Mexico has a well-established upstream oil and gas industry, grounded primarily in Articles 25, 27, and 28 of the Political Constitution of the United Mexican States. The industry’s regulatory framework was significantly enhanced by the Energy Reform, which introduced comprehensive legislation such as the Hydrocarbons Law, along with accompanying regulations and administrative provisions.

The government supports this sector through strategic planning documents, including Plan México, the forthcoming National Development Plan 2024–2030, the National Energy Plan 2024–2030, and the Natural Gas and Hydrocarbons Plan. These documents provide a detailed assessment of past upstream activities, current sector diagnostics, and forward-looking strategies aimed at energizing the industry and boosting Mexico’s economic growth.

On November 13th, 2024, the government unveiled the National Strategy for the Hydrocarbons and Natural Gas Sector 2024–2030. This strategy prioritizes restoring Mexico’s energy sovereignty by reinforcing sector planning and management. It emphasizes employing advanced exploration techniques in shallow waters of the Gulf of Mexico and onshore fields in the southeast to sustain, restore, and expand reserves sufficient for roughly 10 years of consumption.

Consistent with these strategic priorities, and under the conviction that energy constitutes a strategic input for social welfare and national development, Mexico enacted a new Energy Reform in 2025 aimed at recovering energy sovereignty for the benefit of Mexico.

As a result, on March 18th, 2025, the Hydrocarbons Sector Law (Ley del Sector Hidrocarburos in spanish) was published, repealing the Hydrocarbons Law originally enacted on August 11th, 2014. The new statutory framework strengthens state-owned enterprises, expands governmental oversight and monitoring capacities and establishes a clearer and more coherent legal regime across upstream activities.

Subsequently, on October 3rd, 2025, the Regulations to the Hydrocarbons Sector Law were published, formally repealing the previous regulations and completing the implementation of the revised legal framework.

Within this policy context, for 2025, Petróleos Mexicanos (PEMEX) reported an average crude oil production of approximately 1.735 million barrels per day. The previous reflects a slight increase compared to 2024 and is in line with ongoing efforts to stabilize production, though challenges remain due to declining output from mature fields and limited new discoveries. The government continues to publish official reserve figures, but as of the latest public report (January 2024), proven oil reserves remain at 8,382.6 million barrels (MMb).

These production and reserve levels underscore Mexico’s continued commitment to developing its upstream sector within a robust legal and strategic framework, which is designed to balance resource sustainability with long-term economic growth. The government’s focus on modernizing exploration techniques, enhancing regulatory oversight, and supporting strategic planning demonstrates a proactive approach to maintaining energy security while adapting to evolving market and environmental challenges.

The rights to explore and exploit oil and gas resources in Mexico are granted primarily through assignments, governed by contracts, licenses, and agreements entered into with the Mexican government. These legal instruments outline the specific terms, obligations, and rights binding the parties involved.

The regulatory framework for upstream oil and gas activities is anchored in the Political Constitution of the United Mexican States, supported by the Hydrocarbons Sector Law (Ley del Sector Hidrocarburos in Spanish) and its corresponding regulations, official standards, and other administrative provisions. Companies engaging in exploration and production must strictly adhere to these laws as well as the contractual requirements set forth by the government.

Under the new Hydrocarbons Sector Law, the granting of assignments is entrusted to the Ministry of Energy (Secretaría de Energía or SENER), under the modalities of direct development. Contracts may be awarded by the Ministry of Energy, only on an exceptional basis, where PEMEX with the prior authorization of its Board of Directors, has formally notified the Ministry that it lacks the interest or capacity to develop the assignment, regardless of the applicable modality.

It is important to note that offshore operations are subject to a more extensive set of obligations compared to onshore activities, due in part to their complexity and international implications. Key differentiators include:

• Compliance with international maritime laws and conventions, such as the International Convention for the Prevention of Pollution from Ships (MARPOL), because offshore activities often occur in or near international waters.
• Elevated environmental risks, including potential oil spills and adverse impacts on sensitive marine ecosystems, which necessitate stricter environmental safeguards.
• Enhanced safety requirements to protect personnel working on offshore platforms, given the challenging and hazardous operational conditions.
• Greater public health considerations arising from potential water and air pollution linked to offshore hydrocarbon extraction.

