the Mexican Petroleum Fund.
- The Mexican Petroleum Fund for Stabilization and Development Law is issued, the purpose of which is to establish the rules for the creation and operation of the Mexican Petroleum Fund, a public trust managed by the Bank of Mexico, which will receive, manage, invest and distribute the income from the permits and contracts referred to in the seventh paragraph of article 27 of the Political Constitution of the United Mexican States, with the exception of the taxes, in terms of article 28 of the Constitution and the transitory articles of the energy reform Decree issued in December of last year.
- The Federal Budget and Treasury Accountability Law is amended in order to: (i) adapt it to the new definitions and concepts of the other amended laws; (ii) exclude the EPEs from its provisions; (iii) guarantee the continuity of the subsidies to electricity in case of increases in its price, (iv) make it possible to offset the revenue of the State with the funds of the Mexican Petroleum Fund, when it is due to lower petroleum income; (v) consider the regulatory fees as part of the Revenue Budget; and (vi) add the title “Transfers from the Mexican Petroleum Fund” as the fifth title of the law.
- The General Public Debt Law is amended, including the following elements: (i) to include the EPEs as entities having public debt; and (ii) make it possible for the Federal Government to be able to assume a proportion of the labor liability of Pemex and CFE in relation to pensions and retirement funds currently being paid, and those corresponding to active workers of those organizations, conditioned on the renegotiation of the collective bargaining agreement of both companies.
Infrastructure and Expected Investments
The opening of the energy sector is the first step for generating various positive effects in the industry, and in the economy and the development of the country in general, as well as the strengthening of the energy sector infrastructure, and an important increase in investments in the activities of the sector.
The lack of adequate and sufficient infrastructure has been ongoing in several sectors, including the energy sector, largely halting the development of the industry. Currently there is insufficient infrastructure in the various links of the production chain, which generates problems like excess demand in midstream activities (storage, transportation and distribution of gas, among others) or insufficient energy generated to satisfy industrial and domestic consumer needs.
Therefore, it is intended to strengthen the National Gas Pipeline System with at least 16,000 kilometers of gas pipelines, with an approximate investment of 50 billion pesos. Similarly, CFE intends to construct at least 27 thermoelectric plants through bidding processes.
For this purpose it is intended to double the investment in infrastructure, raising it to 3.9 billion pesos at the end of this administration, within the National Infrastructure Plan 2014-10181. Of that amount, Pemex will spend 80% and CFE the remainder; in addition, approximately 50% of the budget contemplated for the National Infrastructure Fund would be used for the energy sector during the next 5 years.
With the publication and implementation of the secondary legislation it is expected that there will be an important increase in the investment required for the proper functioning of the energy sector. For the next 10 years, it is estimated that the accumulated investments in the energy industry will reach 10 billion dollars in the electricity sector and 60 billion in the oil and gas sector2.
It is important to emphasize that since 1995 investments have been received of around 9.5 billion dollars for carrying out activities of gas transportation, storage and distribution, which activities permit private participation, and that around forty percent of the electricity generated in the country comes from private generators, through the restrictive schemes available. These figures are very encouraging taking into account the magnitude of the Reform and the opening that it will promote, since the investments existing today with a narrow margin of private investment are very significant. Therefore, it is expected that those investments will increase greatly when other sectors of the industry are opened.
Finally, various provisions of the different laws making up the energy reform, as well as their respective transitory articles, establish that regulatory instruments will be issued, such as regulations, directives and other specific regulatory instruments in order to properly implement the reform. The issuance of the regulations of the recently created laws is stipulated in the majority of cases for within 120 to 180 days, while other regulatory instruments have up to 18 months, although the Federal Executive Branch has announced that such regulations will probably be ready before these deadlines.
Timeline for Relevant Energy Reform Dates
In addition to the federal secondary legislation discussed above, further regulatory instruments must be issued in order to implement the provisions of the various federal laws issued and amended (including regulations that the Federal Executive Branch will have to issue in its regulatory capacity granted in section I of article 89 of the Constitution, as well as other regulatory instruments that will specify the application of the laws, such as directives, Official Mexican Standards, general conditions, operating rules and model contracts, among others). There will also be various institutions that will implement the different regulatory instruments applicable to the energy sector and carry out the different procedures and actions intended to implement the reform.
Below you will find a timeline with the relevant dates set forth in the reform3:
- On August 13, 2014 the Ministry of Energy (“SENER”) presented the results of the request made by Pemex in relation to Round Zero.
- The Federal Electricity Commission (“CFE”) must provide to the National Energy Control Center (“CENACE”) the complete files related to the interconnection processes of power stations and connection of load centers.
- The Federal Executive Branch must include in the proposal of the Federal Revenue Law and the Federal Expenditures Budget, the new provisions on the public treasury and fiscal coordination and oil and gas fees and taxes.
- The National Water Commission must deliver the files of the geothermal energy fields to SENER.
- Based on the announcement of the Federal Executive Branch in the act of issuing the reform, it is estimated that the decree restructuring the Mexican Petroleum Institute will be issued.
- Based on the announcement of the Federal Executive Branch in the act of issuing the reform, it is estimated that the guidelines for the clean energy certificates will be issued.
- Deadline for the Federal Executive Branch to send to the Senate its proposal for the appointment of the four independent members of the Mexican Petroleum Fund for Stabilization and Development (“Mexican Petroleum Fund”). Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform, this could occur in August 2014.
- Deadline for the Federal Executive Branch to send to the Senate the proposals for the composition of the Board of Directors of Petróleos Mexicanos (“Pemex”) and CFE. Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform.
- Deadline for the Ministry of Finance and Public Credit (“SHCP”) and the Bank of Mexico to create the trust called the Mexican Petroleum Fund. Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform.
- Deadline for the mining concession holders to request the direct award for the exploration and extraction of gas.
- Deadline for the Federal Executive Branch to designate the new director of the National Industrial Security and Environmental Protection Agency of the Oil and Gas Sector.
- According to the Commissioner-President of the CNH, the preliminary terms will be issued for bidding for those fields that have not been granted to Pemex to carry out exploitation and extraction activities, as well as the fiscal model and the mode of contracting for the corresponding bidding.
- The Federal Executive Branch must issue the regulation of the Geothermal Energy Law. Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform, this could occur in October 2014.
- CFE must present the request for the zones in which it intends to continue pursuing geothermal projects, in a process similar to the Round Zero of Pemex.
- The general directors of Pemex and CFE must appoint the head of their respective Internal Audit Departments.
- The Boards of Directors of Pemex and CFE, respectively, must present a plan on the restructuring of those bodies, in relation to the purpose their affiliates will have.
- On January 1, the rules of Income Derived from Permits for Pemex will enter into force.
- On January 1, the Mexican Petroleum Fund will begin to operate.
- On January 1, SENER and the Energy Regulatory Commission (“CRE”) may grant permits and authorizations for new activities such as the treatment, refining, processing, compression, liquefaction, decompression and re-gasification of oil and gas.
- The tax regime of Pemex will change; the States will be entitled to the delivery of estimated funds of 11,800 million pesos.
- Deadline for the issuance of the decree creating the National Center for Control of Natural Gas and the CENACE. Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform.
- Deadline for the Federal Executive Branch to send to the Senate its proposal for the appointment of the new commissioners of the National Oil and Gas Commission (“CNH”) and the CRE. Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform.
- The Federal Executive Branch must issue the regulation of the National Industrial Security and Environmental Protection Agency of the Oil and Gas Sector. Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform, this could occur in October 2014.
- Deadline for the Federal Executive Branch to issue the regulation of the Oil and Gas Law. Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform, this could occur in October 2014.
- Deadline for CRE and CNH to issue their internal regulations. Nevertheless, based on the announcement of the Federal Executive Branch in the act of issuing the reform, this could occur in October 2014.
- Deadline for the Federal Executive Branch to issue the provisions to regulate the sale of natural gas, liquid petroleum gas and gasoline, and their transport by pipeline and their sale to the public, respectively.
- The Ministry of Economy must present its first diagnosis regarding the degree of national content that the projects of the sector must comply with, which should be implemented in bidding procedures related to activities of exploration and extraction of oil and gas for the corresponding year.
- According to the Commissioner-President of the CNH, the terms of the bidding for those fields that have not been granted to Pemex to carry out exploitation and extraction activities will be issued.
- The Boards of Directors of Pemex and CFE must approve the plan for their new structure, presented by the general director.
- The SENER must resolve the requests by CFE with respect to the geothermal projects that CFE wishes to develop. Subsequently, bidding procedures will be carried out on the zones that have not been granted to CFE or on those that CFE has not requested.
- CENACE should receive the economic and material resources for the control of the National Electric System.
- CRE must issue the model contracts referred to in the Electric Industry Law.
- The unions of Pemex and CFE must come to an agreement on the restructuring of their labor liabilities, so that the Federal Government can assume part of them. Similarly, they must renegotiate the terms of the corresponding collective bargaining agreement.
- Deadline for CRE to issue the general conditions for open access applicable to the infrastructure for the transportation, storage and distribution of petroleum products.
- Deadline for the National Industrial Security and Environmental Protection Agency of the Oil and Gas Sector to issue the provisions governing the facilities for the sale, transport, storage and distribution of petroleum products.
- Deadline for Pemex and CFE to be transformed into State production companies.
- Deadline for Pemex to transfer to CNH all the information related to oil and gas activities.
- Deadline for beginning the operations of the National Center for Oil and Gas Information.
- Deadline for the Federal Executive Government to implement the aid program focused on liquid petroleum gas commercialization activities.
- The monthly gasoline price increases, under SHCP, should conclude, a new model for controlling the price of gasoline entering into effect which will contemplate the maximum price of gasoline to the public, the expected inflation and the volatility of international fuel prices.
- Private parties may begin gasoline importing activities.
- The price of liquid petroleum gas will be deregulated.
- The delivery of contracts for the sale of gasoline by the private sector will commence.
- Gasoline prices will be determined based on the market.
* Juan Carlos Machorro is a partner in the Energy & Gas Practice Group in the Mexico City office of Santamarina y Steta. He can be contacted at email@example.com
1 Of the 3.9 billion dollars invested, 2.8 billion would come from the Federal Government and the rest from the private sector, according to government predictions.http://www.sener.gob.mx/portal/Default_blt.aspx?id=2857
2 Estimates made by Francisco Salazar, President of the Energy Regulatory Commission. http://eleconomista.com.mx/industrias/2014/01/29/estima-cre-inversiones-10000-mdd-reforma-energetica
3 It is important to mention that in the act issuing the energy reform, on August 11, 2014, the Federal Executive Branch announced that several dates would be changed, in order to speed up the process.