Mexico´s National Hydrocarbons Commission ("CNH") held on September 5, 2016, an extraordinary session where it issued favorable opinion to the modification (reduction of investment commitment) of 15 Entitlements (Asignaciones) of Pemex-Exploración y Producción ("PEP").

In terms of the Hydrocarbons Law (Ley de Hidrocarburos) the Ministry of Energy may modify the terms of conditions of Entitlements provided that it obtains the prior opinion of the CNH; in this sense PEP requested to the Ministry of Energy the modification of the Minimum Work Obligation ("MWO") of 15 of its Entitlements and the Ministry of Energy requested CNH´s opinion on June 17, 2016. The following are the Entitlements that PEP requested to modify:

Location Entitlement
Onshore 1. AE-0029-Cotaxtla-02

2. AE-0030-Cotaxtla-03

3. AE-0040-Tesechoacán-02

4. AE-0041-Tesechoacán-03
North of the Gulf of Mexico at the border with the United States. 5. AE-0086-Cinturón Subsalino-04
South of the Gulf of Mexico. 6. AE-0005-Amoca Yaxche-03

7. AE-0007-Amoca Yaxche-05

8. AE-0014-Pilar de Akal-Kayab-05

9. AE-0018-Okom-01

10. AE-0040-Kanan-01

11. AE-0101-Ayikal-03

12. AE-0102-Ayikal-04

13. AE-0103-Ayikal-05

14. AE-0104-Ayikal-06

15. AE-0105-Ayikal-07

According to CNH, PEP justified the modification (reduction) of the MWO of these Entitlements, because the surface covered by the same was reduced previously by the Ministry of Energy in order to exclude environmental protected areas where no petroleum activities may be conducted because of environmental concerns.

Notwithstanding the foregoing, it was discussed by the CNH´s commissioners in the session that the reduction of the MWO was not proportionate with the reduction of the areas. For instance, in the Entitlement No. AE-0086-Cinturón Subsalino-04, the surface was reduced 80% and the investment commitment would be reduced slightly.

Likewise it was noted by CNH´s Commissioners, that 5 of the MWO of Entitlements that would be modified did not include the drilling of a well, and the criteria for the allocation of Entitlements to Pemex in Round 0 was that the MWO includes at least the drilling of a well within the first 3 years (i.e. up to 2017), nevertheless it was specified that the Entitlement AE-0086-Cinturón Subsalino-04, was an exception to this because the same was granted to Pemex just because is located close to the US border, and that in case of other Entitlements the drilling of the well was rescheduled by PEP.

In case of the other Entitlements that does not include the drilling of a well, it was indicated by the CNH that the investment reduction represented more than 20% of the total investment foreseen in the MWO and, therefore, as required by the applicable regulations, PEP shall submit for the approval of the CNH the modified versions of the relevant Plans.

CNH resolved to give its favorable opinion to these modifications and the Ministry of Energy will resolve if it modifies or not these Entitlements.

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.