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News Article

Judge Provisionally Suspends Hydrocarbons Law Reform

By Cas Biekmann | Tue, 05/11/2021 - 15:55

Federal judge Juan Pablo Gómez Fierro has provisionally suspended a reform to the Hydrocarbons Law, an initiative President Andres Manuel López Obrador guided through Mexico’s Congress on April 22 with the aim to benefit state oil production company PEMEX. Gómez Fierro was also involved in several suspensions against López Obrador’s bill to favor CFE over private power producers through a reform in the Electricity Industry Law.

Just like in the case of the Electricity Industry Law, experts and watchdogs warned that the move was designed to once again place state companies PEMEX and CFE at the forefront of their respective industries and restrict private participation. Five private permit holders in the hydrocarbons sector requested the suspension, according to Expansión, citing the reform’s hampering of free competition in the Mexican market. The fact that Gómez Fierro is once again the judge to rule against the government’s reform is especially notable after López Obrador announced that he had requested an inquiry in the judge’s motives to the Supreme Court.

The suspension is provisional, meaning it only stays in force until a final decision by the Supreme Court is reached on the matter. Since the reform passed through Congress, this process could take some time. Private investors showed concern when the reform was announced, which among other provisions aimed to raise the requirements toward the issuance of new permits and allows for the cancellation of previously granted authorizations under certain conditions.

Passing a reform of the Hydrocarbons law through Congress is only one of many steps the government has taken to reorient Mexico’s energy sector around its state-productive companies. The slew of measures taken by López Obrador and SENER are a major source of anxiety in the country, as experts fear the lack of certainty is discouraging investments. On May 5, SHCP issued an official record on Mexico’s public finances for 1Q21, revealing that PEMEX is now operating under a historically low tax rate. On April 29, the Senate approved a notion to eliminate asymmetric regulation for PEMEX, so that CRE would no longer have the power to determine the price of hydrocarbons, petroleum products and petrochemicals offered by the NOC.

For private energy companies, seeking legal advice has become somewhat of a necessary practice. “We must be attentive to what we hear from this administration because a priority for its legislative agenda is to pass a structural energy counter-reform through Congress. It is crucial to follow these developments to protect the interests of all companies investing in Mexico’s energy sector so we can react accordingly with a legal and lobbying strategy that includes all the chambers and embassies,” said Edmond Grieger, Partner at Von Wobeser y Sierra in an MBN interview.

The data used in this article was sourced from:  
Expansión, MBN, BNAmericas
Photo by:   (3) on Flickr
Cas Biekmann Cas Biekmann Journalist and Industry Analyst