The Changing Future in Mexico s Oil & Gas Industry: Growth and Expansion August 16, 2016 Presented by: Ricardo Garcia-Moreno Partner Houston
MEXICO TOTAL OIL PRODUCTION AND CONSUMPTION, 2011-2016 Mexico Total Oil Production and Consumption, 2011-2016 2
MEXICO S DRY NATURAL GAS PRODUCTION AND CONSUMPTION, 2004-2013 3
ROUND ZERO AND ROUND ONE 4
ROUND ZERO ROUND ZERO PEMEX was assigned 83% of Mexico s total proved and probable hydrocarbon reserves (1P / 2P) and 21% of Mexico s total prospective resources The reserves granted to PEMEX positions it in 5th place worldwide in proven reserves MIGRATIONS AND FARM-OUTS (ROUND 0.5) Under the new legal framework, PEMEX is allowed to enter into partnerships with private companies to develop the entitlements it retained from Round Zero, and to migrate its current integrated service contracts to the new contractual regime (Contracts of Exploration and Extraction) Out of the 12 shallow-water and onshore fields available, PEMEX recently announced that the deep-water Trion block located in the Gulf of Mexico will be the first project to farm out in order to share risks and investments with the private sector 5
ROUND ONE Phase What was Bid on? Number of Bidders 1 14 block for exploration and 25 CNH-R01- extraction of hydrocarbons in prequalified L01/2015 shallow waters under bidders production sharing contracts. Award Winning Bidders Barrel of Oil Equivalent (BOE) 2 blocks Consortium formed by Sierra Oil Block 2: 142 Million (number 2 & Gas, Talos Energy and Premier Block 7: 102 Million and 7) Oil Total: 144 Million 2 CNH-R01- L02/2015 9 shallow-water fields (with certified reserves) were grouped into 5 blocks. 14 prequalified bidders 3 blocks (number 1, 2 and 4) Block 1: ENI International Block 2: Consortium formed by Pan American Energy and E&P Hidrocarburos y Servicios Block 1: 107 Million Block 2: 61 Million Block 4: 68 Million 3 CNH-R01- L03/2015 25 onshore blocks located throughout the country. 80 prequalified bidders Block 4: Fieldwood Energy and Petrobal 25 blocks 14 winners including a Consortium formed by Geo Estratos and Geo Estratos Mxoil Exploración and Producción (blocks 10, 17, 19 and 24), Strata Campos Maduros (blocks 5, 8 and 20) and Renaissance Oil (blocks 11, 15 and 25) Total: 236 Million Total: 2.5 Billion 4 CNH-R01- L04/2015 10 deepwater exploration blocks in the Gulf of Mexico (six exploration blocks in the Salina Basin and four exploration blocks in the Cinturon Plegado Perdido basin). Pending Pending Expected Early 2017 Total: 25 Billion 6
ROUND 2 PHASE 1 On July 20, 2016, the CNH, published the Bidding Guidelines in connection with a Tender Process to award fifteen production-sharing contracts for the shallow-water production of hydrocarbons (CNH-R02-L01/2016). The total area of the blocks to be auctioned is 8,908 km, with prospective resources of approximately 480 million barrels of crude equivalent and an original volume of approximately 220 million barrels of crude equivalent. 7
U.S. NATURAL GAS PIPELINE EXPORTS TO MEXICO 8
MEXICO PIPELINE SYSTEM 9
RICARDO GARCIA-MORENO Ricardo Garcia-Moreno, Partner in the Houston office of Haynes and Boone, practices corporate law with an emphasis in mergers and acquisitions, energy, securities law compliance and corporate governance. He has more than 21 years of experience representing U.S., European and Latin American clients in the United States and internationally in transactions involving mergers, acquisitions and divestitures involving public and private companies; investments; joint ventures; capital markets transactions, including public, Rule 144A and private placements of equity and debt securities; and acting as "outside general counsel" to public and private companies. He has been recognized by Best Lawyers in America, Texas Super Lawyers and he has a Martindale Hubbell client review rated 5.0 out of 5 Preeminent. He received his B.B.A from the University of Texas at Austin and his J.D. from the University of Texas at Austin School of Law. He can be reached at ricardo.garcia-moreno@haynesboone.com or 713-547-2208. 10
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The Changing Future of Mexico s Oil & Gas Industry Growth and Expansion. Mauricio Cuellar Gamboa EnerCom s The Oil & Gas Conference August 2016 1
