Mexico: Energy Reform: Implications on the Regulations of Offshore Activities

The 2013 Energy Reform

In recent years, Mexico has taken one of the most important steps towards modernizing its energy sector. During late 2013, Mexican Congress approved the enactment of the Energy Reform, with the purpose of introducing greater flexibility to the national energy market.  While conserving the property of hydrocarbons located in the subsoil, Congress opted for a new model focused on a strategic direction of the industry, in lieu of an obsolete economic model based on the State's full control and operation of most energy related activities.[1]

The paradigm change has resulted in the issuance of new regulations, as well as the amendment to others, that have established the terms and conditions for the participation of private entities, either national or foreign, in the hydrocarbons industry.[2]

In addition, Petroleos Mexicanos (Pemex), the State controlled entity that for more than 70 years exclusively performed all activities related to hydrocarbons exploitation, was transformed into a State Productive Entity. Thus, Pemex acquired a new role and purpose: maximizing the State's income, while participating in the energy industry under the same terms and conditions as any other private entity.

The substitution of such economic model and the creation of a new regulatory framework applicable to a greater number of participants, and not only to a State controlled entity, has had a significant impact on several procedures related to the hydrocarbons industry, including the new provisions and regulations to perform offshore activities.

Offshore activities

What is exactly an offshore activity in the hydrocarbons industry?

According to various experts and the definitions contemplated in the law, offshore activities in the hydrocarbons sector are those related to the exploration and extraction (production) of seabed and subsoil resources, including the development of oil wells and natural gas deposits.[3]

In general, offshore activities are related to oil well and gas deposit drilling, installation, closure and dismantling of platforms and complementary facilities, as well as other accessory services related to the transport of hydrocarbons obtained as a result of such endeavor.

These activities are regarded as very critical and risky, as they not only represent billions of dollars in investments, but any failure or accident during their performance could lead to unquantifiable environmental damages, which can go from the total destruction of natural marine habitats to the pollution of seas and beaches.[4]

The steady increase in Mexico's energy demand, the number of participants in its energy market and offshore activities, respectively, has resulted in a proportional increment of the applicable regulations. Considering the foregoing, it is understandable that the Mexican State focused on setting up new standards and norms in order to coordinate all participants, as well as to prevent possible accidents, environmental damages and other undesired consequences.

A new legal framework for the industry

As mentioned above, the economic model and applicable legal framework to hydrocarbons exploitation procedures were modified in substantial terms after the 2013 Energy Reform, entailing great changes on offshore activities regulations.

Prior to the Energy Reform, Pemex, as sole operator in the industry, was subject to tailor-made regulations that were mostly determined in accordance with the needs of such entity.

Not only Pemex had a special legal framework designed to comply exclusively with its necessities, but also a great deal of its procedures were regulated by the company's own rules of operation. Examples of the aforementioned include provisions for Health, Safety and Environmental Protection[5], as well as regulations related to offshore activities issued by Pemex and applicable only to its subsidiaries and contractors.[6]

Although the former regulations were designed to meet Pemex's needs, that is, custom-made rules of operation for a State controlled entity, its subsidiaries and contractors, it was impossible to conceive that these would remain applicable after the Energy Reform and the respective entry of a countless number of new private participants in the industry.  

In light of the foregoing, Congress established new powers and responsibilities to the Ministries of State, and certain technical entities, with authority in the energy sector (e.g., Ministry of Energy, National Hydrocarbons Commission, among others), in order to create a modern legal framework that would coordinate all participants in accordance with the industry's highest international standards.

Thus, regarding technical and industrial safety aspects for activities related to exploration and extraction of hydrocarbons and other offshore operations, current regulations have now granted the following powers and responsibilities to the Ministry of Energy (SENER), the National Hydrocarbons Commission (CNH), and the National Agency for Industrial Safety and Environmental Protection in the Hydrocarbons Industry (ASEA):

  1. Ministry of Energy

The SENER, as head of Mexico's energy policy, has general attributions regarding offshore activities regulation through the selection of contractual areas (potential zones for exploitation of hydrocarbons in Mexican territory) and the establishment of the tender guidelines for awarding hydrocarbons exploration and extraction contracts.

Additionally, the SENER is in charge of designing the exploration and extraction contract models to be awarded by the CNH in favor of the winning bidders.

  1. National Hydrocarbons Commission

The CNH, as competent technical body in the hydrocarbons industry, is responsible for assisting the SENER during the contractual area selection process, as well as organizing and carrying out tenders for awarding hydrocarbons exploration and extraction contracts. Likewise, the CNH is in charge of executing such contracts, as well as monitoring compliance of the winning bidders with their corresponding terms and conditions.

