CNH publishes various Agreements on Hydrocarbon Exploration and Extraction
Executive Summary:
- On August 2, 2023, the National Hydrocarbons Commission published various Agreements on exploration and extraction (E&E) of hydrocarbons.
- The purpose of these Agreements is to manage and supervise the allocations and contracts for hydrocarbon E&E, as well as to promote the development of these activities for the benefit of Mexico.
On August 2, 2023, the National Hydrocarbons Commission (“CNH”) published, in the Official Gazette of the Federation, the following Agreements on exploration and extraction (E&E) of hydrocarbons:
- Agreement CNH.E.09.07/2023 establishing the General Criteria for the extension of the exploration and evaluation periods provided for in the contracts for the exploration and extraction of hydrocarbons that are applicable.
- Agreement CNH.E.09.06/2023 by which the National Hydrocarbons Commission interprets, for administrative purposes, articles 27, 29 and 35 of the Guidelines that regulate the Exploration and Development Plans for the Extraction of Hydrocarbons (the “Guidelines”).
- Agreement CNH.18.03/2023 by which the National Hydrocarbons Commission interprets, for administrative purposes, articles 65 and 65 Bis of the Guidelines that regulate the Exploration and Development Plans for the Extraction of Hydrocarbons.
The purpose of the Agreements is to manage and supervise the allocations and contracts for hydrocarbon E&E, as well as to promote the development of these activities for the benefit of the country.
RELEVANT ASPECTS
Agreement CNH.E.09.07/2023
In the context of the applicable contracts and the Guidelines, the CNH approved various extensions to the E&E periods of hydrocarbons due to causes that could not be attributed to the contractors. These causes include safety problems, delays in government permits and lack of drilling equipment, among others.
In this regard, to be considered for the extension, contractors must submit the application to the CNH 30 days before the expiration of the corresponding period. In cases where the expiration is less than 30 days away, the application may be submitted up to 5 business days after the publication of the Agreement.
The CNH will take into account three main criteria to grant the extension:
- Timely submission of the application.
- The persistence of the causes that motivated the initial extension or that continue to affect oil activities today.
- The technical justification for the requested extension period.
These criteria will be essential in determining whether or not the extension requested by the contractors is granted.
Agreement CNH.E.09.06/2023
Agreement CNH.E.09.06/2023 interprets articles 27, 29 and 35 of the Guidelines and its relevance lies in the establishment of deadlines and procedures for the approval and modification of work programs and budgets for hydrocarbon E&E contracts. These programs are essential for the proper planning and execution of activities related to hydrocarbon E&E in the country and for the benefit of the nation.
Thus, the CNH has decided to standardize the time periods provided for in articles 27, 29 and 35 for the case in which applications for modification of a plan or program and approval of the second and subsequent work and budget programs or their modifications are submitted simultaneously. In these cases, the work and budget programs must be subject to the procedure and time periods established for the approval of the main modification.
This standardization of deadlines seeks to ensure consistency and efficiency in the CNH administrative processes related to hydrocarbon E&E activities, in compliance with the principles established in the Law of Coordinated Regulatory Bodies in Energy Matters.
CNH Agreement.18.03/2023
Finally, through Agreement CNH.18.03/2023, the CNH makes an interpretation of articles 65 and 65 bis of the Guidelines. Article 65 seeks to allow oil operators that have a transition program to carry out preparatory activities for extraction, regardless of whether this program is based on an evaluation report or an initial evaluation report. The scope of the aforementioned Agreement is to promote the development of Hydrocarbon E&E activities in the country, allowing oil operators to carry out early production and preparatory extraction activities as part of their transition program, in accordance with the Guidelines.
Article 65 bis of the Guidelines seeks to standardize the content of the initial evaluation report with the assessment report, in order to establish the same conditions and equal treatment for oil operators. This is so that they can carry out early production activities or preparatory activities for extraction, regardless of whether these are derived from an assessment report or an initial assessment report.
In summary, the Agreements as a whole seek to improve the operating environment, maximize the potential of hydrocarbon resources and promote appropriate and beneficial development for the country in the hydrocarbon E&E sector.
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