Information disclaimer The following information is the sole responsibility of the speaker and does not necessarily represent the institutional position of the National Hydrocarbons Commission, which reserves its position and distributes official information through its institutional web pages: www.cnh.gob.mx and www.rondasmexico.gob.mx, as well as, those published in the Official Gazette. 2
Purpose and Topics The purpose of this presentation is to show an overview of the achievements in connection with the Exploration and Production activities, supporting the Oil & Gas industry of Mexico. Topics Principles of the Energy Reform Main advances in Energy Reform Strategic Goals of CNH Specific Responsibilities of CNH Progress of the Round One Status of Bidding Four Status of the Round Two Status of Trion Farm-out Regulate the E&P operations 3
Principles of the Energy Reform 1 2 Hydrocarbons in the subsurface belongs to the Mexican State Free participation and competition between the Mexican State and private players under the same conditions 3 Strength the Regulatory Entities 4 Transparency and Accountability 5 Sustainability and environmental protection 6 Maximizing revenues and long-term development between the relevant players and Mexico 4
Main advances in Energy Reform Constitutional Amendment December 20th, 2013 Round Zero August 13th, 2014 R1 First Bidding Shallow waters Exploration and Extraction December 11th, 2014 R1 Third Bidding Onshore- Extraction May 12th, 2015 Secondary Laws August 11th 2014 Round One First approach August 13th, 2014 R1 Second Bidding Shallow waters- Extraction February 27th, 2015 Award of Contracts L1 June 15th, 2015 5
Main advances in Energy Reform Signing Contracts L1 A2 y A7 June 15th, September 2015 4th, 2015 Signing Contracts L2- A1 November 30th, 2015 R1 Fourth Bidding Deep waters December 17th, 2015 Signing Contracts L3 May 10th, 2016 Bidding Rules for the migration of an Entitlement to a Farmout for Trion bloc. July 28 th, 2016 Publication of the Five-Year Plan June 30th, 2015 Award of Contracts L2 September 30th, 2015 Award of Contracts L3 December 15th, 2015 Signing Contracts L2 A2 y A4 January 7th, 2016 R2 First Bidding July 20th,2016 6
Strategic Goals of CNH 7
Specific responsibilities of CNH Technical support to the Finance Ministry and the Mexican Petroleum Fund Rules and supervises the compliance Technical Advice to the Energy Ministry Bids and signs the E&P contracts Technically manages and supervises the assignments and contracts CNH Approves the annual investment and operation plans Rules and supervises the E&P milestones Approves the exploration and production plans Rules and supervises the exploration activities Manages the National Data Room 8
Develop Geological knowledge of Mexico Suboil Acquisition of data Reprocess of existing Seismic Industry of information Multi-client model Reprocess of existing data 22 permits for hydrocarbon surface exploration for data, including: acquisition 2D y 3D reprocess of seismic data 9
350k km of new seismic data 2D Industry of information Multi-client model 8.7 times the Earth circumference 111k km 2 of new seismic 3D WAZ 3.2 times the existing 3D WAZ info 387k km2 of seismic reprocess 2.6 times the total info of Deep Water of Gulf of Mexico More than 2.5 billion dollars invested in exploration 10
Summary of the Biddings Contractors Bidding 1rs 14 exploration PSCs 2nd 5 PSCs 3rd 25 License contracts Total Submittal and Opening of bids dates July 15th, 2015 September 30th, 2015 December 15th, 2015 Contracts awarded 2 3 25 30 Bidders winners 1 3 14 18 Consortia 1 2 5 8 Individual Companies 0 1 9 10 Companies winners 3 5 22 30 Companies in consortia 3 4 13 20 Individual Companies 0 1 9 10 Country of origin United States 1 1 2 4 England 1 1 Italy 1 1 Argentina 2 2 Canada 1 1 Netherlands 1 1 Mexico 1 1 18 20 11
Progress of the Round One 3 Tenders 44 areas for exploration and extraction in shallow water and onshore fields 30 awarded areas 6 pending contracts 24 signed contracts About 69% of awarded areas Average income for the State has been above 70% 12 fields in production 16 new companies incorporated to execute the contracts 12
