Notes on the Hydrocarbons Sector Law
On March 18, 2025, a presidential decree was published in the Official Journal of the Federation (Diario Oficial de la Federación) issuing eight new energy laws, aligning Mexico’s legislative framework with the constitutional amendments of October 2024 regarding strategic areas and companies:
- Hydrocarbons Sector Law (“LSH” for its Spanish acronym)
- Law of the State public company Petróleos Mexicanos
- Electricity Sector Law
- Law of the State public company Comisión Federal de Electricidad
- Law for Planning and Energy Transition
- Biofuels Law
- Geothermal Law
- Law of the National Energy Commission
Additionally, various statutory provisions in tax and finance hydrocarbons’ matters were amended, as well as the Organic Law of the Federal Public Administration. The package came into effect the day after its publication, abrogating the laws from August 2014.
It is important to highlight that, “to provide legal certainty for the transfer” of matters from the now extinct Energy Regulatory Commission (“CRE”) to the National Energy Commission (“CNE”), the deadlines and terms related to permit requests and procedures before that body have been suspended for a period of 90 calendar days.
As we did a few weeks ago regarding electricity, this time we offer a summary of the most important novelties observed in the LSH:
Hydrocarbons Sector Law
Both the structure of the LSH and many of its contents are inspired by the now-repealed 2014 Hydrocarbons Law. However, the fundamental institutional change is that the Department of Energy (“SENER”) has much greater control over the sector because energy policy is now considered binding and has now full regulatory authority resulting from the dissolution of the CRE and the National Hydrocarbons Commission (“CNH”).
Assignments and Contracts for Exploration and Production
- Only Pemex can hold assignments for exploration and extraction, in two modalities: (i) for its own development, and (ii) for mixed development with a private entity known as a “participant”. SENER will prioritize the former, in which Pemex can hire services from private entities paid in cash. In the latter, either Pemex or the participant can be the operator, and compensation can be based on production or profit, with Pemex maintaining an interest of no less than 40%.
- Exploration and production contracts with the Mexican State will be exceptional, signed by SENER (no longer CNH), and subject to its authority to define Pemex’s participation, the contractual model, and possible rescissions. Pemex may ally or partner with private parties, and its assignments may migrate to contracts with the prior approval of SENER.
Midstream and Downstream
- SENER will now grant permits for all activities in the crude oil chain. New activities subject to permits include the formulation of petroleum products and their delivery for self-consumption; the latter is mentioned without further details and does not apply to natural gas.
- A detailed list of requirements for obtaining permits is now legally established, as well as evaluation criteria such as the project’s location, local and regional demand, and its impact on the “healthy” development of the respective markets.
- The causes for permit revocation have been expanded, and a formal revocation procedure established. Additionally, SENER and the CNE will have broad authority to suspend activities temporarily if irregularities are detected.
- A permit is required for the importation of natural gas, which will be granted by SENER.
- The “open season” is now called the “capacity allocation mechanism”, though without significant consequences. The open access obligation remains, except for State public companies. In integrated systems, the National Center for Natural Gas Control (“CENAGAS”) will prioritize capacity allocation to State public companies and their affiliates.
- Cross-participation rules will not apply to State public companies. SENER will now authorize cross-participation.
- The LSH eliminates the reference that the sale price of liquefied petroleum gas, gasoline, and diesel will be determined according to market conditions. Additionally, methodologies may be established to control inflation of petroleum products.
Land Use and Occupation, and Social Impact Assessment
- Provisions regarding land use and occupation will also apply to pipeline transportation, not only to upstream activities.
- The Social Impact Evaluation (“EVIS”) is replaced by the Social Impact Assessment (“MIS”), which is mandatory for anyone applying for a permit involving infrastructure in the sector.
Compliance and Sanctions
- New obligations regarding volumetric control equipment and software programs are introduced, requiring periodic reports.
- All authorities must share with SENER any information relevant for permits’ supervision.
- The amounts of penalties have significantly increased. SENER and the CNE may now consider both direct and indirect damages when assessing penalties.
Transitional Regime
- Any act granted by SENER, CNH, or CRE for hydrocarbons sector activities remains valid.
- Requests submitted before the LSH came into force will be processed according to the regulations valid at submission time.
- Until new regulations are published or amended, those issued before the LSH comes into effect will remain applicable if they do not contravene the new legislation.
At CCN, we are pleased to discuss any aspects addressed herein and to respond to consultations regarding Mexico’s energy sector legal framework and the details of its implementation.