Consequently, offshore operators face more rigorous health, safety, and environmental regulations established by official standards and administrative guidelines, ensuring comprehensive oversight and risk management beyond what typically applies to onshore projects.

The main key features of licenses, production sharing contracts, and concessions governing oil and gas exploration, development, and production typically include: (i) exclusive use rights: the contract grants the operator the right to explore and produce hydrocarbons from a specific field or area for a defined period, subject to renewal conditions; (ii) monetary compensation: parties agree on financial terms, including royalties, fees, or profit-sharing mechanisms, ensuring fair economic returns to the state while fostering investment incentives; (iii) development plan: operators must submit a comprehensive project development plan detailing exploration, drilling, production, and environmental management strategies to mitigate ecological impacts throughout the lifecycle; (iv) national content requirements: contracts mandate a minimum percentage of expenditure on locally sourced goods, services, labor, and technology transfer—promoting not only economic growth but also local environmental stewardship; (v) work program compliance: a detailed schedule of exploration and production activities is established, ensuring timely progress and adherence to environmental safeguards; (vi) hydrocarbon measurement procedures: rigorous, transparent protocols govern how extracted hydrocarbons are measured and accounted for, preventing loss, spills, or misreporting that could harm the environment; (vii) environmental and financial guarantees: operators must provide guarantees, including financial bonds or insurance, to cover potential environmental liabilities, ensuring funds are available for remediation or compensation if needed; (viii) dispute resolution: contracts include clear jurisdictional and arbitration mechanisms to resolve conflicts efficiently without compromising environmental commitments; (ix) tax and regulatory compliance: parties must fulfill tax obligations and comply with environmental laws and standards, including those governing emissions, waste management, and ecosystem protection.

Yes, Mexico has unconventional hydrocarbon resources, including shale gas and shale oil, which are actively being developed and produced. The regulatory framework governing these resources is distinct from that applied to conventional hydrocarbons.

Specifically, the regulatory regime for unconventional hydrocarbons incorporates tailored environmental and operational guidelines to address the unique challenges posed by these resources. Key regulations include:

• Guidelines on industrial, operational safety, and environmental protection specifically designed for exploration and extraction activities in non-conventional deposits on land. These guidelines establish standards to minimize environmental impact and ensure safe operations in shale and other unconventional formations.
• Guidelines regulating Exploration and Development Plans for Hydrocarbon Extraction, which include requirements for environmental impact assessments, risk management, and monitoring tailored to unconventional resource development.

Together, these regulations form a comprehensive framework that balances resource development with environmental stewardship, reflecting the technical and operational complexities particular to unconventional hydrocarbon extraction.

The key regulators for the upstream oil and gas industry in Mexico are the Ministry of Energy (SENER) and the Environmental, Energy and Safety Agency (ASEA). SENER is responsible for establishing, conducting, and coordinating the country’s energy policy, with a primary focus on energy security and diversification, while also overseeing compliance with regulatory standards. ASEA, an administrative body under the Ministry of the Environment and Natural Resources (SEMARNAT), regulates and supervises industrial and operational safety, as well as environmental protection within the hydrocarbon sector.

Previously, the National Hydrocarbons Commission (CNH) played a central role as an autonomous technical agency, regulating and supervising hydrocarbon exploration and extraction activities and contributing to the continuous improvement of upstream regulations. However, as of December 20th, 2024, the CNH was formally extinguished following the “Decree amending, adding and repealing several provisions of the Political Constitution of the United Mexican States, regarding organic simplification.” Its regulatory functions have since been redistributed, primarily to SENER and ASEA, which now assume greater responsibility for technical oversight and regulatory enforcement in the upstream sector.

These changes reflect a shift toward centralized regulatory authority, with SENER and ASEA now serving as the principal bodies ensuring compliance with safety, environmental, and operational standards for hydrocarbon activities in Mexico.

Yes, the Mexican government is directly involved in the upstream oil and gas industry, as established by Articles 25, 27, and 28 of the Political Constitution of the United Mexican States. These articles designate the exploration and production of hydrocarbons as strategic activities reserved for the state, meaning that only the Mexican government can authorize and regulate upstream operations.

The government owns PEMEX, which was created on June 7th, 1938. PEMEX is responsible for all oil and gas industry activities through its specialized divisions: PEMEX Exploration and Production, PEMEX Industrial Transformation (covering refining, processing, import, export, marketing, and sale of hydrocarbons), and PEMEX Logistics (managing transport and storage).

Private sector participation is permitted through Exploration and Extraction Contracts with the government but as mentioned before, only on an exceptional basis, where PEMEX with the prior authorization of its Board of Directors, has formally notified the Ministry that it lacks the interest or capacity to develop the assignment, regardless of the applicable modality.

The areas where these contracts are executed are known as Contractual Areas. This framework ensures that while the state retains control and ownership of hydrocarbon resources, private companies can engage in exploration and extraction under government supervision and contractual terms.

Yes, the main special requirement for foreign companies that want to implement upstream activities is that they are obligated to comply with a specific percentage (at least 35%) of national content. This requirement does not apply to hydrocarbon exploration and extraction activities in deepwater and ultra-deepwater areas. In such cases, the Ministry of Economy, with the opinion of the Ministry of Energy (Secretaría de Energía), must establish an appropriate national content target.

The national content is defined as the percentage that represents the part of the expenditure that the Assignees and Contractors make on national goods, services, and labor, as well as on training, technology transfer, and local or regional physical infrastructure in national territory, for the realization of their Exploration and Extraction activities.

The environmental and health, and safety regime for upstream oil and gas activities in Mexico is comprehensive, with a clear structure designed to ensure responsible resource development while protecting human health, safety, and the environment. Companies must comply with a set of primary and secondary legal requirements, as well as technical standards and management systems, tailored specifically to the risks associated with exploration and extraction in both conventional and non-conventional deposits.

Environmental

In México, companies must obtain an environmental impact and risk authorization under the General Law on Ecological Balance and Environmental Protection (LGEEPA), which requires a thorough environmental impact assessment (EIA) and risk analysis, following guidelines issued by the ASEA and the SENER.

Please note additional authorizations are needed for well construction, surface reconnaissance, and exploration activities, each subject to specific technical and environmental review processes.

Also, compliance with the Industrial Safety, Operational Safety, and Environmental Protection Management System (SASISOPA) is mandatory. SASISOPA ensures that companies implement integrated management systems for risk prevention and environmental protection across all stages of upstream operations.

Specialized administrative provisions require companies to manage methane emissions, control special handling waste, and adhere to strict guidelines for well construction and maintenance, all to minimize environmental footprint and prevent pollution.

There is also a minimum insurance requirement for regulated parties, ensuring financial responsibility for potential environmental damages and accidents.

Social

Also, interested parties seeking permits or authorizations to develop hydrocarbons projects, are required to submit to the Ministry of Energy (Secretaría de Energía) for approval a Social Impact Assessment for the Energy Sector. This assessment must be prepared under a participatory approach, incorporating a cross-cutting gender perspective and ensuring respect for and protection of human rights, including the consultation of the interests, rights, and cultural specificities of indigenous and Afro-Mexican peoples and communities.

The document previously known as the Social Impact Evaluation (Evaluación de Impacto Social, or EvIS) is transitioning to a new legal designation as the Social Impact Statement for the Energy Sector (Manifestación de Impacto Social del Sector Energético, or MISSE). The relevance of the EvIS or MISSE lies in its role as a key instrument for identifying, preventing, and mitigating potential social impacts associated with hydrocarbons projects, while promoting community engagement and social sustainability.

Under the new Hydrocarbons Sector Law and its Regulations, the social impact assessment regime has been strengthened and now constitutes a legally binding requirement for the development of hydrocarbons projects. In this context, the assessment has evolved from a non-binding resolution containing recommendations into a formal administrative authorization that may be issued on a conditional or definitive basis, or denied altogether.

Health and Safety Obligations

Companies must observe Mexican Official Standards (NOMs) covering workplace safety, fire prevention, protection systems, and personal protective equipment. Key standards include:

• NOM-001-STPS-2008: Workplace safety conditions
• NOM-002-STPS-2010: Fire prevention and protection
• NOM-004-STPS-1999: Machinery safety devices
• NOM-009-STPS-2011: Safety for working at height
• NOM-017-STPS-2008: Selection and use of personal protective equipment
• NOM-026-STPS-2008: Safety and hazard identification signage

These standards are enforced to prevent workplace accidents, ensure safe operations, and protect workers from occupational hazards inherent in upstream oil and gas activities.

This regime reflects an integrated approach, combining environmental protection, risk management, and worker safety. The emphasis on comprehensive assessments, management systems, and strict technical standards ensures that companies operate in a manner that is both safe and environmentally responsible, aligning with international best practices in the oil and gas sector.

The mechanisms and formulas to calculate the monetary compensations (such as bonuses, contractual fee, royalties, compensation) and taxes related to the celebration of the contracts and the implementation of the upstream activities, will be obtained according to the dispositions established on the Hydrocarbon Revenue Law published in the Official Gazette on August 11th, 2014.

As a general rule, there are no special tax deductions or incentives for third parties related to the upstream activities. Nonetheless, it must be noted that the president of Mexico has the discretionary power to grant subsidies or tax incentives in different sectors. Furthermore, on February 2nd, 2024, a decree was published in the Official Gazette that grants tax benefits to third parties in order to continue supporting the exploration and extraction of hydrocarbons in the country.

In summary, the government’s value capture from oil and gas is systematic and based on established legal frameworks, with limited standard incentives for third parties, though targeted benefits may be introduced by executive decree to stimulate sector growth and investment.

Please note that for export activities will be required a permit issued by SENER. Additionally, must be considered the taxes established on the General Import and Export Tax Law that need to be fulfilled depending on the hydrocarbon to be exported.

As per Article 46 of the Hydrocarbons Law, activities of Exploration and Extraction of Hydrocarbons should comply with at least 35% of national content (related to the onshore activities). In case of offshore activities, the Economic Ministry with SENER, will establish the percentage of national content that the contractor must comply with in the implementation of each stage of exploration and extraction activities.

Additionally, the contractor must elaborate a compliance program including the mechanisms and means in order to comply with the percentage of the national content required. This program will be evaluated and approved by the Mexican Government. Likewise, in the content of the concession or the hydrocarbons contract, will be established the term in the contractor must prefer goods and services of local origin over international.

Yes, the regulatory regime in Mexico includes specific decommissioning obligations for oil and gas operations, reflecting international best practices and tailored requirements for the sector. The ASEA issues general administrative provisions that set out detailed guidelines on industrial safety, operational safety, and environmental protection for the closure, decommissioning, and abandonment of hydrocarbon facilities. These guidelines are mandatory and designed to prevent environmental and safety risks, with non-compliance potentially resulting in administrative sanctions.

Additionally, the National Hydrocarbons Commission (CNH) has issued the CNH.30 AGREEMENT.06/2023, which specifically establishes the Guidelines for Abandonment, Renunciation, and Return. This agreement outlines the procedures and obligations that oil operators must follow for the abandonment, withdrawal, and disposal of materials associated with oil activities. It also sets forth the requirements for the termination and return of contractual areas, including the processes for renunciation or revocation of assignment areas, and details the financial mechanisms that operators must implement to ensure adequate funding for decommissioning obligations.

These regulatory instruments ensure that operators are held accountable for the full lifecycle of their activities, from exploration and production to final site restoration, aligning with both national environmental protection goals and international standards for responsible resource development.

The regulatory regime governing the construction and operation of offshore and onshore oil and gas pipelines in Mexico is a multi-layered framework that integrates federal, state, and municipal requirements, with specific distinctions for onshore and offshore activities. For onshore pipelines, the primary legal framework includes the Hydrocarbons Sector Law, the General Law of Ecological Balance and Environmental Protection, and their respective regulations, which mandate obtaining various authorizations across environmental, risk management, forestry, hazardous waste, and urban development matters. Entities must secure federal environmental impact assessments, social impact assessment, risk analyses, and approvals for land use changes, especially if affecting protected or forestry lands. Additionally, some urban development authorities require Urban Impact Assessments to evaluate the project’s effects on local infrastructure and communities.

At the municipal level, operators must also obtain land use, construction, and, in some cases, operating licenses as stipulated by local ordinances. For offshore pipelines, the regulatory scope is further extended to include permits or approvals from the Secretariat of the Navy (SEMAR), which oversees navigational safety, maritime environmental protection, and security in Mexico’s territorial waters. Offshore activities are subject to stringent environmental and safety standards, including spill prevention, emergency response planning, and continuous monitoring to mitigate risks to marine ecosystems.

Private sector participation is enabled through Exploration and Extraction Contracts awarded by the SENER, which set out technical, environmental, and safety obligations for pipeline projects. These contracts are complemented by oversight from regulatory agencies such as ASEA, which enforces compliance with national and international best practices in pipeline construction, operation, and decommissioning. This integrated regime ensures that both onshore and offshore pipeline projects are developed and operated with due regard for environmental protection, public safety, and sustainable resource management.

The regulatory regime that applies to the liquefaction activity is contemplated in the Hydrocarbons Law and its secondary regulation, which establishes the obligation to obtain a permit in order to import or execute such activity. Also, it is necessary to procure the environmental impact and risk authorization and the social impact resolution for the construction and operation of the terminal. In environmental matters, it’s important to observe the provisions of the applicable guidelines, regulations, and Official Mexican Standards (NOM).

The main liquefaction and import terminals in Mexico are the (i) “Saguaro” located in Puerto Libertad, Sonora, (ii) “Sonora SSLNG” located in Pitiquito, Sonora, (iii) “Pioner II” located Altamira, Tamaulipas, among others.

The regulatory regime for gas storage in Mexico is primarily governed by the Hydrocarbons Sector Law and its secondary regulations, which require operators to obtain a permit to conduct gas storage activities. In addition to this, operators must secure environmental impact and risk authorizations, as well as a social impact assessment authorization for both the construction and operation of storage facilities. These requirements are designed to ensure that storage projects are carried out safely, with minimal environmental impact and adequate consideration of local communities.

Mexico does have several gas storage projects, including underground storage facilities and above-ground installations. Notably, the country has been developing natural gas dispensing systems such as “Gas Bienestar,” which distributes liquefied petroleum gas (LPG) to the public through a network of storage and distribution terminals. These facilities are subject to strict regulatory oversight to ensure compliance with safety, environmental, and operational standards. The regulatory framework continues to evolve, reflecting both international best practices and the specific needs of Mexico’s energy sector.

Yes, there is a gas transmission and distribution system known as the National Integrated Natural Gas Transportation and Storage System (SISTRANGAS). The gas distribution and transmission infrastructure may be owned by private entities or by the government through different entities such as PEMEX. Please note, it is regulated by the legal framework issued, such as the Hydrocarbons Law and its secondary regulations, official standards, and general administrative dispositions issued by different authorities.

The Hydrocarbons Law contemplates a non-discriminatory open access regimen in order to guarantee that third parties can be interconnected to the transmission and distribution of natural gas pipelines, considering the capacity of the natural gas system.

In Mexico, there is a privatized downstream gas market in which public entities (PEMEX, Gas Bienestar) compete on a free market with private entities (Naturgy, Engie, Enestas, Shell, G500, among others) to offer competitive prices to customers who can choose the best option. In such a sense, customers are free to choose their supplier.

The downstream gas market is regulated primarily through the Hydrocarbons Law and its associated secondary regulations, which establish a comprehensive framework for all participants in the sector. These regulations require companies to obtain specific permits and authorizations before engaging in any downstream activities, including transportation, storage, distribution, compression, liquefaction, decompression, regasification, and marketing of natural gas.

Beyond operational permits, entities must also comply with a range of additional requirements related to environmental protection, risk management, health and safety, and land use. For example, operators must secure environmental impact assessments, risk management plans, and approvals for activities such as changing land use (including forestry lands), managing hazardous wastes, and controlling emissions to the atmosphere. These regulatory measures are designed to ensure that downstream gas activities are conducted safely, minimize environmental impact, and protect public health.

Overall, the regulatory system for the downstream gas market integrates technical, environmental, and safety standards to promote responsible and sustainable operations throughout the value chain.

Yes, there has been a reform to articles 25, 27, and 28 regarding the legal nature of PEMEX. Previous the reform approved by the President of Mexico, PEMEX was a “state productive company,” and with the update, PEMEX transforms into a “state public company” in which it is intended to maintain the majority of resources in favor of the government.

A key challenge facing Mexico’s oil and gas industry is the ongoing constitutional and regulatory uncertainty stemming from recent amendments to the political constitution and the introduction of the “Plan Mexico” initiative. Under this plan, the government aims to consolidate control over oil and gas resources by prioritizing PEMEX, the state-owned energy company, which could significantly restrict private sector participation in upstream, midstream, and downstream activities. This shift threatens to reduce competition, deter foreign investment, and limit technological innovation, as private operators face increased regulatory hurdles and diminished opportunities to develop new projects.

Recent geopolitical tensions—such as global energy market volatility, trade disruptions, and shifting alliances—have further complicated Mexico’s energy outlook. These factors have heightened the importance of energy security, prompting the government to prioritize national control over strategic resources, but at the cost of reduced market flexibility and international collaboration. At the same time, evolving regulatory frameworks are expected to introduce new rules governing private sector involvement, restructuring PEMEX’s organizational model, and defining the terms under which private companies can collaborate with or support PEMEX-led projects.

Market developments, including fluctuating hydrocarbon prices and growing pressure to transition toward cleaner energy sources, have also influenced the industry’s trajectory. Mexico faces the dual challenge of maintaining production levels and attracting investment while balancing environmental commitments and adapting to global energy trends. These dynamics are likely to shape upcoming regulatory changes, which may further redefine the roles of state and private actors in the sector.

Yes, Mexico has implemented several policies and regulatory requirements reflecting the global trend toward a low-carbon energy transition, particularly in the oil and gas sector. These measures aim to reduce carbon emissions and promote cleaner energy technologies, aligning with international climate commitments such as the 2030 Agenda and the Paris Agreement.

Carbon Emission Reduction Requirements

• The Special Climate Change Programme 2021-2024 and the General Climate Change Law set clear goals for reducing greenhouse gas emissions, requiring oil and gas companies to adopt best practices that minimize fugitive emissions and comply with maximum emission limits established in official standards.
• Regulatory authorities at federal, state, and municipal levels are mandated to implement technically and economically viable mechanisms to promote emission reductions across all stages of hydrocarbon operations, including extraction, transportation, processing, and utilization.

Hydrogen Production and Infrastructure

• While there is no comprehensive national hydrogen strategy in Mexico, the Electric Industry Law recognizes hydrogen as a clean energy source, provided it meets minimum efficiency criteria (≥70%).
• Most hydrogen production in Mexico is currently for domestic use, with only a small fraction available for commercial sale. The development of a broader hydrogen market is envisioned to occur through coordination between the private sector and federal authorities, but there is no dedicated roadmap or large-scale infrastructure plan as of now.

Carbon Capture, Utilization, and Storage (CCUS)

• Mexico has initiated pilot projects for CCUS, including a pilot capture project at the Poza Rica thermoelectric plant and a CO2 injection pilot for enhanced oil recovery at the Brillante field, both in Veracruz.
• SENER has also produced a geological storage atlas identifying suitable zones for carbon capture across the country, based on soil and geological properties. However, significant progress in scaling up CCUS technology and infrastructure has been limited in recent years.

These regulatory and policy frameworks demonstrate Mexico’s commitment to aligning its oil and gas industry with global climate goals, but further development and investment are needed, especially in hydrogen and CCUS, to fully realize the potential of a low-carbon energy transition.