Important Energy Reform

Please be advised that on Thursday, December 12, 2013 the Mexican Congress approved a historic Energy Reform Bill. Since the Bill requires changing the Mexican Constitution, it must now be approved by at least 17 of Mexico’s 32 State Legislatures, which we believe it is more than likely. Exploration and drilling of oil in Mexico by private, Mexican and foreign companies will be allowed. 

 

Herein below please find 10 most important issues of the Energy Reform.

 

1 – Sets the control and planning of public power system and opens the door to individuals to enable them to participate in the activities of the electricity industry.

2 – On the subject of Hydrocarbons, it opens the possibility of executing contracts with public and private companies. Nevertheless, it must be stated in the assignments that the subsurface resources are owned by Mexico.

3- The Mexican Petroleum Fund is created for the Stabilization and Development that shall administer and distribute the proceeds from the contracts that are executed regarding energy.

4 – The National Hydrocarbons Commission and the Energy Regulatory Commission will be the regulatory bodies.

5- A governmental control is maintained over the transmission and distribution of electricity.

6- The Federal Electricity Commission (CFE) and Petróleos Mexicanos (Pemex) will become “productive companies of the Government”, a change that will be regulated thereafter with additional laws, with a maximum term of two years.

7 – The Ministry of Energy is responsible for granting to Pemex the exploration areas, including those that are already operating, and Pemex must demonstrate “technical, financial and execution capabilities” necessary for the operation.

8 – Pemex has a period of ninety days once the Bill is in effect in order to submit the requests in the areas that it wants to reserve and the Ministry of Energy shall issue its decision within a maximum period of 180 days from the date that Pemex submits the corresponding request.

9 – In the case of Pemex, the board shall consist of five members of the Mexican Government, including the Energy Ministry, who will preside the board, and five “independent directors.”

10 – The Oil Union, led by Carlos Romero Deschamps, will no longer be a member of the board of directors of Pemex.

We will keep you posted on further developments.

Sincerely,

Ernesto Velarde Danache, Inc.

 

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