Mexico's lower house to vote on changes to hydrocarbons revenues law

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Tuesday, October 18, 2016

The treasury committee of Mexico's lower house of congress approved changes to the hydrocarbons revenues law that would make the rules governing deductions relating to oil and gas production more flexible.

The proposals will be debated and voted on by the full house at a future date.

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The hydrocarbons law was part of Mexico's 2014 energy reform and redefined the way the government receives revenues as state oil firm Pemex loses its production monopoly.

The government proposed the modifications to the law in September to guarantee revenues from contracts signed with third parties amid continued low oil prices.

The committee's president, Gina Cruz Blackledge of the opposition PAN party, said the proposal aims to adjust deduction limits on hydrocarbon extraction in onshore and shallow water fields at depth of up to 500m. The aim of the modification is to provide financial certainty to state-owned firms and ensure more efficient and secure operations in the areas assigned them.

Due to the fall in oil prices since mid-2014, a reduction in the taxation deductions was implemented, which has affected the performance of companies engaged in E&P, she said.

The hydrocarbons revenues law states that E&P contracts include a mechanism for adjustment of payments to allow the Mexican state to receive greater revenues in the event of an increase in benefits due to an improvement in price conditions, production volumes or cost efficiency compared to those at the outset of the contract.