Following seven months of intense debate and surrounded by protesters gathered outside the Congress, Mexico’s Chamber of Deputies (Camara de Diputados) yesterday approved certain changes to Mexico’s energy law regime, according to a report in El Economista. The changes, which were approved by the Senate last week, must be signed by President Felipe Calderon before they will become law, but receipt of his imprimatur is all but certain.

Nearly all analysts agree that the amendments, which could have been a great opportunity for Mexico to enact expansive reform to its energy sector and root out inefficiencies at Pemex, are a major disappointment.

The following is a summary of a few of the significant aspects of the new energy law regime, as set forth in the report:

Laws Under Article 27 of the Constitution

  • Blanket prohibition on private sector participation in strategic areas of the hidrocarbons sector, such as refining of oil and gas and construction of pipelines and storage plants.
  • Allows Pemex to enter into contracts with private sector participants for projects or services provided Pemex does not grant any rights to such participants relating to ownership of hidrocarbons.
  • Prohibits Pemex from entering into contracts with private sector participants that permit or require Pemex to share a percentage of production or the profits of Pemex or which include rights of preference or shared production (i.e., risk-sharing arrangements).
  • Prohibits Pemex from agreeing to submit itself to the jurisdiction of foreign courts in project or services contracts performed in Mexico and entered into with foreign contracting parties, but allows Pemex to submit itself to the jurisdiction of arbitral tribunals pursuant to international agreements to which Mexico is a party.

Amendments to the Law of the Energy Regulatory Commission (Comision Reguladora de Energia - CRE)

  • Grants the Energy Regulatory Commission (CRE) technical, operative, and management control over regulation of the gas and electricity sectors.
  • Allows for the CRE’s participation in the generation and cogeneration of electricity through renewable energy sources, as well as the establishment of financing the same, including electricity generation by wind, solar, geothermal, and water sources.

Law for the Sustainable Exploitation of Energy (Ley para el Aprovechamiento Sustentable de la Energia)

  • Provides for sanctions by fine for those who import, distribute, or sell electrial equipment or devices that provide false or incomplete information to consumers.
  • Creates the National Program for the Sustainable Exploitation of Energy and the National Commission for Energy Efficiency.

Amendments to the Law of the National Hidrocarbons Commission (Ley de la Comision Nacional de Hidrocarburos)

  • Approves the Law of the Energy Regulatory Commission (CRE), which expands and increases the regulatory and oversight activities of the CRE.

Law for the Exploitation of Renewable Energy

  • Establishes the System of Energy Sustainability.

Pemex Law

  • Prohibits the privatization of Pemex.