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After excluding foreign companies for 75 years, Mexico began implementing sweeping reforms in 2013-2014 to open its energy industry and “kick-start its production of oil and gas by attracting significant outside investment.”
Attorneys Dennis R. Luna, Editor-in-Chief of the California Oil & Gas Report, and Olman Valverde, both of the Los Angeles law firm Luna & Glushon, explain the sweeping reforms implemented by Mexico in an article in the current issue of “Latino Journal.”
The article reviews the public-private partnerships that will have a major role in exploration, extraction and production, as well as refining, natural gas processing, distribution and other functions in oil, natural gas and other hydrocarbon products.
Private sector companies can receive compensation through cash payments for services, profit-sharing of income or hydrocarbons after they have been extracted, or a combination of these, the article notes.
A series of auctions will be held to allow private companies to bid on Mexico’s energy holdings, including shallow-water and deep-water leases in the Gulf of Mexico. The country’s Ministry of Energy has specified qualifications for prospective bidders.
The article explains that at least eight Mexican governmental agencies have roles in regulating or overseeing various aspects of the nation’s energy sector, from raw reserves through production, refining, transportation and retailing of oil and gas products as well as generating and distributing electric power.
In addition to the reforms and constitutional changes that opened its energy market, nine new secondary laws affect the market and companies that want to operate in it, the authors note.
The reform “presents a valuable opportunity both for Mexico and for foreign investors as the process unfolds over the next several years and decades,” the authors write. “With decades of experience and investment in energy by the private sector the U.S., there is significant opportunity for U.S. companies to become involved,” they conclude.