Pursuant to the transitory articles of the Secondary Laws to Mexico's Energy Reform, enacted on August 11, 2014, Mexican President Enrique Peña Nieto has announced the issuance of a series of clarifying Regulations, with an effective date of October 31, 2014 (the "Regulations").
The Regulations provide a clear framework for the authority that has been granted to different Mexican governmental agencies and a preview of the contracting process that will be unfolding over the next several years.
Significant Aspects of the Regulations
Regulation of the Hydrocarbons Law (Reglamento de la Ley de Hidrocarburos) details (i) the procedures to be followed for bid rounds in different contractual areas or blocks, with a focus on the procedures for Round 1; (ii) the manner in which Petroleos Mexicanos ("Pemex") will deal with the contracts or farm-outs that it obtained during "Round Zero"; (iii) the contracts that will be executed with Mexico's National Hydrocarbons Commission ("CNH") by private or public entities as a result of different bid rounds; and (iv) the harmonization of hydrocarbon operations with existing mining operations.
Regulation of Hydrocarbons Law Referring to the Activities in Title III (Reglamento de las Actividades a que se Refiere el Titulo Tercero de la Ley de Hidrocarburos) details the regulations, terms, and conditions for the development operation of midstream and downstream projects, including permitting and regulated rates.
Regulation of the Hydrocarbons Revenues Law (Reglamento de la Ley de Ingresos sobre Hidrocarburos) details the royalties and payments under the different contracting schemes to be used in Mexico's upstream oil and gas sector.
Regulation of the Electricity Law (Reglamento de la Ley de la Industria Electrica) restructures the industry, and it enables and encourages private parties to participate in the market, sets the ground rules for a wholesale electric market, and addresses permitting for power generation projects. As part of a separate package, the Mexican government also issued the final criteria for regulating the Clean Energy Certificates described in the Electricity Law.
Regulation of the Pemex Law (Reglamento de la Ley de Petroleos Mexicanos) establishes internal governance rules for Pemex, together with Pemex contracting procedures.
Regulation of the CFE Law (Reglamento de la Ley de la Comisión Federal de Electricidad) establishes internal governance rules for the Mexican Federal Energy Commission ("CFE"), together with CFE contracting procedures. This Regulation includes specific information on the eventual transition from CFE's current vertically integrated monopoly into a market that features private participation.
Regulation of the Geothermal Energy Law (Reglamento de la Ley de Energia Geotermica) specifies the manner in which private parties may develop geothermal energy resources in Mexico.
Internal Regulation of the Agency for Industrial Safety and Environmental Protection for the Hydrocarbons Industry(Reglamento Interior de la Agencia de Seguridad Industrial y Protección al Medio Ambiente del Sector Hidrocarburos) provides internal governance rules for this agency, which will be responsible for verifying industry compliance with environmental regulations.
Internal Regulation of the Ministry of Energy (Reglamento Interior de la Secretaría de Energía) restructures the Mexican Ministry of Energy to contemplate new regulatory activities.
The Regulations also include Regulation of the Mining Law, Regulation of the Foreign Investment Law, and Regulation of the Public–Private Partnerships Law.
Although the Regulations provide a substantial overall framework for the implementation of the Secondary Laws and the overhaul of the Mexican energy regulatory sector, a number of pending directives and rulings from various Mexican governmental entities are expected to provide additional details on the future of Mexico's energy industry.