Reed Smith Client Alerts

On Friday (March 26, 2021), Mexico’s president introduced a bill to the House of Representatives proposing significant amendments to Mexico’s Hydrocarbon Law (the Oil & Gas Bill).

Authors: Nicolas Borda Francisco Rivero

The Oil & Gas Bill is intended to give preferential treatment to the state-owned petroleum company, Pemex and restrict private sector participation in fuel import and midstream fuel activities (including gasoline, diesel, and jet fuel). In addition, the proposed amendments would have a broad impact on all permits issued by Mexico’s Energy Regulatory Commission (CRE) and the Ministry of Energy (Sener).

If implemented as drafted, the Oil & Gas Bill would:

  1. Empower CRE and Sener to revoke all permits deemed not to be in compliance with the minimum storage policy requirements set by the Ministry of Energy.
  2. Empower CRE and Sener to revoke existing permits in instances where permit holders are believed to have violated Mexico’s Hydrocarbon Law.
  3. Allow for government takeover of private company operations on the basis of protecting the national interest; including designating Pemex, CFE or other state enterprises to operate such facilities including with third parties or even with the original permit holder’s own employees.
  4. Allow for the suspension of permits on purported national security, energy security, or economic grounds without providing fair market value compensation.

In the short term, we anticipate a significant volume of amparos (i.e. constitutional injunctions to prevent these amendments from taking effect), and in the longer term, the filing of even more investment treaty arbitrations.

Client Alert 2021-089