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:
- 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.
- Empower CRE and Sener to revoke existing permits in instances where permit holders are believed to have violated Mexico’s Hydrocarbon Law.
- 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.
- 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