On May 19th, 2021, the Decree amending the Thirteenth Transitory Article of the Hydrocarbons Statute (the “Bill”) was published in the Federal Official Gazette. The amendment will enter into force on May 20th, 2021.
The Bill revokes CRE’s power to hold first-hand sales (or VPM for its acronym in Spanish) and marketing of hydrocarbons, fuels and petrochemicals carried out by entities controlled by Pemex to asymmetric regulation to limit Pemex’s dominance while a greater participation of other economic agents is achieved, in order to foster an efficient and competitive development of the market. 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) or by a legal entity acting on behalf of the Mexican State.
CRE had imposed strict regulatory measures to Pemex –known as asymmetric regulation– to promote greater participation of other economic agents which presumably are arguably at a disadvantage vis a vis Pemex.
However, based on a determination by the Energy Commission of the Lower House of Congress that a greater participation of economic agents other than Pemex in the market has been achieved, the Bill now revokes CRE’s power to impose asymmetric regulation to first-hand sales and marketing and further provides that any sale of the aforementioned products carried out by Mexican State-owned productive companies (i.e., Pemex) 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.
Opposite to what the Bill states, it is worth bearing in mind that Mexico’s autonomous antitrust regulator, the Federal Economic Competition Commission (“COFECE”), has pointed out Pemex’s dominance 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.
The amendments to the Hydrocarbons Statute contained in the Bill may negatively impact the legal interests of market participants.
Affected parties may challenge the amendments to the Hydrocarbons Statute through domestic amparo proceedings. In addition, affected market participants may wish to analyze investment protection mechanisms which could be available to them under bilateral and multilateral investment protection treaties.
At González Calvillo, we have an expert team on energy regulation, antitrust, and constitutional defense and are available to assist you in connection with the amendments to the Hydrocarbons Statute.
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