Mexico Upstream Fiscal and Regulatory Guide

The upstream fiscal and regulatory outlook of Mexico has undergone many changes. Mexico had implemented different regimes for oil exploration and production, including Production Sharing Agreements (PSAs), Concession Agreements, Service Contracts and Pemex's Entitlement Regime. Private development of fields has been halted since 2018, when President Lopez Obrador put a stop to Licensing Rounds in a bid to position Pemex as the sole player in upstream development, with the company already securing a monopoly on the rest of the value chain. The reports dives into the tools and strategies used to lower Pemex's tax burden, amid serious liquidity issues.

The fiscal burden varies depending on the regime, with different cost and risk levels associated with each. The latest changes in the Pemex tax burden aimed to align taxation with the terms offered under PSAs and Concession Agreements, which were more friendly towards investment. Overall, Mexico's fiscal regime front-loads the tax burden, with a significant share of payments required before positive cash flows are achieved, worsening the risk profile of projects and impacting profitability. However, certain project types, such as Non-associated Gas, Deepwater Oil projects and those in the Chicontepec formation, have higher expected profitability due to special conditions, as detailed in the report.

“Mexico Upstream Fiscal and Regulatory Guide”, presents the essential information relating to the terms which govern investment into Mexico's upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Mexico’s upstream oil and gas investment climate.

Scope

Overview of current fiscal terms governing upstream oil and gas operations in Mexico

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in Mexico

Reasons to Buy

Gain insights into the regulatory landscape: Get a comprehensive overview of the fiscal and regulatory environment.
Understand the impact on business operations: Learn how the regulatory burden affects the cost of doing business.
Assess risks and challenges: Identify the potential risks and challenges associated with operating in the country.

1 Executive Summary

1.1 Regime Overview - National Oil Company (PEMEX) Entitlement Regime
1.2 Regime Overview - Service Contracts
1.3 Regime Overview - Concession Agreements
1.4 Regime Overview - Production Sharing Agreements
1.5 Timeline

2 State Take Assessment

3 Key Fiscal Terms - Pemex Entitlement & Service Contracts

3.1 Royalties, Bonuses and Fees
3.2 Profit-Sharing Duty
3.3 Direct Taxation
3.4 Indirect Taxation

4 Key Fiscal Terms - Production Sharing Agreement & Royalty and Tax

4.1 Royalties, Bonuses, and Fees
4.2 Additional Royalty
4.3 Profit Sharing
4.4 Abandonment Fund
4.5 State Participation
4.6 Taxation
4.7 Fiscal Stability

5 Regulation and Licensing

5.1 Legal Framework
5.2 Institutional Framework
5.3 Licensing Process
5.4 Other applicable Regulations

6 Appendix

6.1 References
About the Publisher
Contact the Publisher

List of Tables

Table 1: Regime Overview: National Oil Company (NOC) Entitlement Regime and Service Contracts.
Table 2: Regime Overview: Concession Agreement and Production Sharing Agreement (PSA).
Table 3: Regime Overview: Concession Agreement and Production Sharing Agreement (PSA).
Table 4: Mexico, Key Events Since Year 2000
Table 5: Royalty Scheme
Table 6: Contractual price formulas.
Table 7: Exploration Rental Duty Schedule.
Table 8: Profit-Sharing Duty rates.
Table 9: Cost deduction limits on DUC.
Table 10: Hydrocarbon Activity Tax.
Table 11: Cost deduction limits on DUC.
Table 12: Mexico, Concession Agreements, Additional Royalty Adjustment Mechanism, Deepwater.
Table 13: Mexico, Concession Agreements, Additional Royalty (%), Deepwater Licenses, Rounds 1.4 and 2.4.
Table 14: Mexico, Concession Agreements, Additional Royalty Adjustment Mechanism, Onshore.
Table 15: Mexico, Concession Agreements, Additional Royalty (%), Rounds 1.3, 2.2, and 2.3.
Table 16: Mexico, Production Sharing Agreement, State’s Share of Profit (%), Rounds 1.1, 1.2, 2.1, and 3.1.
Table 17: Mexico, Licensing Rounds by terrain and agreement type.
Table 18: Mexico, Round 2.3, 2.4 and 3.1 Prequalification Requirements.
Table 19: Mexico, Weighted Value of Economic Proposal formulas, Rounds 3.1, 2.4 and 2.3.
Table 20: Mexico, License Duration (Years).
Table 21: Mexico, Local Content Requirement (%).
Table 22: References.

List of Figures

Figure 1: Regime Flow Chart - National Oil Company Entitlement
Figure 2: Regime Flow Chart - Service Contracts.
Figure 3: Regime Flow Chart - Concession Agreements.
Figure 4: Regime Flow Chart - Production Sharing Agreements.
Figure 5: Mexico, Indicative NPV10/boe, IRR (%).Project returns by Regime and Resource Type
Figure 6: Mexico, State Take Comparison. State-take by Regime and Resource Type
Figure 7: Mexico, State Take, Price Sensitivity.
Figure 8: Mexico, State Take Cost Sensitivity.
Figure 9: Mexico, Legal Framework.
Figure 10: Mexico, Institutional Framework.

Companies Mentioned (Partial List)

A selection of companies mentioned in this report includes, but is not limited to:

Petroleos Mexicanos (Pemex)

License	Format	Properties	Price
SINGLE USER LICENSE PDF	The product is a PDF.	This is a single user license, allowing one user access to the product.	€1490EUR$1,500USD£1,239GBP
SITE LICENSE PDF	The product is a PDF.	This is a site license, allowing all users within a given geographical location of your organization access to the product.	€2235EUR$2,250USD£1,858GBP
ENTERPRISE LICENSE PDF	The product is a PDF.	This is an enterprise license, allowing all employees within your organization access to the product.	€2980EUR$3,000USD£2,478GBP

Mexico Upstream Fiscal and Regulatory Guide - 2024

Scope

Overview of current fiscal terms governing upstream oil and gas operations in Mexico

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in Mexico

Reasons to Buy

Table of Contents

Companies Mentioned (Partial List)

Scope

Overview of current fiscal terms governing upstream oil and gas operations in Mexico

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in Mexico

Reasons to Buy

Table of Contents

Companies Mentioned (Partial List)

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