Oil, Gas and the Transition to Renewables 2025 Comparisons

In Mexico, all liquid, solid and gaseous hydrocarbons in the subsoil are the inalienable and imprescriptible property of the nation, as set forth in Article 27 of the Mexican Constitution. Accordingly, private individuals and entities may not claim ownership over oil and gas resources. Instead, the State retains ownership and carries out exploration and production activities, either through assignments to state-owned productive enterprises or through contracts with such entities or private parties. There are no federal, State or private hydrocarbon ownership interests, as such belong exclusively to the nation.

Assignments are granted exclusively to the state-owned entity Petróleos Mexicanos (PEMEX) by the Ministry of Energy (SENER), which always retains ownership of the hydrocarbons. Within the framework of assignments, there are two models:

• standalone assignments (exclusively operated by PEMEX – with participation by private entities only through services agreements); and
• joint development assignments (private entities or PEMEX may act as operator).

In the latter, PEMEX may enter into agreements with private entities to obtain technical and financial assistance. These agreements are formalised through joint operating agreements and governed by terms and conditions set forth in the contract approved by SENER. The selection of private partners in joint development assignments is based on the proposal offering the most favourable technical, financial and operational terms for both the nation and PEMEX. Under the terms of these contracts, PEMEX must retain a minimum participation of 40%.

As an exceptional measure, exploration and extraction contracts may be awarded by SENER in accordance with the provisions of the recently enacted Hydrocarbons Sector Law (Ley del Sector Hidrocarburos, LSH) through a public tender process, in accordance with guidelines issued by both SENER and the Ministry of Finance and Public Credit. PEMEX may also partner with private entities to submit joint tenders.

The National Energy Commission (CNE)

The CNE, regulated by the recently enacted National Energy Commission Law, is sectorised under SENER and is responsible for the regulation, supervision and sanctioning of activities in the energy sector. Particularly in the hydrocarbon sector, it is responsible for:

• regulating compensation, prices and tariffs;
• granting, modifying, terminating and supervising permits related to processing, liquefaction, regasification, compensation, decompression, transportation, storage, distribution, marketing and retail sale of natural gas, refined petroleum products and petrochemicals;
• monitoring compliance, setting technical standards and enforcing sanctions for non-compliance; and
• collecting, managing and publishing sector-related information within its jurisdiction.

Its scope of jurisdiction is national and it functions as the primary operational regulator for both hydrocarbons and electricity.

SENER

SENER remains the top-level policy-making body under the new legal framework. In the hydrocarbon sector, it is responsible for:

• establishing, conducting and co-ordinating the national energy policy;
• supervising compliance with national energy policy;
• planning medium and long-term energy policy and setting economic and social guidelines for the national energy sector;
• granting exploration and extraction assignments to PEMEX under standalone development or joint development schemes;
• approving national development plans; and
• overseeing international agreements related to energy.

Its authority stems from the LSH and the Organic Law of the Federal Public Administration. Please see its website for more details.

State and Local-Level Governmental Agencies

At the state and municipal level, regulatory involvement is limited. Local authorities typically participate in environmental permitting, land use authorisations and civil protection matters, but they do not have jurisdiction over subsoil resource rights or contractual arrangements – those remain exclusively under federal control.

The national oil/gas company in Mexico is PEMEX (see 1.1 System of Hydrocarbon Ownership).

LSH

As of March 2025, Mexico’s hydrocarbon sector is governed at the federal level by the recently enacted LSH, which repealed the 2014 Hydrocarbons Law.

The LSH centralises regulatory oversight and restructures the roles of key institutions such as SENER and the recently created CNE. It applies to upstream, midstream and downstream operations and introduces two types of assignments for exploration and extraction: one exclusively for PEMEX using its own resources and another allowing PEMEX to enter partnerships with private entities, to enhance its operational capabilities.

Amendments to the current regulation or new regulation of the LSH are expected to be published in the coming months.

State and Local-Level Laws

At the state and municipal levels, local authorities hold concurrent powers in environmental matters, which allows them to enact complementary regulations, especially related to environmental impact and land use.

Pooling and Unitisation

While the law does not contain specific provisions on pooling and unitisation, the framework for mixed development assignments implicitly enables co-ordinated resource development between PEMEX and private partners, enabling joint operations over shared reservoirs or contiguous blocks.

Under the LSH, private investment in upstream activities (exploration and extraction) is permitted through the following mechanisms.

Exploration and Extraction Contracts

These contracts are awarded through competitive tender processes managed by SENER. The available contract types include:

• service agreements;
• production sharing agreements;
• profit-sharing agreements; and
• licence agreements.

These contracts grant private investors the right to explore for, develop and produce hydrocarbons, without transferring ownership of the subsoil resources, which remain the inalienable property of the nation.

Self-Development Assignments

These include exclusive assignments to PEMEX with it acting as operator. Under these assignments, PEMEX is allowed to enter into service agreements with private entities, with prior written authorisation from SENER. These assignments grant PEMEX exclusive exploration and extraction rights, and cannot be transferred to third parties. PEMEX must execute activities directly, although it may contract technical services.

Mixed-Development Assignments

In this model, PEMEX, as the state-owned production company, may enter into joint development agreements with private entities to enhance technical, operational, execution or financial capabilities, with prior authorisation from SENER and PEMEX’s board of directors, in order to substitute a self-development assignment with a mixed-development assignment. Private entities may participate as technical and financial partners under the condition that PEMEX retains a minimum 40% equity stake in the project. This structure is designed to leverage private-sector expertise while maintaining State control over strategic assets.

