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Mexican energy market open for private investment
In December 2013 Mexico’s President passed the Energy Bill, which amends Articles 25, 27 and 28 of the Mexican Constitution, in order to open the energy sector to private investment and to promote the development of the electric energy sector. Taxand Mexico investigates the new Energy Bill and how it affects the oil, gas and electricity industries.
Oil and gas exploration and production will be conducted by means of assignments or contracts awarded to PEMEX and contracts awarded to private parties by means of bid processes. The contractual frameworks under which private entities may participate in this sector will be regulated and detailed in secondary laws and consist of service, profit-sharing, production-sharing and license agreements (in this last case, the private party may receive as consideration the hydrocarbons that are extracted from the subsoil).
The Ministry of Energy, the Energy Regulatory Commission and the National Hydrocarbons Commission will grant permits and enter into agreements to allow private parties to carry out hydrocarbons exploration and production activities, oil treatment and refining, natural gas processing, storage, transportation, distribution and wholesale marketing of petroleum products, and the supply of superficial recognition and exploration services.
Private parties that execute the above-mentioned agreements may report for accounting and financial purposes the expected benefits as reserves (booking of reserves), provided they clarify that the hydrocarbons in the subsoil belong to the Mexican State.
In the electricity sector, the secondary laws will set forth the contractual modalities to allow private parties to generate electricity and to participate in the financing, set-up, maintenance, management, operation and extension of the infrastructure necessary to provide the public service of transmission and distribution of electricity.
Also published in Thomson Reuters' Taxnet Pro, 14 February 2014
By opening up the Mexican energy sector to private investors, the Government is allowing for more competition within the industry with the aim of increasing revenue. Multinationals seeking to invest in the sector should fully investigate all tax implications in order to operate lawfully within the country.