Pillsbury Winthrop Shaw Pittman

Mexico’s energy reform provides significant opportunities in oil and gas exploration and production

By John B McNeece III, Eric Save and Michael S Hindus

Mexico’s new energy legislation, which went into effect on 12 August 2014, will completely restructure the Mexican energy sector, including both hydrocarbons and electricity. This legislation opens up oil and gas exploration and production (E&P) to the private sector, through authorisation of new contract arrangements with the Mexican state or with PEMEX (Mexico’s state-owned oil and gas company), while reaffirming Mexico’s ownership of hydrocarbons in the ground. Mexico’s opening to the private sector will generate numerous opportunities for E&P operators, the E&P arms of international oil and gas companies, suppliers and investors.

The new legislation — a package of 21 new laws and amendments to existing statutes known as the Secondary Laws — implements the reforms to the Mexican Constitution on energy that were promulgated in December 2013.

Regarding oil and gas, the Secondary Laws open up E&P to the private sector, through authorisation of new types of contract arrangements with the Mexican state or with PEMEX, while reaffirming the state’s ownership of hydrocarbons in the ground. The new contract arrangements will include production-sharing and profit-sharing contracts, together with licence agreements where the E&P contractor can retain the extracted hydrocarbons. The initial opportunities for the private sector in oil and gas E&P will derive from potential joint ventures with PEMEX. There will be subsequent opportunities presented by open bidding for oil and gas resources identified by the Mexican Ministry of Energy…

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