Contract Administration and CNH's Operational Framework

A level playing field for all players, whether domestic or international, is a key tenet of the Energy Reform and the National Commission of Hydrocarbons (CNH) is tasked with helping to ensure that parameter exists in the oil and gas industry, Gaspar Franco, Commissioner of CNH, told the Mexico Oil & Gas Summit 2016 at the Sheraton Maria Isabel Hotel in Mexico City.

“The key principles (of the Energy Reform) are that resources under the soil are crucial for the economy. Moreover, it aims to create an environment in which all the oil companies that will operate in Mexico have do so under the same conditions as any Mexican oil company,” Franco said to open his presentation dedicated to “Contract Administration and CNH's Operational Framework.”

Providing a general overview of the Energy Reform to date, Franco explained the principal advantages, starting with the Five-Year Plan. Many proposals from industry operators have been included in the plan.

The CNH’s duty, according to the Commissioner, is to create regulations, legislate exploration projects, and support SHCP among other entities. Technical areas focus on each important sector involved in all hydrocarbon projects. The principal aims of CNH include coordinating the licensing rounds, administrating upstream contracts and regulating all operational activities. Primarily, Franco emphasized CNH’s part in openly correcting any abnormality it may see in contracts and activities. “As the ‘referee’ of the industry, CNH can manage blocks from exploration to production and throughout the different stages of the contractual process,” he said.

Mexico has signed 24 contracts with private operators, 12 of which currently producing hydrocarbons, Franco said. The Commissioner also defended the amount of information required. This “bureaucratic process” he said, is crucial to comply with all the different clauses in the contract. Once approved, operators can begin to take steps toward commercialization and create a development plan for production.

Franco emphasized the need for excellent planning before any project begins. CNH has minimum requirements with which companies must comply. These ensure the company will exploit gas in a way that maximizes the recovery factor and optimizes value creation for the operators and the state, while ensuring safety and protecting the environment in line with laws and regulations.

CNH guides operators through the entire process because handing over operational fields is extremely complicated. “Mexico has no prior experience in this area because fields had never changed hands in the past,” Franco said.

Legislatively, the country needs the support of many officials to check on new operators. All the exploration and production plans are handed to CNH and that information is documented and made public on the Commission’s website.

This key information will provide the most important data regarding companies and their exploration of a potentially lucrative field. Ultimately, the entity aims to support growing oil and gas production volumes in Mexico. Franco urged the industry to request even more information from authorities, including from CNH.