On December 11, 2013, the Mexican Senate passed a sweeping energy reform bill that, if enacted into law, will revolutionize the country’s energy sector and bring about the most significant overhaul of the sector since 1938. Two important revisions were made to the bill by the Senate, and these are detailed below. For a more detailed description and analysis of the bill as proposed in the Senate on December 7, 2013, see our Legal Update, “Sweeping Reforms Expected to Revolutionize Mexico’s Energy Sector.”
Flexibility for Congress in Establishing Upstream Contractual Frameworks
The Senate approved a revision to Transitional Article 4 so that it now provides that the contractual framework governing upstream oil and gas production and development “shall” (instead of “may”) include licenses, production sharing, profit-sharing and service contracts. The revised Transitional Article 4 also was revised to provide that the list of contracts in the bill is not exclusive and that those named in the article are “among others” available for use by the Nation in developing the country’s oil and gas resources. These Senate revisions underscore that in passing secondary legislation Congress is not limited to choosing between licenses, production-sharing, profit-sharing and service contracts but has the flexibility to choose among contractual frameworks.
PEMEX and CFE Board of Directors
The Senate also approved revisions to the language of Section IV of Transitional Article 20. As revised in the Senate, Transitional Article 20 provides that the boards of directors of PEMEX and CFE shall be composed of five independent members and five members of the federal government, including the Secretary of Energy who will preside over the boards. In addition, the Secretary of Energy as the President of the Boards, will have the power to cast a deciding vote in the event of a tie, giving ultimate control to the Nation. Among other things, this revision removes the representatives of the PEMEX union from the PEMEX board of directors. The revised Transitional Article 20 now provides members of the boards are to be appointed and removed by the President.
For more information about the topics addressed in this legal update, please contact Dallas Parker at +1 713 238 2700, Jose Valera at +1 713 238 2692, Pablo Ferrante at +1 713 238 2662, Gabriel Salinas at +1 713 238 2622, or John D. Furlow at +1 713 238 2637.