4 th Bidding of Round 1 10 areas located in the deepwater Gulf of Mexico 4 Perdido Fold Belt 6 Basin Salina Information Bidding Process to June 10, 2016 Companies showed interest Companies requesting access to the Data Room Companies authorized to access the Data Room Companies accessed the Data Room Companies initiated the prequalific ation process On August 24, 2016 - the CNH will release the list of prequalified bidders On December 5, 2016 - it will take place the opening of proposals 13
4 th Bidding of Round 1 Perdido Folt Belt % Prospective Area Seis Deep water Block resources (sq km) mic (m) (MMboe) 3D 1 1,678.0 625.8 100 1,000-3,100 2 2,976.6 1,439.7 79.2 2,300-3,600 3 1,686.9 1,304.0 100 500-1,700 4 1,876.7 540.5 100 600-2,000 Total 8,218.2 3,910.0 Salin Basin Block Area (sq km) Prospective resources (MMboe) % Seis mic 3D Deep water (m) 1 2,381.1 1,851.9 100.0 2,000 3,100 2 2,411.2 1,446.0 62.5 2,000 3,000 3 3,287.1 1,668.9 100.0 1,000 2,500 4 2,358.7 392.1 100.0 1,000 1,500 5 2,573.2 621.4 100.0 1,000 1,500 6 2,605.5 999.2 100.0 500 1,000 Total 15,616.8 6,979.5 10 License Contracts
Round 2 1 st Bidding On July 20, the 2nd Round Bid was convened by CNH 15 contract areas This are located in shallow waters of the Gulf of Mexico. The oil provinces Tampico Misantla, Veracruz and Southeastern Basins. 6 areas in front of Veracruz 8 areas in front of Tabasco 1 area in front of Campeche 15
Round 2 Shallow Waters of the Gulf of Mexico On July 20, the 2nd Round Bid was convened by CNH 5 blocs for exploration and production 10 blocs for exploration Location Number of Bloc Surface (km 2 ) 1 544.4 2 548.6 Tampico-Misantla 3 546.4 4 556.8 Veracruz 5 824.5 Cuencas del Sureste 6 559.3 7 590.8 8 586.0 9 562.4 10 532.6 11 532.9 12 521.2 13 564.6 14 466.5 15 971.6 TOTAL 8,908.5 16
Bidding for Trion Trion Bloc Migration of 2 Entitlements by Pemex: AE-0092 Subsaline Belt -10 AE-0093 Subsaline Belt -11 To Explorations and Production License Contracts 17
Bidding for Trion Participation structure: Technical experience:» Pemex 45%» Designated Operator [30% - 45%]*» Operator [10% - 25%]» Non Operator (Max 10%) Participate as Operator in a project within the last 10 years. At least one ultra-deepwater project with 1,500meters depth & = + 50mil (mbpced) from 2011-2015. Certifications on OHSAS18001, ISO14001 & APIRP75. Financial capacity:** For Operator.- Stockholder s equity of =/+USD$5Billion Assets.- =/+USD$25Billion Investments on E&P Projects.- =/+USD$2Billion * At least a consortium integrated by an Operator and a Non Operator ** Among others 18
Regulate the E&P operations 1. Guidelines of Analysis and assessment of prospective and contingent resources. Official Gazette date 05.12.2013. 2. Guidelines to authorize Pemex to drill wells. Official Gazette 19.08.2014. 3. Guidelines for oil & gas bidding rounds. Official Gazette 28.11.2014. 4. Guidelines to authorize the hydrocarbon surface exploration. Official Gazette 15.04.2015. 5. Dispositions for licensing information of the CNIH. Official Gazette 08.10.2015. 6. Guidelines for the usage of the non-associated gas in oil production. Official Gazette 07.01.2016. 7. Guidelines for metering oil & gas production in México. Official Gazette 11.02.2016. 8. Guidelines for the migration of historical information. Official Gazette 08.04.2016. 9. Guidelines for the quantification and certificate of reserves. Official Gazette 15.04.2016. 10. Guidelines for the approval of exploratory & production plans. DOF 21.04.2016 19
Final Comments From this presentation we talked about: The Main advances in Energy Reform in Mexico and how has the CNH take the leadership on the management of the bids, entitlements and contracts. The interaction among the regulatory entities in Mexico. The pro-active participation of CNH on granting Contracts from the bidding procedures over a transparent environment as paramount element to secure the interest of the national and international oil and gas companies. The issuance of a considerable number of rules to secure a legal framework over equal conditions. The importance of the information that CNH is gathering from the suboil of Mexico. The results of the biddings and the status of Round 2. 20
The Changing Future of Mexico s Oil & Gas Industry Growth and Expansion. Mauricio Cuellar Gamboa mauricio.cuellar@cnh.gob.mx EnerCom s The Oil & Gas Conference August 2016 21
