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GC news | Bill to amend the Hydrocarbons Statute by which Congress revokes the asymmetric regulation applicable to Pemex’s first-hand sales and marketing

04/23/2021

Legal News / Updates

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On April 20, 2021, the Energy Commission of the Lower House of Congress passed the Bill amending the Thirteenth Transitory Article of the Hydrocarbons Statute published in the Official Federal Gazette on August 11, 2014 (the “Bill”). On April 21, 2021, the Lower House of Congress passed the Bill with 301 votes in favor, 147 opposing votes, and 2 abstentions. The Bill has been submitted to the Senate for a vote.

The current Thirteenth Transitory Article of the Hydrocarbons Statute provides that the Energy Regulatory Commission (“CRE”) shall impose or maintain asymmetric regulation on the first-hand sales of hydrocarbons, fuels, or petrochemicals (“First Hand Sales” or VPM for its acronym in Spanish) and marketing activities carried out by entities controlled by Petróleos Mexicanos (“Pemex”) or its subsidiaries, for such period of time as shall be required in order to achieve greater participation of other economic agents in the market, which shall in turn foster an efficient and competitive development of such markets. In connection therewith, “First-Hand Sales” means the initial sale of the foregoing products in Mexico carried out by Mexican State-owned productive companies (i.e., Pemex and its subsidiaries) or by a legal entity acting on behalf of the Mexican State.

CRE has imposed strict regulatory measures to Pemex –known as asymmetric regulation– to promote greater participation of other economic agents which are arguably at a disadvantage vis a vis Pemex. Even if CRE has rolled-back certain elements of the asymmetric regulation applicable to Pemex on First-Hand Sales, there are currently elements of such special regulatory regime which would cease to be applicable should the Bill be approved by the Senate and officially enacted as an amendment to the Hydrocarbons Statute. 

The Bill seeks to amend the Thirteenth Transitory Article of the Hydrocarbons Statute based on a determination by the Energy Commission of the Lower House of Congress that, as of today, a greater participation of other economic agents in the market, which shall in turn foster an efficient and competitive development of such markets, has indeed been achieved.

Based on the foregoing, the Bill revokes CRE’s power to subject First-Hand Sales or marketing of hydrocarbons, fuels, or petrochemicals to asymmetric regulation, and further provides that any sale of such products carried out by Mexican State-owned productive companies (i.e., Pemex and its subsidiaries) or by a legal entity acting on behalf of the Mexican State will be considered as standard marketing, as provided by the Hydrocarbons Statute, without the application of a special asymmetric regulation regime to such activities.

An important item to note is that, as opposed to what the Bill provides, Mexico’s autonomous antitrust regulator, the Federal Economic Competition Commission (“COFECE”), has pointed out the dominance of Pemex in the hydrocarbons’ value chain and has recommended the preservation and strengthening of asymmetric regulation to level the playing field for entrants. Moreover, COFECE opened and maintains an on-going investigation for possible abuse of dominance (presumably by Pemex) in the marketing, storage and transportation of fuels, and the conclusions of such investigation could potentially be in tension with the content of the Bill.

Once passed and in force, these amendments may negatively impact the legal interests of market participants. The amendments to the Hydrocarbons Statute contained in the Bill could be challenged by affected parties through domestic remedies and might as well be considered as additional relevant elements in the context of international disputes against recent legal and regulatory amendments to the Mexican energy framework.

We, at González Calvillo, S.C., have an expert team on energy regulation, economic competition, and constitutional defense. 

We are thus prepared to advice your company and answer your questions with respect to the Bill and its potential impacts.

Click here to read the PDF version.

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