Investing in Upstream Oil and Gas in Mexico

Liberalisation of the Mexican Energy Sector Although oil and gas exploration and production in Mexico has over 75 years of history, for most of that period the Mexican market was closed to private investment. In late 2013, Mexico de-nationalised its oil, gas and power industry and invited international companies to participate for the first time in the country’s history following the enactment of comprehensive legal reforms. Prior to the 2013 constitutional reforms, the sole market producer was Mexico’s state-owned oil and gas company, Pemex Exploración y Producción (“Pemex”). Since the reforms, international investment in Mexico has gained momentum and the oil and gas industry has quickly become competitive as international companies seek to take part in developing the country’s considerable hydrocarbon reserves. Demand has been high, with companies that meet pre-qualification criteria able to bid for blocks awarded directly by the Mexican State, or to participate through contractual arrangements with Pemex. There are a wide range of possible investments for international oil and gas companies in Mexico. Opportunities exist for producing both conventional and unconventional resources, and are onshore and offshore in both shallow and deep water. Development is potentially aided by an existing infrastructure network for transportation and processing. Multiple auction rounds have been successfully held. Oil and gas resources are identified by Mexico’s Ministry of Energy (Secretaría de Energía) (“SENER”) before they are presented for open bidding by Mexico’s Comisión Nacional de Hidrocarburos (“CNH”). SENER establishes the type of exploration and production contract to be awarded in the bid process. At the conclusion of the bid process, contracts are entered into between the winning company or consortium and CNH, on behalf of the Mexican State, and CNH continues to manage and supervise contracts after they have been awarded.

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