The eagerly awaited implementation of the 2013 Reform is finally near completion as the last two years following such Reform were defined by the issuance of the secondary laws and regulations. Once the pieces are in place and after learning from the experiences of the projects awarded last year, 2016 is poised to be a critical year for the arrival of new investment as the uncertainty of the implementation of the Reform has been reducing
During the first steps of
the implementation of
the Reform, the regulators
have shown empathy
with the arrival of new competitors
into the newly opened
markets by adopting the best international
practices in order to
grant them legal certainty when
building their strategies. As an
example of this was the increasing
participation of bidders during
the second and third bids of
Round 1 launched by the National
Hydrocarbons Commission
(CNH). The experience gained
during these bids will be invaluable
for the participants of the ongoing bid comprising the award of license contracts
for the exploration and production of hydrocarbons
in deep water fields in the Gulf of Mexico.
The interest shown by the investors towards
the liberalization of the oil & gas industry has
pulled the Ministry of Energy to lift the restriction
to import gasoline and diesel imposed to
the private parties moving forward this opening
as of April 1, 2016. The early liberalization
to import such fuels by the private sector encourages
the arrival of investment focused in
the construction of midstream and downstream
infrastructure such as maritime terminals, storage
facilities and pipelines.
Mexico’s shift towards a cleaner and efficient
power generation policy will be led by the substitution
of the existing power plants supplied by
fuel oil into plants fueled with natural gas, a vast resource in Mexico’s geography. However, until
Mexico is able to tap into its own resources, it has
resulted very attractive for the midstream participants
during the recent public bids called by the
Federal Electricity Commission (CFE) to import
and transport natural gas into Northern Mexico
such as Los Ramones pipeline. Natural gas projects
will continue to be an attractive area of opportunity
in Mexico as envisioned in the National Infrastructure
Program 2014-2018 with the construction of
more than 5,000 km of pipelines and investments
of over US$8 billion.
Projects
As part of the strategy to transit to clean energy sources,
renewable projects will be reinforced with the
construction of transmission grids that will be developed
together by the CFE and private parties using
the new contracting schemes brought by the Reform,
such as the Public-Private Partnership (PPP) and joint
ventures. One of these projects is the Tehuantepec
Istmo-Central Mexico transmission grid that will be
announced the second trimester of 2016 and it will
comprise a 372 mile transmission line interconnected
to the National Electric System. Other projects to follow
are the Cozumel 15 mile subsea transmission line
and the Puebla 65 mile transmission line. The scheme
to be used will most likely be under a Build,
Own, Operate and Transfer (BOOT).
Likewise, renewable energy
projects will be fostered by the
issuance of Clean Energy
Certificates (CEL) that
may be traded in the
wholesale market or in the long term auctions called by National Power
Control Center (CENACE). The ongoing first auction
caused a surprising response by having received 468
offers from 103 bidders to satisfy the demand of CFE
comprising 500 MW of power; 6.3 million MWh of
electricity and 6.3 million CEL.
Last but not least, accurate and prompt legal
advice will play a major role for investors during
the implementation of the Reform by understanding
the rationale of the different provisions
and concepts of the Reform and public
policy matters to interpret the new regulatory
framework, creation of new opportunities and
first mover advantages, as well as the interaction
of the new regulatory agencies and nontechnical
risks such as liabilities, tax and environmental
issues. Haynes and Boone has been
a very active law firm in Mexico representing
national and international clients during the
development and financing of energy projects.
Its Mexico City office has more than 20 years
of experience in the Mexican market.