Following the recent energy reform, historic contracting models – such as exploration and extraction assignments and contracts granted prior to the enactment of the LSH – remain valid and continue to be governed by the terms and legal framework in effect at the time they were issued. Assignments previously granted to PEMEX are now considered self-development assignments under the new regime.

Under the LSH, exploration and extraction contracts are granted through public tender rounds administered by SENER. These rounds are conducted under a competitive framework designed to ensure efficient resource development and national benefit.

To participate, private investors must meet predefined technical and financial qualifications, which include demonstrating proven operational experience in exploration and production, as well as financial solvency, although specific qualifications shall be detailed in the corresponding tender guidelines. Applicants may also be required to provide performance guarantees or tender bonds, though specific thresholds depend on the tender round and the technical complexity of the contract area.

The aforementioned tender process typically involves:

• submission of a formal expression of interest;
• review of eligibility and pre-qualification documents;
• technical and economic evaluation of proposals based on set criteria; and
• awarding of contracts to the highest-ranked qualified tenderers.

Once a contract is awarded, separate permits must be obtained to begin field operations. These include environmental impact assessments, land use authorisations and social consultation procedures, depending on the project’s geographic location and potential impact.

Under the current regulatory framework, the mechanism for assigning exploration and production rights has shifted. Instead of recurring public tender rounds, rights for exploration and extraction are now granted directly to PEMEX. However, the private sector continues to play a critical role – particularly through collaboration mechanisms such as mixed contracts, service agreements and strategic partnerships under PEMEX-led projects. This model maintains space for private technical and financial participation, while reinforcing PEMEX’s leadership in national energy development.

The 2025 energy reform introduced changes to the fiscal regime applicable to standalone state assignments, replacing the Shared Profit Duty, the Hydrocarbon Extraction Duty, the Hydrocarbon Exploration Duty, and income tax with a single levy called the “Petroleum Duty for Wellbeing” (Derecho Petrolero para el Bienestar), which restructured the fiscal terms applicable to upstream activities in Mexico under the following framework:

• crude oil production is subject to a 30% production levy, calculated on the gross value of the hydrocarbons produced; and
• non-associated natural gas is taxed at a rate of 11.63%, also based on the gross production value.

Upstream operators remain subject to general corporate income tax and are required to fulfil development obligations, which may include minimum work programmes and infrastructure commitments. Social investment requirements, such as local community programmes and environmental safeguards, may also be included, particularly in sensitive or high-impact regions.

Additionally, contractors are granted the right to extract hydrocarbons in exchange for various fiscal obligations, including the transfer of ownership of the extracted hydrocarbons to the contractor once all contractual payments have been fulfilled.

Key Fiscal Terms

The main fiscal terms include the following.

Signature bonus and exploration phase fee

This is a one-time bonus paid upon execution of the contract, as well as a recurring contractual fee during the exploration phase.

Royalty on hydrocarbons

This is a variable rate applied to the contractual value of each type of hydrocarbon, as follows.

Crude oil

• If the contractual price is below USD48 per barrel: a fixed rate of 7.5%.
• If the contractual price is equal to or above USD48 per barrel: rate = (0.125 × price) + 1.5 (%).

Natural gas

• Associated gas rate = (contractual price ÷ 100).
• Non-associated gas:
1. if the price is ≤ USD5/MMBTU: 0%.
2. if the price is > USD5 and < USD5.5/MMBTU: rate = [(price − 5) × 60.5] ÷ price (%).
3. if the price is ≥ USD5.5/MMBTU: rate = (price ÷ 100).

Condensates

• If the contractual price is below USD60 per barrel: 5%.
• If the price is equal to or above USD60 per barrel: rate = (0.125 × price) − 2.5 (%).

Profit share or additional payments

In licence contracts, an additional percentage of the contractual value of hydrocarbons is paid to the state. The exact rate is determined in the corresponding agreement and the public tender guidelines.

Unlike assignees, who are obligated to pay the “Petroleum Duty for Wellbeing”, other upstream operators in Mexico (such as contractors under licence, profit-sharing or service contracts) are subject to the country’s general federal tax regime, as there is no separate hydrocarbon-specific income tax currently in effect.

Key Taxes

Key applicable taxes include the following.

The Petroleum Duty for Wellbeing

This is a new progressive levy for assignees (PEMEX) applying to the gross value of extracted hydrocarbons, with no deductions allowed. Assignees must make estimated payments towards the annual duty no later than the 25th day of the month following the relevant period. In the case of generating credit balances, such balances may be offset (duly adjusted for inflation) against subsequent payments of the same duty.

Corporate income tax (ISR)

This is applied at the federal level on net income, currently at a standard rate of 30%. Upstream operators may deduct certain eligible costs, including qualified exploration and development expenditures, subject to depreciation and amortisation rules.

Value-added tax (VAT)

This is applicable to certain transactions related to services, imports and leasing of equipment.

Withholding taxes

These may apply to payments made to foreign entities, including dividends, interest, royalties and service fees, depending on the tax residency of the counterparty and any applicable tax treaties.

Surface rights payments

Operators holding upstream contracts must pay annual fees for the use or occupation of public or private land, calculated based on the area awarded.

