Hydrocarbon Sector Reforms

Greenberg Traurig - On 4 February 2025, the head of the Federal Executive presented to the Senate an initiative with a draft decree amending various laws on hydrocarbons, including the following:

• Hydrocarbons Sector Law.

• Law on the State-Owned Company, Petróleos Mexicanos.

• Mexican Petroleum Fund for Stabilisation and Development Act.

• Hydrocarbons Revenue Act.

The aforementioned initiative has yet to be discussed and approved in the Senate and the Chamber of Deputies, and if approved, it will be published in the Official Journal of the Federation (‘DOF’).

Below is an executive summary of the most relevant aspects included in these laws, highlighting the most important points for companies participating in activities related to the hydrocarbons sector.

Hydrocarbons Sector Law

The new Hydrocarbons Sector Law (‘LSHC’) establishes, among other aspects, the following:

I. Activities expressly regulated.

• Import and export of petroleum, petroleum products, petrochemicals and natural gas.

• Formulation of petroleum products.

• Marketing of petrochemicals.

• Transport and storage of petrochemicals, which previously only related to transport by pipeline or storage linked to pipelines.

II. Hydrocarbon Exploration and Extraction.

The Ministry of Energy (‘SENER’) will be in charge of granting allocations to Petróleos Mexicanos (‘Pemex’), in accordance with the following modalities, according to the aforementioned order of priority:

• Allocations for Own Development and for Mixed Development.

When Pemex informs SENER that it has no interest or capacity to carry out activities through these allocations, SENER may grant Contracts for the Exploration and Extraction of Hydrocarbons (‘CEE’).

Law of the State-Owned Company, Petróleos Mexicanos

The new Law on the State-Owned Company, Petróleos Mexicanos (‘Pemex Law’) aims to regulate the organisation, administration, functioning, operation, control, evaluation and accountability of Pemex, as a public company, as well as to establish its special regime.

I. Nature of Pemex.

In accordance with the Pemex Law, Pemex is a Federal Public Administration entity sectorised to SENER, with technical, operational and management independence, legal personality, special regime and its own assets.

II. Activities.

Pemex may carry out, among others, the following activities:

• The E&P of oil and hydrocarbons, their collection, processing, conditioning and treatment, purchase, sale and commercialisation, and all other activities and services related to the production chain;

• The refining, transformation, transport, storage, distribution, purchase, sale, commercialisation, export and import of oil and hydrocarbons and the products of their refining or processing and their waste, the provision of services in the production chain and other activities in the hydrocarbons sector;

• The processing, compression, liquefaction, decompression and regasification, export, transport, storage, distribution, commercialisation and sale to the public of natural gas.

• The formulation, transport, storage, distribution, import, export, commercialisation and sale to the public of petroleum products.

• The research, development and implementation of energy sources other than those derived from hydrocarbons, as well as the generation and commercialisation of electrical energy, the implementation of instruments and actions necessary for the production, transport, distribution, commercialisation and formulation with biofuels, as well as the efficient use of renewable energies and lithium;

Mexican Petroleum Fund for Stabilisation and Development Act

The amendments to the Mexican Petroleum Fund for Stabilisation and Development Act (‘LFMPED’) establish, among other things, the following:

I. Assets of the Mexican Petroleum Fund.

The LFMPED provides that the assets of the Mexican Petroleum Fund shall consist, among other things, not only of the income derived from allocations and contracts, but also of the unification agreements or resolutions.

II. Requirements to be an independent member of the Committee.

In addition to the provisions of the LFMPED mentioned above, it is stated that those interested in being independent members of the Technical Committee of the Mexican Petroleum Fund for Stabilisation and Development may not have been participants in a Mixed Contract derived from an Allocation for Mixed Development in the two years prior to their appointment.

Hydrocarbons Revenue Law

The amendments to the Hydrocarbon Revenue Law (‘HRL’) consist of, among other changes, the following:

I. Revenue to be received by the State for hydrocarbon exploration activities.

Revenue to be received by the State for hydrocarbon exploration activities shall include, among others:

A. Income tax.
The State shall receive income from the income tax incurred by the Contractors for the activities they carry out under an EPC, according to the nature of the Contractor, as well as for the activities carried out by the participants in Joint Development Allocations.

B. Income per Unified Area.
The LISH defines the unitised area as that determined in terms of surface area and depth in which unitisation was instructed because it is a shared reservoir.

II. Deductions.

The LISH provides that when Contractors use assets that have been partially or totally deducted in another CEE or Allocation, only the outstanding balance to be depreciated of the assets corresponding to said CEE can be recognised for CEE purposes in terms of the guidelines issued in this respect by the Ministry of Finance and Public Credit (‘SHCP’). Previously, Allocations were not contemplated for the purposes of recognising the outstanding balance.

Biofuels Act

On 4 February 2025, the head of the Federal Executive presented to the Senate an initiative with a bill issuing the new Biofuels Act (‘BA’), which repeals and replaces the Biofuels Promotion and Development Act. The most relevant aspects of the BA are summarised below:

I. Purpose.

The purpose of the LB is to regulate and promote the sustainable development of biofuels in order to contribute to energy sovereignty, justice and self-sufficiency, as part of energy diversification and transition. It also establishes the basis for, among other things:

• Promote the sustainable production of biomass for the production of biofuels in marginal soils that do not come from primary inputs of plant origin intended for human consumption; and

• Develop and promote mechanisms to encourage the direct use of biomass as biofuel, including production, export, storage, transport, marketing and sale to the public.

II. New concepts.

The new LB includes a series of new concepts, among which the following stand out:

• The concept of ‘Storage’ is added.
The deposit and safeguarding of biomass or biofuels, or both, and facilities determined for that purpose.

• The concept of bioenergetics is replaced by ‘Biofuel’.
Gaseous, liquid or solid fuels produced from the direct energy use of biomass or those obtained from processing.
The wholesale of biofuels whose sale is not intended for retail sale or final consumption, except for own consumption.

• The concept of ‘Retail Sale’ is added.
Retail sale to the final consumer, in facilities with a specific multimodal purpose.

• The concept of ‘Distribution’ is added.
Activity that consists of acquiring, receiving, storing and transferring and, where appropriate, transporting a certain volume of biofuels from a specific location to one or more previously assigned destinations for sale to retail outlets.

• The concept of ‘Production’ is added.
The conditioning or transformation processes necessary for the energy use or transformation of biomass that requires it for use as biofuels.

• The concept of ‘Transport’ is added.
The activity of receiving, delivering and, where appropriate, transporting biofuel from one place to another through pipelines or other means, which does not involve the sale or marketing of said product.

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