The Changing Future in Mexico s Oil & Gas Industry: Growth and Expansion August 16, 2016 Presented by: Nicolas Borda Partner Mexico City
Content Key changes to Mexican oil & gas sector Energy Agencies CENAGAS CENACE Mexican Petroleum Fund PEMEX ASEA Permits & Authorizations Cross participation Price regulation Recommendations by COFECE on gasolines 2
Key changes Mexican oil & gas sector Mexico maintains state ownership of subsoil hydrocarbons resources, but allowing companies to take ownership of those resources once they are extracted and to book reserves for accounting purposes; E&P activities could be undertaken by private parties different to PEMEX under four types of contracts Service contracts Profit-sharing contracts Production sharing contracts Licenses 3
Key changes Mexican oil & gas sector Opening refining, transport, storage, natural gas processing, and fuels sectors to private investment; Pemex was transformed into a productive state enterprise with an autonomous budget and a board of directors that does not include union representatives Strengthening agencies in the hydrocarbons industry with autonomy from the Ministry of Energy: National Hydrocarbons Commission Energy Regulatory Commission Creation of a National Agency for Industrial Safety and Environmental Protection (ASEA) and a sovereign wealth fund, the Mexican Petroleum Fund for Stabilization and Development. 4
Key changes Mexican oil & gas sector Pemex s monopoly on retail gasoline and diesel sales ended on December 31, 2015. Private parties are allowed to import gasoline and diesel as of April 1, 2016. 5
Key changes Mexican oil & gas sector National content percentage shall be observed: Statutory percentage for E&P activities is 35%, except for deep waters and ultra deep waters which percentage shall be determined on a case by case basis. The national content percentage for Round 1.4 (Deep waters) is of: From 3%-8% for the different stages of exploration stage From 4%-10% for the different stages of the development stage 6
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Energy Agencies The National Hydrocarbons Commission (CNH) will act as upstream agency, the authority in charge of organizing the public bids to award E&P Contracts and the representative of the Nation in the E&P Contracts. The Energy Regulatory Commission (CRE) will be the agency for the midstream and downstream activities, including Mexico s electric power industry. The CRE and CNH are formed by 7 Commissioners each one, with their corresponding deparments and officials. To select a Commissioners, the President of Mexico proposes two candidates and one of them shall be selected by 2/3 of the members of the Senate. 8
CENAGAS CENAGAS is a new entity created by the energy reform in charge of administering former Pemex s (a) transportation assets; and (ii) transportation and capacity reservation. CENAGAS is intended to be the independent system operator of the National Integrated Natural Gas Transportation and Storage System ( STNI ) that was transferred by Pemex, on an independent basis, to guarantee open access to all shippers, on a non-discriminatory basis, including marketers and endusers. CENAGAS will be responsible for administering bids to develop infrastructure projects aimed at ensuring efficient growth of the STNI and the general welfare. 9
Mexican Petroleum Fund The fund will manage the Mexican state revenue from E&P Contracts. It also will collect and pay the considerations to the E&P Contractors. The fund is meant to receive 4.7% of the country s GDP on an annual basis, which would then be divided in order of priority between the Budget Revenue Stabilization Fund, the Federal Entities Revenue Fund, the Hydrocarbons Extraction Fund, CONACYT-SENER, and the Federal Treasury. In the event a surplus would is obtained, it will be saved for future generations. 10
PEMEX Pemex, as a result of the opening of the industry, will be the predominant player subject to antitrust and competition laws to be enforced by the Federal Competition Commission, and the asymmetry regulation to be introduced by the CRE in the midstream and downstream sectors. Pemex was transformed into a State productive enterprise with corporate governance and special regime for assets, procurement, responsibilities and budget. 11