As of 2025, there are no state-level income taxes or severance taxes specifically targeting upstream oil and gas activities. However, local governments may impose administrative fees, permit-related charges and municipal service contributions, particularly related to land use, environmental impact mitigation and infrastructure.

Under Mexico’s 2025 energy reform, PEMEX has been granted enhanced preferential rights in upstream oil and gas activities. The LSH introduces two primary modalities for exploration and extraction assignments.

Assignment for Self-Development

PEMEX is granted exclusive rights from SENER to conduct exploration and extraction activities independently, utilising its own resources and capabilities.

Assignment for Mixed Development

PEMEX is granted exclusive rights from SENER but may partner with private entities to supplement its technical, operational, financial or execution capabilities. In these mixed-development schemes, PEMEX must retain a minimum 40% participation interest. These partnerships are governed by mixed contracts that outline the terms of co-operation, including decision-making processes and risk-sharing mechanisms.

To facilitate these collaborations, PEMEX has established the Exploration and Extraction Assignment Group (GAEE), responsible for evaluating and approving mixed-development proposals. This group ensures that projects align with PEMEX’s strategic objectives and comply with the regulatory framework.

As of May 2025, local content requirements for upstream oil and gas operations in Mexico are established at the federal level under the LSH, with no specific or binding mandates issued by state or municipal governments.

The federal framework obliges private investors engaged in upstream activities to prioritise the use of Mexican goods, services, labour and technology, particularly during the development and production phases.

While exact percentage thresholds vary depending on the type and scale of the project, the general objective is to strengthen domestic supply chains, encourage knowledge transfer and promote workforce development. Although local and municipal authorities may participate in monitoring community engagement or facilitating training initiatives, they do not impose independent local content quotas or enforceable hiring mandates separate from federal law.

Compliance with local content obligations is overseen by the Ministry of Economy in co-ordination with the CNE.

Under the LSH, assignees must submit a detailed development plan to SENER for approval before commencing production following a commercial discovery. This plan must outline the technical, operational, financial and environmental strategies proposed for the field’s development. SENER evaluates the aforementioned plan to ensure compliance with national energy policy objectives and technical standards, and approval is granted only if these requirements are met.

Additionally, a social impact assessment must be conducted and submitted to SENER. This assessment identifies the potential social effects of the project on surrounding communities and proposes mitigation measures; it must be reviewed and authorised by SENER within the designated timeframe.

Assignees are also required to obtain drilling permits from SENER. These are mandatory for exploration wells, deep and ultra-deepwater wells, and type wells used as design models. Approval is subject to regulatory timelines, and if SENER does not respond within the specified period the request is deemed approved. Additionally, SENER may classify non-viable wells for potential reuse in geothermal or lithium recovery projects, subject to specific abandonment and development guidelines.

While the regulatory framework is centralised at federal level, assignees must still comply with any applicable state or municipal regulations concerning land use and environmental safeguards. In the event of a denial by SENER, assignees have the right to appeal the decision through administrative or judicial processes, in accordance with Mexican administrative law.

Under the LSH, upstream assignment titles in Mexico follow a standardised structure that incorporates key operational and compliance obligations. Each assignment title defines distinct exploration and production periods, typically with firm timelines for completing exploration activities and transitioning into development and extraction.

Operators are subject to minimum work programmes, which set required investment levels or activity benchmarks within initial phases of the assignment.

Assignment titles also include relinquishment obligations, requiring the assignee to return portions of the awarded area that are not actively under development, usually at the end of the exploration period or during subsequent contract reviews.

The LSH does not explicitly define deadlines or criteria for extensions of exploration or production periods; the regulations authorise SENER to grant extensions, through its Committee on Assignments, Contracts and Permits. Approval is subject to the assignee’s compliance with minimum work obligations, demonstration of technical and financial capacity, and a justified request aligned with the project’s performance and national energy policy objectives.

Additionally, domestic supply requirements may be imposed, mandating that a specified portion of production be offered to the domestic market under regulated conditions if national supply constraints arise.

In terms of international trade, contractors retain export rights, provided all domestic obligations are met and necessary export permits are obtained from the relevant authorities. The legal framework also outlines a comprehensive liability and risk regime, holding operators fully responsible for operational, environmental and third-party damages.

Finally, upstream assignment titles contain detailed provisions governing withdrawal, termination and abandonment. These include specific triggers for early termination (such as non-compliance), procedures for contract exit, and requirements for site restoration and decommissioning, including environmental remediation and the removal of infrastructure at the end of the contract term. All such obligations are enforced under the supervision of the CNE.

As of May 2025, transfers of interests may only be carried out in exploration and extraction contracts with prior approval from SENER. The transferee must meet the same financial, technical and operational qualifications as the original contractor.

The transfer process involves submitting a formal application including:

• transaction terms;
• documentary evidence of the transferee’s qualifications; and
• updated guarantees or bonds, where applicable.

The CNE may be consulted to ensure regulatory compliance.

Transfers of operatorship require separate approval and are subject to stricter review. Existing liabilities generally remain with the transferor unless expressly reassigned.

There is no government right of first refusal, and no special federal tax applies, though administrative fees may be incurred.

As of May 2025, no mandatory production quotas are imposed under international frameworks such as OPEC, as Mexico is not a member. However, the CNE may impose regulatory restrictions on production rates to promote resource conservation, prevent reservoir damage and maintain market stability. These measures are applied on a case-by-case basis and typically arise in the context of field-specific technical reviews or national supply-demand considerations. Operators are required to comply with established production limits outlined in their development plans and to follow industry best practices to ensure long-term sustainability. There are currently no state-level proration systems in place, and all such regulation is handled at the federal level.

