Italian energy company Enel Green Power recently launched a qualified energy supplier subsidiary in Mexico, through which it intends to acquire at least 150 large customers. Enel plans to make a substantial bid to commercialise electric power, clean energy certificates and energy solutions for commercial and industrial users. This type of private investment is a clear example of how the Mexican energy reform has led to the emergence of new players that were previously unable to participate in this sector.
The National Hydrocarbons Commission (CNH) recently announced the tender for the commercialisation of hydrocarbons that the state obtains as consideration in exploration and extraction contracts. The CNH indicated that the tendered services will consist of the company that wins the tender selling the hydrocarbons when they are delivered by the private company that extracted them. This action is another example of the new business opportunities that the recent energy reform has introduced.
Following the latest energy reform and the enactment of the new Hydrocarbons Law in 2014, a new legal concept regarding the legal servitude of hydrocarbons has been introduced. This concept aims to replace direct expropriation by giving landlords more options when negotiating the ownership of properties used by public utilities in the acquisition of land needed for hydrocarbon activities.
According to its recent press release, the Ministry of Energy, in conjunction with the National Hydrocarbons Commission, plans to increase substantially the number of areas offered in future oil tenders. This will increase national production of oil and gas, as well as future reserves. In addition, the energy secretary has stated that it will help to consolidate Mexico as one of the world's most attractive investment destinations in the hydrocarbons field.
The execution of major energy projects has been affected by social opposition from various communities, including individual landowners and indigenous communities, among others. The magnitude of this problem is best addressed from a human rights perspective, as the complex structure of international and regional organisations of which Mexico is a member has resulted in a vast number of international treaties relating to the human rights of communities affected by energy projects.
The Environmental and Energy Security Agency recently published environmental rules that aim to kickstart shale hydrocarbon extraction in Mexico. The General Administrative Provisions that establish the Guidelines on Industrial Safety, Operational Safety and Environmental Protection for Hydrocarbon Exploration and Extraction Activities in Non-conventional Land Deposits require all operators, as of September 2017, to prove that they have undertaken various planning and activities.
Private equity funds are looking to invest in profitable energy projects, including alternative and environmentally friendly schemes. To date, a reported $6 billion has been invested, with private equity funds having a further $8 billion available. For investors, opportunities lie not only in big energy projects, but also associated development projects, such as the construction of infrastructure and the development of services for surrounding communities.
As of April 19 2017, the Energy Regulatory Commission has been accepting bid proposals from private companies for Pemex's infrastructure regarding the operation and delivery of fuel in the states of Coahuila, Nuevo Leon, Tamaulipas and Durango. This process is the first step towards achieving an open market with regard to petrol and diesel prices in these states.
The Ministry of Energy recently published the Notice Announcing the Requirements for the Acquisition of Certificates of Clean Energies in 2019, 2020, 2021 and 2022 in the Official Gazette. The notice establishes the percentage of electricity consumption by companies and users which must come from clean energy sources in each of the relevant years and has given clean energy market participants more information with which to plan their clean energy certificate initiatives.
According to news reports, Acciona Energia is developing its fifth wind farm in Mexico. The project is a clear example of Mexico's commitment to achieving its clean energy goals. It is also a result of the General Law on Climate Change 2012, which included a commitment to the generation of clean energy through a series of provisions concerning environmental protection, sustainable development and the preservation and restoration of ecological balance.
The agreement containing the guidelines and model contracts regarding the use, enjoyment and acquisition of land, goods and rights for the exploration and extraction of hydrocarbons and their transportation via pipelines was recently published in the Federal Official Gazette. The agreement establishes the minimum requirements for such contracts with regard to payment, other terms and conditions (including rights and obligations) and dispute resolution mechanisms.
In December 2015 the Ministry of Energy published the bidding guidelines for the fourth phase of the first round of tendering for the exploration and extraction of hydrocarbons in deep water blocks, which changed the prior model contract from a production sharing contract to a licensing contract. Following the recent bidding process, questions have arisen as to whether investors can settle disputes regarding termination of a contract for administrative reasons by way of arbitration.
Following President Trump's election, Mexico is eager to enter into negotiations with the United States due to the uncertainty around the North American Free Trade Agreement (NAFTA). During the drafting of NAFTA's energy chapter, Mexico's commitment to the agreement's energy matters was uncertain, and no formal intention to renegotiate or reform Chapter 6 of NAFTA has been signalled following Mexico's energy reform.
Public gasoline and diesel prices for 2017 and 2018 will be set in accordance with a flexible schedule issued by the Regulatory Commission of Energy. The commission's aim is to deregulate gas and diesel prices in a gradual and organised manner, in order to ensure that they reflect actual delivery costs. The objective of the schedule is to promote the development of infrastructure and reduce costs through the entry of new economic agents in the Mexican market.
Citibanamex recently stated that the liberalisation of gasoline prices in Mexico has increased the probability of achieving a primary surplus in 2017. Citibanamex also stated that, following the liberalisation, Mexico's economy will become a free market in which retail prices will reflect demand and supply, thus encouraging investment in the sector. In the long-term, this is arguably a positive measure for everyone.
Mexico City is one of the highest solid waste-generating cities worldwide. As such, the Mexico City government recently published public tender guidelines for the design, construction and operation of a thermal solid waste treatment plant, which will generate and provide electric power to the city's subway system. The plant will reduce fossil fuels and directly contribute to the city's waste management transportation issue, which will result in a more sustainable city and boost energy transition.
The president has confirmed that imports of diesel and gasoline will be opened up to private parties as of April 1 2016. Mexican companies holding the relevant import permits issued by the Ministry of Energy will now be allowed to import diesel and gasoline, while retail prices for these commodities will continue to be subject to maximum prices set by the federal executive until December 31 2017.
The Energy Regulatory Commission has published the general administrative provisions on open access and services provided in the national transmission grid and the general distribution grids. The provisions are intended to facilitate the obligation of the National Centre for Energy Control to guarantee open access to the grids, which will remain owned by state productive subsidiaries of the Federal Electricity Commission.
The Energy Regulatory Commission has published in the Federal Register two regulatory instruments that are key to the development of the natural gas marketing sector in Mexico. In particular, the regulatory instruments aim to increase competition and expand value-added services for natural gas consumers.
The National Centre for Energy Control recently published the model agreement for the technical and commercial operation of transmission and distribution infrastructure, as well as model market participant agreements for generators, suppliers, non-supplier marketers and qualified users. Among other things, the agreements set out operational terms and conditions and the grounds for their termination.