PEMEX Asymmetric regulation What is? Specific legal provisions to diminish monopolistic power of PEMEX issued by the CRE. Its purpose is to allow new participants to compete with PEMEX under similar circumstances. 12
PEMEX Asymmetric regulation Asymmetric regulation in first hand sales and transportation and storage capacity limits have been imposed to Pemex and its subsidiaries in order to counterbalance its market power. Pemex must unbundle all the different services from the price of the products; The contract must consider gasoline and diesel acquisition or delivery without being forced to hire any other service such as transportation, custody or storage; Unilateral and earl termination of supply contracts without penalties will be allowed if notified to PEMEX with 30 days of anticipation. Supply and franchise contracts shall be unbundled. 13
New subsidiaries of PEMEX Pemex Exploración y Producción (E&P activities) Pemex Perforación y Servicios (Drilling and services) Pemex Cogeneración y Servicios (Cogeneration and Services) Pemex Etileno (Ethilene) Pemex Fertilizantes (Fertilizer) Pemex Logística (transportation and storage logistics) Pemex Transformación Industrial (Refining, transformation, processing and commercialization of hydrocarbons) 14
ASEA ASEA will regulate and approve from the industrial safety and environmental perspective all projects from exploration and production to gas processing and refineries, to pipelines, storage terminals and retail businesses. The main activities in charge of ASEA are the following: (i) risk assessment and analysis, (ii) preventive and mitigation measures, (iii) applicable and adequate industrial safety standards for the particular activity, (iv) activities and process control, (v) industrial safety and environmental protection training programs, (vi) document control proceedings, and (vii) internal surveillance mechanisms 15
Permits & Authorizations CRE SENER CNH Hydrocarbons Transportation (by pipeline or other means) Oil refining Well drilling Hydrocarbons torage Natural gas processing Recognition and Superficial exploration activities (ARES) Distribution Marketing Compression Descompression Liquefaction Regasification Importation Exportation Permits granted by CRE and SENER are valid for a term up to 30 years and may be extended for an additional 15 year period, except for importation and exportaion permits that are valid for 1 or 20 years. 16
Cross participation An entity may participate, directly or indirectly, in the corporate structure as user, producer, marketer of transportation and storage permit holders if such participation does not affect market access and competition. Any cross-participation must be authorized by the CRE and have the favorable opinion by the Federal Commission for Economic Competition (COFECE). 17
Cross participation Participation of one company in the corporate structure of another entity can arise in two manners, directly or indirectly. Direct participation takes place when the entity owns the membership interests or shares. Indirect participation in stock is determined by mechanisms such as those mentioned in Article 7 of the Foreign Investment Law which provide legal or effective control over a legal entity. Indirect participation can further subdivided into real or potential indirect participation. Real indirect participation refers to the effective control of the legal entity which controls any subsidiaries,and Potential indirect participation refers to the potential of exerting control despite not having any legal relationship. 18
Price regulation 19
Natural Gas Tariffs for transportation, storage and distribution are approved by the CRE. Permit holders of such activities submit for CRE s approval a business plan containing, investment commitments, efficiency factors and other considerations included in the relevant permit Regulated rates are subject to annual adjustments based on Mexico US inflation and currency exchange variations Every five years of operation, the tariff shall be reviewed by the CRE. 20