Under the LSH, private investment is allowed in both midstream and downstream segments, including gathering systems, pipelines, processing, storage, refineries and fuel marketing. There is no monopoly in these sectors.

Private entities must obtain permits from the CNE. These permits cover the operation of pipelines, terminals, processing plants and retail distribution. While PEMEX maintains a strategic role, the legal framework ensures open participation by private investors throughout the value chain.

Typical forms of private investment under the legal framework include permit-based ownership of infrastructure, participation through joint development contracts with PEMEX, and contracts for integrated exploration and extraction.

The LSH states that there is no state monopoly in midstream and downstream. Private parties may invest directly, subject to obtaining permits from the CNE for transportation, storage, processing, distribution and fuel sales. Open access rules apply to private permit holders, although PEMEX infrastructure is exempt.

In Mexico’s downstream sector, activities such as transportation, storage, distribution, and retail sale of hydrocarbons and petroleum products are regulated under the LSH. Accordingly, the LSH establishes that access to downstream infrastructure must be granted under conditions of open and non-discriminatory access when capacity is available. This applies broadly to private operators; however, state-owned entities such as PEMEX and its subsidiaries are not explicitly required to provide such access under the same terms.

The LSH confirms that downstream and midstream activities are not exclusive to the state. Private investment is permitted throughout the value chain, and there is no legal monopoly in favour of PEMEX or other state-owned companies.

The LSH mandates that permit holders in the downstream sector publish available capacity and grant services under transparent conditions. SENER and the CNE are tasked with authorising tariffs and methodologies used to calculate them. These tariffs must be based on technical and financial criteria, ensuring that they are cost-reflective and promote fair access.

The CNE is explicitly authorised to regulate and approve tariffs for transportation, storage and distribution, and to supervise compliance through inspections and sanctions, including the suspension or revocation of permits for anti-competitive behaviour.

Challenges to rates or service terms can be brought before the CNE, which is empowered to supervise compliance, authorise tariff schemes and issue corrective measures when anti-competitive practices or abuse of dominance are identified. Penalties for non-compliance include suspension or revocation of permits.

Although private investment is permitted in downstream operations, PEMEX and other state entities retain significant market influence. The current legal framework allows the government to intervene – such as through the setting of maximum retail prices or prioritised allocation – in scenarios of public interest, national security or market failure, as needed.

As of 2025, midstream and downstream licences in Mexico are issued by the CNE, following the regulatory overhaul established by the LSH.

Private investors must submit permit applications that demonstrate financial solvency, technical capacity and compliance with safety and environmental standards.

Key documentation includes project descriptions, technical designs and risk mitigation measures.

No public tendering is required since permits are granted individually based on regulatory review.

A notable shift since March 2025 is the full centralisation of authority in the CNE, which replaced the former CRE to simplify procedures and unify oversight.

Since March 2025, commercial arrangements for midstream and downstream operations in Mexico – such as transportation, storage, refining and fuel marketing – are governed by service contracts, joint ventures or long-term supply agreements. These often include take-or-pay clauses, firm or interruptible service terms and defined volume commitments.

The CNE regulates tariffs and service conditions to ensure non-discriminatory access and promote market efficiency; pricing structures and capacity allocation methods must comply with regulatory oversight, supporting transparency and competitiveness across the hydrocarbons value chain.

As of mid-2025, midstream and downstream operations in Mexico are governed by the general federal tax framework, including a 30% corporate income tax (ISR) and value-added tax (VAT) on applicable transactions. Fuel sales are also subject to the Special Tax on Production and Services (IEPS).

Under the Hydrocarbons Income Law, contractors engaged in midstream activities under exploration and extraction contracts are subject to a special investment deduction regime for income tax purposes. In lieu of the depreciation rates provided by the Mexican Income Tax Law, contractors must apply the following accelerated deduction rates:

• 100% of investments in exploration, secondary or enhanced recovery, and non-capitalisable maintenance;
• 25% of investments in field development and exploitation, annually; and
• 10% of investments in storage and transportation infrastructure that is indispensable for the execution of the contract, such as pipelines, terminals, transport equipment or storage tanks required to deliver the contractual production to the delivery or measurement points designated in the contract.

While no sector-specific tax exemptions are currently available, certain tax incentives may apply to projects in designated development zones or those aligned with national energy and sustainability goals.

All entities must comply with tax reporting obligations set by the Mexican Tax Authority (SAT).

Under the 2025 energy reform, PEMEX retains preferential rights in midstream and downstream activities. As a state-owned entity, it may receive direct assignments for strategic infrastructure projects, enjoy priority access to certain assets and participate in joint ventures with private investors. While the sector remains open to private investment, PEMEX continues to play a central role in advancing national energy policy objectives.

As of 2025, Mexico’s updated regulatory framework requires private investors in midstream and downstream operations to prioritise local content. This includes the use of Mexican goods and services, employment of local labour and implementation of workforce training programmes.

These aforementioned obligations aim to strengthen domestic supply chains and support regional development. Compliance is overseen by the Ministry of Economy, with annual reporting obligations. Non-compliance may lead to administrative penalties.