Moreover, such Commission should approve the exploration and extraction plans for each assigned contractual area, including deep and ultra-deep water drilling. For purposes of the foregoing, the CNH has issued several guidelines, technical provisions and resolutions in order to regulate such activities[7]; therefore, all participants, including Pemex, must comply with the new standards set out by such technical entity.

  1. National Agency for Industrial Safety and Environmental Protection in the Hydrocarbons Industry

The ASEA is a decentralized body of the Ministry of Environmental Affairs, responsible for regulating and supervising compliance with technical provisions regarding industrial and operational safety and environmental protection in the hydrocarbons sector, including offshore activities.[8]

In recent months, the ASEA has issued various technical guidelines and provisions in order to regulate the implementation of adequate industrial and operational safety and environmental protection systems related to the industry.[9]

Thus, the ASEA has taken a fundamental role in the implementation of safety measures for offshore activities, integrating the industry's highest standards to the provisions applicable to procedures related with surface inspection and exploration, exploration and extraction of hydrocarbons, replacing the regulations used by Pemex prior to the Energy Reform.[10]

Conclusions

The Energy Reform enacted in December 2013 represented a radical change in the economic and legal frameworks applicable to hydrocarbons related activities. Such transition led to a complete transformation of the Mexican energy industry and a deviation from the paradigm that prevailed for more than 70 years. As a result, Mexico transitioned from a regulation focused only in a State controlled entity to a modern free market scheme.

One of the most notable modifications brought by the Energy Reform is the applicable regulations for offshore activities, that is, those related with the exploration and exploitation of resources in the seabed and subsoil resources, including the development of oil wells and natural gas deposits.

In order to adapt this new model to the industry's highest standards, Congress assigned and distributed new powers and responsibilities among the Ministry of Energy and other technical bodies, such as the CNH and the ASEA, to establish the terms and conditions applicable to operations related to the hydrocarbons industry, including the so mentioned offshore activities.

As of today, such technical bodies have designed and issued, among others, guidelines, administrative provisions and resolutions that combine the experience acquired during the State's regulated monopoly and the industry's highest standards, which establish the terms and conditions of a much more dynamic framework that enables the participation and coordination of a vast number of participants in the energy sector.


[1] "Reforma Energética", Gobierno de la República, web. January 5, 2017, http://cdn.reformaenergetica.gob.mx/explicacion.pdf

[2] "Presentación de las iniciativas de las Leyes Secundarias de la Reforma Constitucional en Materia Energética enviadas al Senado de la República por el Poder Ejecutivo Federal", Comisión de Energía del Senado de la República, web. January 5, 2017, http://www.senado.gob.mx/comisiones/energia/docs/reforma_energetica/presentacion.pdf

[3] "Offshore", EDP Solutions, web. January 5, 2017, http://www.exploration-production-services.de/en/o-offshore.html

[4] Lysimachou, Angeliki, "La Exploración de Hidrocarburos en el Mar", Revista El Ecologista, June, 2014, web. January 5, 2017, http://www.ecologistasenaccion.org/article28107.html

[5] "Seguridad, Salud y Protección Ambiental", Petróleos Mexicanos, web. January 4, 2017, http://www.pemex.com/responsabilidad/sspa/Paginas/seguridad.aspx

[6] Examples of the aforementioned are the System for the Integral Management of Safety, Health and Environmental Protection (Sistema para la Administración Integral de la Seguridad Salud y Protección Ambiental) or "PEMEX-SSPA System", and various Norms of Reference (Normas de Referencia) designed to regulate a wide range of diverse operations, issued by the Pemex's Standardization Committee. 

[7] In order to create a legal framework in accordance with the highest international standards, the CNH has issued new guidelines to determine the technical conditions to perform activities related to surface inspection and exploration, as well as hydrocarbons extraction and exploitation procedures.

For a better reference, the following hyperlink provides access to all new guidelines and provisions issued by the CNH: http://www.gob.mx/cnh/acciones-y-programas/regulacion-emitida-por-la-cnh?idiom=es

[8] "Agencia de Seguridad, Energía y Ambiente", Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos, web. January 6, 2017, http://www.asea.gob.mx/cms/wp-content/uploads/2016/04/Presentaci%C3%B3n-General-ASEA.pdf

[9] For a better reference, the following hyperlink provides access to all new guidelines and provisions issued by the ASEA: https://www.gob.mx/asea/acciones-y-programas/leyes-y-normas-del-sector

[10] On a related matter, in the case of oil spills, the Navigation and Maritime Commerce Law (Ley de Navegación y Comercio Marítimos) and the National Oil Spill Contingency Plan (Plan Nacional de Contingencia para Derrames de Hidrocarburos y Sustancias Nocivas Potencialmente Peligrosas en las Zonas Marinas Mexicanas) contemplates a coordinated regulation between private entities, the SEA and the Ministry of the Navy to contain and handle any incident that may arise from the performance of offshore activities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions