Challenges Facing Natural Gas Developers in Mexico

August 31, 2020

The unpredictable regulatory landscape is a risk for natural gas companies operating and Mexico. In addition, existing land use and environmental regulations may threaten the growth of natural gas transmission projects.

Currently, private firms engaged in building out natural gas storage or transportation infrastructure must obtain permits at the federal and local level. This could be a significant barrier to entry for many firms for the time and resources that are required to undergo the lengthy and complex process.

Permits Remain a Challenge for Foreign Investors

Obtaining the adequate approvals involves direct communication with CRE and ASEA, Mexico’s Security, Energy and Environment agency which focuses on environmental compliance. Permits are typically granted as a 30 year “open access” permit which allows shippers to use the distribution services if capacity is available.

For integration into the SISTRANGAS system, general terms of service (GTS) and roll-in rates must also be approved. A social impact assessment (SIA) should be completed with SENER prior to the permit authorization process.  Companies are also required to obtain the adequate real estate rights to break ground on the project. Mexico Energy Partners helps companies navigate the permitting and regulatory process for large energy projects.

Fundamentals Will Likely Outweigh Politics

Though the political environment poses some challenges because of an increase in nationalist rhetoric, the reality of Mexico’s current energy situation could make it difficult for the Administration to roll back reforms as quickly. When congressional elections occur in 2021, Mexican voters could overwhelmingly support opposition party leaders who would likely block proposals that might threaten the implementation of energy reforms.

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