Gasoline and Diesel In order to transit into a liberalized market, there has been a maximum price limit on public sales of gasoline and diesel since January 1, 2015, which will be lifted on December 31, 2017. The maximum price is determined monthly by the Ministry Finance in accordance with a price band (with minimum and maximum values) that it determines annually. This band primarily takes into account product prices, taxes and guaranteed margins for retailers. 21
Recommendation issued by COFECE on fuels market On January, 2016, COFECE issued an opinion with recommendations to the model contracts proposed by Pemex for the supply (formerly known as first-hand sale contracts) and gasoline and diesel franchise contracts. COFECE recommended the following: Pemex shouldn t establish compulsory delivery schemes as a condition for the gasoline and diesel sale such as the transfer of fuels to service stations using Pemex s own staff and/or equipment, a condition currently stated on the model contract; Regardless of the agreed validity, contracts shall include a clause that enables the purchaser to unilaterally terminate the contract; 22
Recommendation issued by COFECE on fuels market The purchase of fuels from Pemex shouldn t create any exclusivity or limit sales transactions with other suppliers; Avoid the inclusion of any commercial margin linked to the service station category given that it may create exclusive market advantages in favor of Pemex franchisees Not establishing long term relations -the model contract has a validity period of 15 years- neither to hinder the ending of the business relationship; Specify that the franchise relation only involves the gasoline and diesel sale, so that the franchisee it is not constrained to commercialize other products; Under the new regime which establishes a range of maximum prices, the selling prices should be allowed to be determined by each licensed person and not by Pemex 23
FIBRA E Trust under Mexican law that issues certificates that are publicly traded in Mexico Backdrop of energy industry and FIBRA Income requirement: At least 90% of gross income each year must come from: oil & gas midstream and downstream (not-retail) activities; electricity generation, transmission and distribution; certain infrastructure with contracts with 7-year term or longer, FIBRA E management 24
Anticorruption On 2015, one of the major steps towards transparency was the Constitutional reform and the creation of a National Anticorruption System. On July 18, 2016, the new legal framework implementing the 2015 Constitutional reform on anticorruption was issued. 25
Anticorruption The National Anticorruption System will be responsible for the nationwide anticorruption policy and for establishing the guidelines that all levels of government (executive, legislative and judicial branches, either federal or local as well as the public officials of autonomous entities such as the Federal Economic Competition Commission, Energy Regulatory Commission, National Hydrocarbons Commission and the Central Bank) and personnel of PEMEX and CFE (except for their board members) and must follow the prevention, identification and sanctions applicable to acts of corruption and crimes committed by public officials and private parties. 26
Anticorruption Sanctions under the newly established anticorruption system: Reduced sanctions will be given to companies collaborating during the investigations or whistleblowing. Sanctions may increase if the partners, board of directors or internal auditor(s) are aware of the corrupt practices and do not report such conduct and the individuals involved. Private parties confessing their participation in any act of corruption may obtain a reduction of up to 70 percent of the economic sanction. 27
Anticorruption Other anti-corruption legislation: The Federal Anti-Corruption Law in Public Procurement establishes responsibilities and sanctions on national and foreign persons or entities for irregularities committed in federal public tenders and other contracting procedures or international commercial transactions. The Federal Law of Administrative Liabilities of Government Officials prohibits to the public officers and Commissioners of the CRE and CNH to accept gifts, payment of travel allowances and tickets, services, economic or in kind contributions as well as any other considerations of value. Agencies (i.e. CRE, CNH, ASEA) of the energy sector have their own code of conduct regulating the attendance of officers and Commisioners to public events or meetings with company representatives. 28
