On July 15, 2016, the Mexico's National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos) ("CNH") approved to officially engage P.M.I. Comercio Internacional, S.A. de C.V., ("PMI") - a subsidiary of our national oil company, Petróleos Mexicanos ("Pemex") - through a direct award procedure in order to provide the service of hydrocarbons commercialization for the Mexican State.
We understand PMI has never carried out this activity in the national market before. PMI is used to carry out international transactions. In our opinion, another challenge that PMI will have is to properly "negotiate" with Pemex the tariffs, responsibilities and liabilities in connection with logistics activities (such as transportation, storage, blending, conditioning, etc.).
Due to the Energy Reform different types of hydrocarbons Exploration & Extraction Contracts were created: (i) service agreements; (ii) production/profit sharing agreements ("PSA"); and (iii) license agreements. In all these types of agreements (with the exception of the licenses which have a different mechanism to deliver the Government take) the Government, through CNH, receives a remuneration consistent in a part of the extracted hydrocarbons, which will have to be commercialized; in this sense, the first hydrocarbons that CNH will receive will be those derived from the first and second bids of Round 1, in which the following five PSAs were awarded:
(i) Shallow waters - contractual area #2 of Round 1, bid 1 (where Talos Offshore Mexico 2 is the operator)
(ii) Shallow waters - contractual area #7 of Round 1, bid 1 (where Talos Energy Offshore Mexico 7 is the operator)
(iii) Shallow waters - fields Amoca, Mizton & Teocalli of Round 1, bid 2 (where Eni Mexico is the operator)
(iv) Shallow waters - fields Ichalkil & Pokoch of Round 1, bid 2 (where Fieldwood Energy E&P Mexico is the operator)
(v) Shallow waters - field Hokchi of Round 1, bid 2 (where Hokchi Energy is the operator)
In terms of the Mexico's Hydrocarbons Law (Ley de Hidrocarburos), the CNH shall engage a marketer for the commercialization of the hydrocarbons that it will receive from the E&E Contracts (the "Marketer"), prior request of the Mexican Petroleum Fund for the Stabilization and Development (Fondo Mexicano del Petróleo para la Establización y Desarrollo) ("FMP"), which recently made such request.
In terms of the Eight Transitory Article of the HL, the CNH may award directly to Pemex (or to one of its...