Under the 2025 regulatory framework, midstream and downstream licences set clear obligations for service continuity, safety and regulatory compliance. Licensees must report weekly on volumes, quality and commercial activity, and integrate with the national electronic reporting system, as well as prioritise domestic supply and ensure sufficient capacity to meet national demand.

Export rights are allowed but are subject to permits and oversight by SENER or the CNE, as applicable. Domestic supply is prioritised through operational obligations.

The framework also establishes detailed rules for liability, risk management and end-of-life obligations such as decommissioning, remediation and formal termination procedures.

Permit holders must notify the CNE prior to the abandonment or definitive closure of infrastructure. The CNE is authorised to evaluate technical and safety compliance, request remediation plans and approve or deny closure requests based on public interest or risk to the national system.

Failure to comply with proper abandonment or termination obligations may result in sanctions, including revocation of permits and financial penalties, especially where environmental or operational risks are left unresolved.

In Mexico, ownership of the lands and waters within the boundaries of the national territory originally belongs to the nation, as set forth in Article 27 of the Mexican Constitution. Therefore, private investors in Mexico do not have direct condemnation or eminent domain rights.

A project may be declared to be of public utility when its activities or services are impacted by circumstances beyond the permit holder’s control, or when the government determines that such a declaration is necessary for reasons of public interest. In such cases, the government may initiate expropriation or temporary occupation proceedings on behalf of the permit holder.

In accordance with the LSH and the Expropriation Law, these proceedings must follow due legal process, including prior notice, fair compensation to affected landowners, and the protection of third-party rights. Temporary occupation may last up to 36 months, including any extensions, and may be terminated early if the underlying causes are resolved.

Additionally, under the LSH, the government may establish legal easements for hydrocarbon activities. These easements grant the assigned operator, contractor or pipeline permit holder the right to transit, construct, maintain and operate infrastructure necessary for the proper execution and oversight of the activities authorised under an assignment, contract or pipeline permit. Such legal easements may not exceed the term of the corresponding legal instrument. They may be established through either judicial or administrative proceedings, and are governed by federal law, with jurisdiction over related disputes falling exclusively to federal courts.

However, surface rights for infrastructure projects can generally be acquired through private agreements with landowners.

As of 2025, the CNE regulates hydrocarbon transportation in Mexico. It oversees permitting, safety compliance and tariff structures under the LSH.

Transportation systems must offer open and non-discriminatory access, with tariffs subject to regulatory approval. The framework does not draw a regulatory distinction between intra-state and interstate pipeline systems; under the LSH, all hydrocarbon transportation infrastructure falls under federal jurisdiction and is uniformly regulated by the CNE.

All operators must comply with technical, environmental and safety standards established by the CNE.

As of 2025, Mexico’s regulatory framework, administered by the CNE, mandates open and non-discriminatory third-party access to midstream and downstream infrastructure. Licence holders must offer available capacity on fair terms, with pricing and service conditions subject to CNE oversight. Unbundling of services may be required to ensure transparency, and cross-segment participation is regulated to prevent market dominance or conflicts of interest.

This obligation applies to both public and privately constructed infrastructure, ensuring that third parties can access systems such as pipelines, terminals and storage facilities under regulated conditions.

Third-party access must follow transparent, cost-reflective terms, and operators are required to publicly disclose available capacity and register key operational and contractual information with the regulator.

Although the law does not explicitly require “unbundling”, separate permits are required for transportation, storage, distribution and marketing, which effectively results in a functional separation of services.

Operators are allowed to participate in multiple segments of the value chain; however, cross-segment activity is monitored to prevent anti-competitive behaviour. The CNE has the authority to address abuse of dominance and may impose corrective measures if market integrity is compromised.

As of 2025, product sales into Mexico’s local hydrocarbon market are governed by federal regulations under the LSH, overseen by the CNE.

Distributors must obtain the relevant licences and comply with rules on quality, safety and reporting. While there are no outright prohibitions on vertical integration, operators may be subject to regulatory scrutiny to prevent anti-competitive behaviour.

State and municipal governments may impose complementary rules, particularly on environmental compliance, land use and public safety.

There are no restrictions on foreign or private ownership in the retail, wholesale or distribution segments, provided operators comply with federal licensing requirements. No obligation exists to use intermediaries.

As of 2025, the exportation and importation of crude oil, natural gas and petroleum products in Mexico are governed by the LSH and are overseen by the National Customs Agency of Mexico (ANAM) and the SAT, who have the authority to regulate, audit and sanction such operations in accordance with the Customs Law, the Federal Fiscal Code and other applicable provisions related to foreign trade.

However, there are other agencies that participate in a complementary manner depending on the type of product and nature of the operation, such as SENER, the National Agency for Industrial Safety and Environmental Protection of the Hydrocarbons Sector (ASEA) and the Ministry of Economy:

• SENER is responsible for granting prior permits for exportation and importation of crude oil, natural gas and petroleum products, as well as for verifying compliance with the conditions established in such permits, in accordance with the LSH and related administrative provisions;
• ASEA is in charge of supervising conditions for industrial security and environmental management in transportation, storage, distribution and handling of hydrocarbons, in accordance with its organic law and the sector’s technical regulatory framework; and
• the Ministry of Economy’s main function is to regulate foreign trade, and it may establish restrictions if needed.

Entities must obtain export or import permits, comply with quality and reporting standards and meet customs and tax requirements.

Cross-border infrastructure (such as pipelines) requires additional approvals, including environmental impact assessments and bilateral authorisations.

