Energy Reform Implementation Laws - Hydrocarbon Law
On April 30, 2014, the Federal Government submitted to Congress a package of nine new laws and twelve energy statutes to be amended ("supplemental laws"), resulting from the recent changes to Mexico's Federal Constitution with respect to the energy reforms.
Regarding the proposal for the Hydrocarbon Law, the most important aspects of the Hydrocarbon Law proposal (the "Law") are described below:
It is stated that hydrocarbons in the subsoil belong to the state and the exploration and exploitation of oil and other hydrocarbons are of strategic importance. The state will exercise its right to explore and exploit these resources through assignments granted by the Ministry of the Economy ("SENER" for its acronym in Spanish) to government-owned production companies or by entering into agreements with government-owned companies or private entities. Petroleos Mexicanos (PEMEX) will become a government-owned production company, whose purpose will be the creation of economic value and an increase in national income; it will have its own budget, technical operation and management and its organization, management and corporate structure will be consistent with best international practices. A Round Zero is expected whereby SENER will assign PEMEX exploration areas and production fields; provided that PEMEX has the technical, economic and performance capacities and complies with a performance and development plan. PEMEX may, with SENER' approval, transfer the awarded exploration permits to private entities by entering into agreements. If PEMEX considers it appropriate to associate with private entities, the National Hydrocarbon Commission ("CNH" for its Spanish acronym) will issue an invitation to bid for such purpose, subject to the guidelines issued by SENER and the Treasury Department. The petroleum and other hydrocarbon exploration that are carried out through agreements, will be carried out through service, shared income and production or licensing agreements or a combination of the previous agreements, through bidding carried out by the CNH in which PEMEX may participate, as well as government productive entities and individuals. In contracting areas where it is possible to find boundary fields, PEMEX will participate in at least 20% of project investment. In order to carry out the commercialization of the hydrocarbons that the government obtains as a result of the exploration and extraction agreements, the CNH may hire PEMEX or a public entity...
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