Energy - México Commentary 1-2014

1. Background

On December 20, 2013, the Official Federal Gazette published a decree to reform and add various energy-related provisions to articles 25, 27, and 28 of the Political Constitution of the United Mexican States (the “Constitutional Reform”). Although the Constitutional Reform laid the foundations for the new energy regulatory framework, many of the central points were left subject to secondary legislation.

This secondary legislation was published on August 11, 2014, in the Official Federal Gazette, resulting in the enactment of nine laws and the amendment of 12 existing instruments. These reforms implemented important elements of the Constitutional Reform and introduced a number of significant changes to both the oil and gas and electricity industries.

2. Oil and gas industry

2.1 Opening up of the oil and gas industry

• 2.1.1 Assignments
• 2.1.2 Contracts

2.2 Payment and management of oil and gas revenues

• 2.2.1 Fees
• 2.2.2 Consideration
• 2.2.3 Tax on oil and gas exploration and extraction activities (IEH)
• 2.2.4 Income tax
• 2.2.5 Mexican Oil Fund for Stabilization and Development (FMP)

2.3 National Control Center for Natural Gas (CENAGAS)

2.4 Pipeline classification

3. Electricity Industry

3.1 Electricity generation

• 3.1.1 Transitional regime

3.2 Electricity transmission and distribution

3.3 Marketing

3.4 National Energy Control Center (CENACE)

3.5 Wholesale electricity market

3.6 Clean energy obligations

3.7 Geothermal energy

4. Legislation applicable to both industries

4.1 New regime on Pemex and the Federal Electricity Commission

4.2 Coordinated regulatory entities on energy matters

4.3 Implementation Timeline

5. Conclusions