Liquefied natural gas (LNG) exports follow the same general framework, with no standalone export law. While there are no current export taxes, policy changes could introduce quotas or duties based on energy security considerations.

Transfers of midstream and downstream licences and assets between private parties require prior approval from SENER or the CNE, as applicable, to verify that the acquiring party meets the technical, financial and legal requirements originally required. Approval is subject to review of continuity in service obligations, safety compliance and reporting standards.

The licensee must demonstrate technical and financial capacity equal to that of the original permit holder.

The process involves submitting transaction details, operational updates and compliance documentation.

Common issues include updating existing permits, ensuring uninterrupted service and aligning with national energy policies. The CNE or SENER, as applicable, reviews each case to confirm regulatory continuity and safeguard infrastructure reliability.

As of mid-2025, foreign investment in Mexico’s hydrocarbon sector continues to be permitted under the Foreign Investment Law, and is supported by protections under international agreements such as the United States-Mexico-Canada Agreement (USMCA). There are no new restrictions specific to hydrocarbons, and foreign investors retain access to international arbitration mechanisms.

Additionally, the federal government launched the Portfolio for Shared Prosperity, a programme aimed at streamlining administrative processes and encouraging both domestic and foreign investment, including in energy. This initiative supports legal certainty, promotes infrastructure development, and simplifies permitting procedures in strategic sectors such as hydrocarbons.

The 2025 energy reform introduced a more co-ordinated model for upstream participation, in which PEMEX leads exploration and production activities. Foreign and private companies may continue to participate through structured partnerships or service contracts with PEMEX, allowing them to contribute technical expertise and capital while aligning with national energy priorities.

To reinforce long-term planning and policy alignment, the energy reform also introduced clearer provisions regarding permit oversight. The government now has greater flexibility to manage energy resources in the public interest, while maintaining predictability through well-defined regulatory procedures.

Mexico continues to honour its commitments under international treaties such as the USMCA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), ensuring that foreign investors retain access to international arbitration and legal protections against unfair treatment or expropriation. These frameworks offer an additional layer of certainty for long-term investment.

Overall, the 2025 energy reform reflects a renewed commitment to strategic energy development, preserving space for private and foreign collaboration in ways that complement state-led efforts, foster regulatory clarity and strengthen Mexico’s capacity to meet future energy demands.

As of May 2025, Mexico does not maintain or enforce any domestic sanctions that restrict investments in oil and gas assets in foreign jurisdictions, nor does it prohibit conducting business with foreign counterparties in the oil and gas sector. Mexico’s foreign policy (including sanctions) is governed by the Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores), and it traditionally follows a non-interventionist approach. There are currently no official government restrictions limiting Mexican individuals or companies from investing or engaging in oil and gas activities abroad.

Mexico’s approach to energy transition is embedded within its broader environmental legal framework, which includes several major federal laws and institutions. The General Law of Ecological Equilibrium and Environmental Protection promotes sustainable development and environmental protection across all sectors, including hydrocarbons. The Secretariat of Environment and Natural Resources (SEMARNAT), through agencies such as the Federal Attorney for Environmental Protection (PROFEPA), ensures compliance with environmental policies. In parallel, ASEA oversees industrial safety and environmental protection specifically within the hydrocarbons sector, ensuring that projects align with safety and sustainability goals.

Other relevant laws include:

• the National Waters Law, administered by the National Water Commission (CONAGUA), which regulates sustainable water use – a critical issue for energy infrastructure; and
• the Federal Environmental Liability Law, which holds parties accountable for environmental harm.

Additionally, Mexican Official Standards (NOMs) impose minimum environmental and technical standards for energy-related activities.

While these laws are not exclusively focused on energy transition, they increasingly shape how traditional oil and gas projects are developed, often requiring more rigorous assessments and sustainable practices. The system of concurrent jurisdiction established by Article 73, Section XXIX-G of the Mexican Constitution also empowers local governments to introduce complementary environmental regulations, further influencing the design and operation of hydrocarbon infrastructure to meet modern environmental standards.

Relevant URLs for the aforementioned entities are as follows:

• https://www.gob.mx/semarnat;
• https://www.gob.mx/profepa;
• https://www.gob.mx/conagua; and
• https://www.gob.mx/asea.

Before initiating upstream, midstream or downstream operations in Mexico’s hydrocarbons sector, private investors must obtain environmental approval from ASEA through an environmental impact assessment (EIA). The EIA process begins with the submission of an EIA, which must describe the potential environmental effects of the project, propose mitigation measures, and, if applicable, include an environmental risk study.

Upon receipt, ASEA initiates a public consultation process and requires the project proponent to publish a summary in a local newspaper. ASEA may request clarifications or corrections within 45 days, which pauses the remaining resolution timeline. ASEA must issue a decision – approval, conditional approval, or denial – within 82 calendar days.

In addition to the EIA, investors must also obtain authorisation for a risk analysis for the hydrocarbons sector and register a management system for industrial safety, operational safety and environmental protection. These approvals are required before project execution, and are designed to proactively prevent environmental damage and ensure safety throughout the facility’s life cycle.

Further environmental permits may be required once operations commence, depending on the project’s specific characteristics. These include permits for atmospheric emissions, waste generation and management, and other environmental uses. All regulatory processes aim to safeguard the environment, public health and property while facilitating responsible development.