Rule of Law Although Federal Courts in administrative matters are being specialized in regulatory matters (antitrust, telecommunications and energy) there is little expertise to solve energy litigation. Waiver of sovereign inmunity defence Arbitration Governing law 29
Land use and Social aspects New land use and acquisition procedures have been established. Social impact assessment and indigenous consultation are new requirements to assure supportiveness of the communities for the development of energy projects. 30
Land use rights procedure 1. The developer shall inform in writing to the landowner its interest to use the relevant land where the missing 5% is located for the provision of the transmission service. 2. The notification mentioned above shall also inform the intent to initiate negotiations, and attach a description and explanation of the scope of the project, its benefits and possible effects; 3. The parties shall inform the SEDATU the commencement of the negotiations. 4. The consideration payable to the land owners shall cover: (a) the payment of the damages caused to any rights or assets different from the land as a result of the project; and (b) A compensation for the occupation, encumbrance, or use of the land. The agreed considerations may be paid in cash, in kind or by means of the following: (i) social programs for the benefit of the community; (ii) any other consideration that is not against the law; or, (iii) a combination of all the foregoing options. This consideration may use as basis of calculation, the criteria established by the Institute of Appraisal and Administration of National Assets (Instituto de Administración y Avalúos de Bienes Nacionales). 31
Land use rights procedure 5. In the case of the project, and any other project located in lands regulated by the Agrarian Law, the negotiations shall comply with the following additional requirements: (i) The Ejido members may request the assistance of the Agrarian General Attorney Office (Procuraduría Agraria); (ii) The relevant agreements shall be approved by the Ejido members meeting (called at least 30 days in advance), with the attendance of 3/4 of the Ejido members and the favorable vote of at least 2/3 of the Ejido members present at the meeting. A representative of the Agrarian General Attorney Office and a notary public shall also be present at the meeting. (iii) Payments for the use of parcels held by Ejido members who have individual rights shall be paid either directly to the individuals or through a trust. 6. The parties shall document their agreements in writing, pursuant to the guidelines and model contracts issued by SEDATU and SENER, containing the parties rights and obligations and the applicable dispute settlement mechanism. 32
Land use rights procedures 7. Once the parties reach an agreement, the agreement shall be filed with: (i) the National Agrarian Registry (Registro Nacional Agrario) or the Public Registry of Property (Registro Público de la Propiedad) of the place where the land is located, as applicable; (ii) a District Court or an Agrarian Court, who shall verify that the agreement complies with the applicable requirements, and publish an excerpt in a local newspaper and in the most visible places of the ejido; and (iii) the Energy Regulatory Commission. Following the publication of an excerpt, the court shall issue its ruling within a term of 15 business days, which shall be considered final, and will not be subject to appeals, except through an amparo claim proceeding. 33
Indigenous consultation With the purpose of taking into consideration the rights and interests of the indigenous communities and peoples located where energy projects will be developed, the Ministry of Energy shall carry out the necessary previous, free and informed consultations procedures and any other necessary activity to safeguard them, in coordination with the Ministry of the Interior and other competent authorities. 34
Natural gas projects Source: SENER, 2016 35
Fuels projects Source: SENER, 2016 36
Contact: Nicolas Borda Partner, Mexico City nicolas.borda@haynesboone.com 37