Mexico Upstream (Oil and Gas) Fiscal and Regulatory Guide, 2024
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Mexico Upstream Fiscal and Regulatory Report Overview
The upstream fiscal and regulatory outlook of Mexico has undergone many changes. Mexico has 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 report dives into the tools and strategies used to lower PEMEX’s tax burden, amid serious liquidity issues.
The Mexico Upstream Fiscal and Regulatory Guide presents essential information relating to the terms that 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.
Key Regimes | · Production Sharing Agreements (PSAs)
· Concession Agreements · Service Contracts · PEMEX’s Entitlement Regime |
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Mexico Regime Overview ─ National Oil Company (PEMEX) Entitlement Regime
The PEMEX assignment regime concerns all blocks assigned to PEMEX via Round Zero. PEMEX pays price-based royalties, the profit-sharing duty, the hydrocarbon-activity tax, exploration rental fees, and the ISR at a more than 29% rate. The fiscal burden comprises mostly early and regressive taxation, such as royalties, fees, and profit-sharing duties. When PEMEX operates at a loss, the total state take is less than the fiscal take, as the government must finance PEMEX’s losses.
Regime Flow Chart – National Oil Company Entitlement
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Mexico Regime Overview ─ Service Contracts
The Service Contract regime provides PEMEX with the possibility of outsourcing operations. It provides outsourcing operations when it is lacking in infrastructure or know-how, and the contractor or operator can operate more efficiently. It also allows for a different structuring of disbursements through the project cycle, so the cash flow may look different than in a PEMEX-operated field.
Regime Flow Chart – Service Contracts
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Mexico Regime Overview - Concession Agreements
Mexico issued concession licenses/agreements for new onshore blocks and deepwater blocks from 2015 to 2018. It is a model in which the licensee owns production, and is taxed through royalties and different taxes. Under this regime, licensees pay price-based royalties, the hydrocarbon-activity tax, exploration rental fees, the ISR at a more than 29% rate, and an additional royalty.
Regime Flow Chart – Concession Agreements
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Mexico Regime Overview - Production Sharing Agreements
Mexico issued PSAs for new shallow-water licenses from 2015 to 2018. Under this new regime, production, and therefore risk, is shared between licensees and PEMEX. Licensees pay price-based royalties, the hydrocarbon activity tax, exploration rental fees, and the ISR (income tax) at more than 29%.
Regime Flow Chart – Production Sharing Agreements
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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 the application of fiscal and regulatory terms to specific licenses.
- Outlook on the 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.
Table of Contents
Frequently asked questions
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Which are the different regimes for oil exploration and production implemented by Mexico?
Mexico has implemented different regimes for oil exploration and production, including Production Sharing Agreements (PSAs), Concession Agreements, Service Contracts, and PEMEX’s Entitlement Regime.
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What is the PEMEX regime implemented by Mexico?
The PEMEX assignment regime concerns all blocks assigned to PEMEX via Round Zero. It pays price-based royalties, the profit-sharing duty, the hydrocarbon-activity tax, exploration rental fees, and the ISR at a more than 29% rate.
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How does the Service Contract regime help PEMEX?
The Service Contract regime provides PEMEX with the possibility of outsourcing operations.
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