Offshore oil well drilling projects in Mexico must meet specific environmental and regulatory requirements outlined in NOM-149-SEMARNAT-2006. This Mexican Official Standard establishes the environmental protection specifications applicable during the drilling, maintenance and abandonment of oil wells in marine areas, aiming to prevent and mitigate adverse environmental impacts.

Instead of submitting a full environmental impact statement, project proponents must file a preventative report to obtain environmental authorisation. This streamlined process still requires detailed risk-based assessments and evidence of mitigation measures for potential environmental impacts.

Additionally, compliance with regulations related to national waters is mandatory. Projects must secure permits and authorisations from CONAGUA, including:

• a concession title for the use of surface or subsoil national waters;
• a discharge permit for wastewater released into national water bodies; and
• a concession title for the use or exploitation of federal property and maritime zones.

These provisions are designed to ensure that offshore drilling operations adhere to strict environmental standards while also maintaining legal and operational accountability throughout the project life cycle.

Decommissioning of hydrocarbon sector facilities in Mexico is governed by the General Administrative Provisions, which establish the Guidelines on Industrial Safety, Operational Safety, and Environmental Protection for the Stages of Closure, Dismantling and/or Abandonment of Facilities in the Hydrocarbon Sector. Regulated parties intending to conclude operations must undertake a structured process that includes planning, updating risk and safety systems, and obtaining regulatory approvals.

As a first step, the regulated party must update the risk analysis for the hydrocarbon sector and the mechanisms of its industrial safety, operational safety and environmental protection management system. These updates form the foundation for risk prevention, control and mitigation during the decommissioning process. The party must also prepare a detailed plan outlining deadlines and activities for closure, dismantling and abandonment. This plan must incorporate findings from the updated risk analysis and the conditions stated in the project’s environmental impact authorisation. The full programme must be submitted to ASEA at least 30 working days before execution begins, and must be backed by an insurance policy covering civil liability and environmental damages.

The process unfolds in three stages.

• The closure stage marks the permanent suspension of operations. During this period, which must begin within one year of its approval, actions are taken to secure the facility in preparation for dismantling.
• In the dismantling stage, the regulated party is responsible for safely removing, disassembling, reusing or disposing of equipment and materials, while managing any waste in compliance with environmental laws.
• Finally, the abandonment stage involves actions to render the site environmentally safe. This includes conducting a site survey to identify damage, implementing restoration, remediation or environmental compensation measures, and ensuring long-term environmental protection.

After completing the closure, dismantling and abandonment activities, the regulated party must submit a final report to ASEA, verifying compliance with the approved plan. Additionally, it is required to retain all supporting documentation for ten years from the date ASEA issues its official abandonment resolution. These obligations apply irrespective of changes in ownership, meaning that previous licence holders may remain liable for compliance failures unless otherwise discharged under applicable regulations.

Mexico has implemented a range of laws and regulatory instruments aimed at addressing climate change and regulating emissions from the hydrocarbon sector. The General Law on Climate Change provides the legal foundation for national mitigation and adaptation measures, aligning with international agreements such as the United Nations Framework Convention on Climate Change. This law introduced the National Emissions Registry, which requires hydrocarbon sector establishments to report direct and indirect greenhouse gas emissions annually.

A key market-based mechanism established under this law is the Emissions Trading System (ETS), which targets facilities emitting over 100,000 tonnes of CO₂ annually. While currently in a pilot phase, the ETS is designed to progressively reduce emissions in the energy and industrial sectors without undermining their competitiveness. The regulatory authority for managing this system rests with the Ministry of the Environment and Natural Resources.

In parallel, the Energy Planning and Transition Law mandates the integration of clean energy planning into national energy policy, reinforcing the transition towards sustainable energy practices and reduced emissions across all stages of the value chain.

Specific to the hydrocarbon sector, ASEA has issued General Administrative Provisions establishing guidelines for the “Prevention and Integral Control of Methane Emissions”. Regulated entities must develop and implement a dedicated programme detailing measurable goals and actions to reduce methane emissions. Progress under these programmes must be reported annually, ensuring continuous monitoring and compliance.

At the local level, state and municipal governments exercise concurrent jurisdiction under the framework of the General Law on Climate Change. Many states, including Baja California, Zacatecas, Querétaro, and Quintana Roo, have enacted green taxes to internalise environmental costs. These taxes are levied on emissions into soil, water and air, as well as on the extraction of stone materials, reinforcing the “polluter pays” principle and encouraging environmentally responsible practices within the hydrocarbons industry.

Transfers of midstream and downstream licences and assets in Mexico are regulated at the federal level under a framework of laws, regulations, Official Mexican Standards and administrative guidelines.

While the federal government holds primary authority, states and municipalities also play a role in environmental regulation under the principle of concurrent jurisdiction established in Article 73, Section XXIX-G of the Mexican Constitution.

As such, local laws may impose additional environmental and operational obligations that must be considered when structuring a transfer. Investors must comply with both general and local regulatory requirements when transferring ownership or control of hydrocarbon-related infrastructure.

Laws Focused on Energy Transition

The recently enacted Energy Planning and Transition Law, which repeals the Energy Transition Law, establishes and regulates binding planning in the energy sector, strengthens energy transition and promotes sustainable use of energy.

