Navigating Mexico’s evolving energy law landscape

Mexico

Valeria M. Vázquez Maulén, then-energy and resources legal leader for S-LATAM at Deloitte S-LATAM, talks to The Energy Year about recent changes in Mexico’s energy industry and how the country can achieve energy sovereignty. Deloitte is an international professional services network that offers audit, consulting, financial advisory and risk advisory services.

What recent changes would you say are key in Mexico’s energy industry and what should we expect from President Sheinbaum’s six-year term?
We are witnessing a new energy model that, at its core, aims to strengthen and increase the strategic planning and control by the Ministry of Energy, as well as the mandate for energy justice of the State-owned companies, CFE [Federal Electricity Commission] and Pemex. The focus of the Sheinbaum administration is also more oriented towards social wellbeing and ensuring that energy is equitable and affordable for all.
Despite the focus on ensuring the pre-eminence of CFE and Pemex, as well as helping them overcome their financial crises, the private sector will be allowed to participate in the industry. There is also talk of redoubling efforts to achieve our renewable energy goals. These have not been met for 2025, but we hope that by 2040-2050 we will indeed be able to reach a 35-50% share of renewable energy in our mix.
Overall, the positives today are that the constitutional reform of 2024 and the secondary laws which have been recently published have together given us a playing field with clear rules. Therefore, we are conveying to our clients the need to be patient, as this new energy model will yield results not in five years but over a longer period. Under AMLO [former President Andrés Manuel López Obrador], since several controversies reached the Mexican courts, the industry was severely impacted, so change will require continued clear policies and strategies. The industry is moving in the right direction and our message is to play by the new rules.

What factors will be essential in Mexico’s drive to achieve energy sovereignty?
Pemex’s first challenge is to achieve energy sovereignty and make sure Mexico maximises its hydrocarbons resources. To achieve this, financial discipline will be key, and the simplification of Pemex’s constitution, with the elimination of the CRE [Energy Regulatory Commission] and CNH [National Hydrocarbons Commission], and the creation of a single regulator, the National Energy Commission, will be vital to establishing a single communication channel for the entire energy industry. This administrative simplification will play a very important role in addressing Pemex’s financial troubles.
Secondly, to increase the productivity of its projects, Pemex must leverage its strengths as well as accept help and collaboration in areas where it is weaker, such as storage and refining. This will be vital to growing the country’s energy security, and here, the development of the Olmeca and Deer Park refineries will play an important role in Mexico’s energy future.
Finally, to achieve energy sovereignty, Mexico must find collaboration schemes that benefit the State but also allow co-operation with private players. Tenders are unlikely to be reinitiated, as they will be granted only by exception, but we do expect other more dynamic contracting schemes, such as mixed development assignments, that will allow Pemex to collaborate with private companies in exploration and production projects to come into play.

What opportunities do you see for private companies in this current panorama?
Although some IOCs have left Mexico, the market will provide new opportunities for more regional and local participants. Harbour Energy and Grupo Carso are two recent examples of this and considering that the government’s Mexico Plan proposes that at least 50% of public purchases or contracts must be with Mexican entities, this will force investors in the energy industry to have Mexican participation and foster the transfer of technology and know-how to Mexican parties. For example, mixed assignments require a minimum of 40% of participation interest for Pemex.
Furthermore, as well as investment in transport, distribution and storage infrastructure in the country, petrochemicals is a sector the federal government is serious about reactivating. This will subsequently lead to the development of the country’s agribusiness and fertiliser industries, and at Deloitte, we would highlight these as key areas for private participation.

How much of Deloitte’s work in Mexico comes from the energy industry and what type of clients do you serve?
Energy represents 20-30% of our work in Mexico. At Deloitte, we are multidisciplinary, and energy is just one of the industries we focus on. However, many of our projects in these different industries overlap, so it is hard to give you an exact figure for how much of our revenue comes from energy. What we do know is that in Mexico this year, we are expecting projects to reach the USD 60-million mark.
In terms of clients, we have a huge variety. We help big IOCs implement their E&P projects, providing services ranging from tax, VAT refunds and transfer price reviews to addressing everyday issues and strategies that need specialisation.
We also support big energy consumers and work with public projects, many of which are financed by multilaterals, such as the Inter-American Development Bank and the World Bank, as well as several downstream companies involved in the importation, commercialisation and distribution of fuels. We cover almost the entire value chain.

Which are the most in-demand services for your oil and energy clients?
Our main, traditional service is auditing. At a global level, Deloitte audits about 65% of energy companies. Our other main lines of service are in the areas of tax and legal, which make up 40% of our work in energy, and we also provide clients with regulatory assistance to help them understand the flood of new laws and specific regulations. This is something all of our clients need, whether they are established or new market players.
Then we have our new storefront including Strategy, Risk and Transformation (SRT) services. Here, we help clients look at projects from a strategic, financial and business strategy point of view to help them develop solutions to increase energy efficiency across their whole enterprise value chains, while reducing costs and mitigating risks. The goal is to help them be sustainable and cost-efficient and subsequently allow them to better ride the ups and downs that come with the energy industry.
Finally, another prominent service we provide to companies in the energy industry is in the area of cybersecurity. The energy industry always requires being at the forefront of these issues, but now with the new nature of global threats, they are becoming much more challenging. This means that cyber issues now are taking on even greater importance for our clients in the mining, midstream and hydrocarbons sectors.

What goals does Deloitte have in Mexico’s energy industry for the coming year?
Our first objective is to accompany our clients in their adaptation to this new economic and regulatory model, from all perspectives: compliance, tax, legal, etc. We want to help them regain confidence in the energy sector, which we believe will be successful in the long term.
Our second objective is to accompany our clients in their own energy transition goals, because although the government is key to this, it is undeniable that large companies must also play their role. This is forcing us to be very creative and aggressive in the strategies we propose to our clients.
Finally, we want to help our clients take advantage of nearshoring, a window of opportunity that is closing fast. Energy is going to be key in this goal and therefore we are creating a task force to accompany our partners, especially those in M&As, to specifically help them navigate these energy-related factors.

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