Mexico's President Felipe Calderón has signed into law the seven energy reform bills passed by congress late October.
The bills were published in the country's official gazette, Diario Oficial, on Friday and become law the following day.
The measures are: a new law for state oil company Pemex; a reform of the secondary law that regulates constitutional article 27; the reform of the public administration law to modify the powers of the energy ministry Sener; the creation of an upstream hydrocarbons regulator; a reform of the law that establishes the powers of energy regulator CRE; a new renewable energy law; and the establishment of sustainable energy measures.
NEW PEMEX LAW
The new Pemex law replaces the company's "organic law," which relates to the organization and administration of the state firm, and reforms laws related to acquisitions, leases and services for the public sector as well as public works and services.
The new law allows Pemex to sign contracts with incentives for those carrying out services. Pemex can provide bonuses to service companies and modify multi-year contracts to incorporate technological advances and changes in market prices, among others.
Companies can be penalized for damaging the environment or failing to comply with contract terms.
The law gives Pemex 180 days to establish a strategy to support domestic service providers and contractors. The strategy should have the goal of at least 25% national participation.
Mexico's finance and public credit ministry (SHCP) will establish a national fund within 90 days to promote development of domestic service providers and contractors, particularly focused on SMEs.
The federal spending budget earmarks 5bn pesos (US$378mn) in 2009 and 2.5bn pesos in 2010 for the fund.
The law allows the state firm in some cases to invite specific companies to bid on contracts or award contracts directly and grants Pemex more autonomy to manage its own finances.
Pemex can take on debt and - provided it does not exceed the annual amount allocated by the government - modify its budget and increase expenses based on surplus revenue without SHCP approval as previously required.
In the first year, Pemex can use either 20% of surplus revenue or 10bn pesos, whichever is larger, for investment, maintenance and operations.
If Pemex meets its annual goals, these figures will grow to 35% or 11bn pesos in 2010, 50% or 12.5bn pesos in 2011, 62.5% or 14bn pesos in 2012, 75% or 15bn pesos in 2013, 87.5% or 15bn pesos in 2014 and finally reach 100%.
Pemex's board will authorize the budget as well as execution of projects without SHCP intervention.
Another measure included in the new Pemex law increases the number of board members from 11 to 15, six of whom will be designated by the country's president. Five will represent the oil workers' union (STPRM) and another four will act as professional advisers.
The advisers will be appointed by the president as well but need to be ratified by the senate. They will serve six-year terms that can be extended once by an equal period.
Likewise, the law creates new committees for the state firm. Pemex committees will include: audit and performance evaluation; strategy and investments; salaries; acquisitions, leases, works and services; environment and sustainable development; transparency and accountability; technological R&D.
The law allows Pemex to issue so-called citizen bonds, which will be available to Mexican retirement funds, investment funds for individuals, pension funds and other financial institutions, excluding brokerage houses.
The bonds will be tied to Pemex's performance and not grant holders any decision-making ability in the firm.
SHCP will determine regulations for the bonds, including the form in which they will be acquired and ways to ensure individuals hold no more than 0.1% of the total value of the bonds issued.
ARTICLE 27
The reform of the secondary law that regulates constitutional article 27, which itself regulates private sector participation in the oil sector, was also signed into law.
This establishes all payments for service contracts must be made in cash as opposed to stakes in production or sales.
In addition, it bans Pemex from being subject to foreign courts in any disputes over service contracts.
SENER'S POWERS
Another law reforms Sener, granting it powers to establish the annual oil production platform, which was previously SHCP's responsibility.
Sener also now has the responsibility of determining and disclosing hydrocarbons reserves as well as the power to determine a national policy for their replacement.
HYDROCARBONS COMMISSION
Calderón also signed the law that creates a national hydrocarbons commission to oversee E&P in Mexico.
The new commission will act as a decentralized Sener division.
CRE BILL
A new law also gives CRE more autonomy and regulatory capacity. For example, the regulator will be able to dictate terms and conditions for the energy sector rather than just approve them.
RENEWABLES
The final two laws focus on renewable energy and put Sener in charge of drafting and coordinating a renewable energy program.
Sener will establish specific goals and objectives in the program, which it will present within six months.
The laws also call for the development of a national strategy for the sustainable use of energy. The strategy will provide incentives for renewable energy sources as well as efficiency and energy savings.
Hydroelectric plants with up to 30MW of capacity classify as renewable.
The laws also create a fund for sustainable energy use, which will receive 3bn pesos in 2009, 2010 and 2011 from the federal spending budget.
Subscribers are invited to check out the four-part feature series recently published by BNamericas that analyzes the significance of the new laws.
Oil & Gas - Mexico - Senate committees publish first 3 reform bills