The aforementioned law incorporates the Electricity Sector Development Plan (PLADESE), the Hydrocarbons Sector Development Plan (PLADESHI) and the Sustainable Energy Transition and Utilisation Plan (PLATEASE):

• PLATEASE will have a 15-year horizon, with annual updates, and will be key for energy transition and sustainable energy utilisation;
• PLADESE plans the modernisation of the electricity sector; and
• PLADESHI defines strategies for the development and modernisation of the hydrocarbons sector.

Programmes Impacting Traditional Energy Development

The National Electric System Strengthening and Expansion Plan 2025–2030, announced by the Mexican government, has the goal of increasing generation capacity, reinforcing transmission and distribution infrastructure, and accelerating transition to clean energy sources. This plan includes the development of new high-efficiency natural gas plants and conversion of fuel oil plants to gas, creating opportunities for private contractors through state-led projects.

The so-called Plan México aims to promote the country’s economic growth through strategies focused on key sectors such as energy, infrastructure and mining, and by promoting private investment in renewable energy and self-supply projects, especially in energy-intensive companies. It also sets targets to reduce fuel imports and increase domestic oil and gas production, opening investment opportunities for infrastructure upgrades and PEMEX-led hydrocarbons projects.

Overall, the 2025 energy reform aligns traditional energy development with national planning instruments, prioritising modernisation, efficiency and energy security, while preserving limited but strategic roles for private participation through partnerships with PEMEX.

As of May 2025, Mexico is increasingly repurposing oil and gas infrastructure to support energy transition goals. Pipelines and upstream assets are being evaluated for use in renewable natural gas (RNG) and green hydrogen projects, including large-scale developments such as Tarafert’s ammonia and hydrogen facilities.

To cut emissions, Mexico aims to reduce methane by 40%–45% by 2025, with regulatory oversight by ASEA. However, enforcement remains inconsistent, especially with PEMEX’s reported difficulties in meeting targets.

Projects in carbon capture and storage (CCUS) are underway, including CO₂ injection for enhanced oil recovery. While no national cap-and-trade system is active, the government has updated its climate strategy and launched programmes to attract investment in low-carbon technologies across the energy sector.

As part of the 2025 energy reform, Mexico maintains its Clean Energy Certificates (CELs) programme to support renewable generation.

The recently enacted Energy Planning and Transition Law integrates long-term planning instruments, including PLATEASE, which guides investment in sustainable energy use and supports deployment of clean technologies.

The federal government has introduced policies to align hydrocarbons operations with climate goals, promoting hybrid infrastructure use. This shift has redirected some investment towards cleaner fuels and low-emission technologies.

Additionally, through the so-called Plan México, the government aims to simplify regulatory procedures and attract both domestic and foreign investment in energy transition projects, including those involving traditional hydrocarbons infrastructure.

Over the next five to ten years, this trend is expected to continue, with further regulatory adjustments and incentives likely to support decarbonisation, enhance energy efficiency and facilitate the integration of oil and gas assets into Mexico’s broader clean energy strategy.

As of May 2025, Mexico is considering expanding fracking operations, particularly in the Burgos Basin, to reduce dependence on US natural gas. While no specific legal framework exists yet for unconventional resources, early consultations with private stakeholders are under way.

These developments fall under the general fiscal terms of the 2025 Petroleum Duty for Wellbeing, which imposes a 30% levy on oil and an 11.63% levy on non-associated natural gas production for assignees such as PEMEX.

Oversight is now managed by the centralised CNE. Though fracking remains controversial, the government’s recent actions reflect a strategic shift towards developing domestic unconventional reserves.

The 2025 energy reform does not prohibit hydraulic fracturing, but it does not establish a dedicated regulatory regime either. Fracking remains governed by general upstream rules and is subject to environmental and social permitting requirements.

As of mid-2025, LNG projects in Mexico are governed by the LSH. There are no specific legal frameworks or incentives solely for LNG, but projects in the Strategic Development Hubs for Welfare (energy being one of the Development Hubs) may access tax benefits such as immediate deduction on fixed assets and additional deductions on training and innovation.

Export permits are issued by SENER, based on technical and environmental reviews. Timelines vary by project complexity.

Key LNG developments include Saguaro Energía (Mexico Pacific), Altamira (New Fortress Energy) and Vista Pacífico (Sempra). Challenges remain around pipeline access and environmental opposition in sensitive areas.

The Mexican government, through the so-called Plan México and along with the 2025 energy reform and the Portfolio for Shared Prosperity, aims to promote private participation by investing in energy projects, reducing bureaucratic burdens, launching international public tenders for energy infrastructure and creating a tool (the Portfolio for Shared Prosperity) to detect new investment opportunities and ensure their implementation.

Furthermore, Mexico offers a unique legal framework that supports international arbitration through its adherence to the 1958 New York Convention. This ensures enforceability of arbitral awards, which remains an important consideration for private investors. Additionally, the recent consolidation of regulatory functions under the CNE aims to streamline oversight and decision-making in the hydrocarbon sector, offering a more centralised and co-ordinated regulatory approach.

Moreover, the recently enacted LSH includes “formulation” as a new permitted activity, consisting of mixing petroleum products with additives and biofuels to obtain new products.

In March 2025, Mexico enacted the new LSH, which redefined the legal framework for upstream, midstream and downstream activities. This law also replaced the Comisión Reguladora de Energía (CRE) and the Comisión Nacional de Hidrocarburos (CNH) with a single authority: the CNE. The CNE now holds comprehensive regulatory, supervisory and sanctioning powers across the entire energy and hydrocarbon value chain, centralising oversight under SENER.