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Feature 092412

Monday, September 24, 2012

What the PRI Must Learn About the Mexican Energy Sector

  • occasionally issues "Public Policy Perspectives," in English or in Spanish, as a public service with the aim of inviting fresh discussion of matters of politics, law, policy, regulation and corporate governance.

In its 70 years in power, Mexico's Institutional Revolutionary Party (PRI) built a powerful, state-run economy in the energy sector, based on two constitutional principles: 1) economic development would be guided by the State; and 2) the oil and power industries, as such, would remain off-limits to the private investor who would seek a role as a producer and commercial actor in Mexico.

And the subsequent 12 years of rule by the PAN (National Action Party) did nothing to change this basic framework.

In the old days of the PRI, the CFE and LFC were self-regulated, with only a courtesy nod to the Energy Ministry (known by a sequence of acronyms: SEPAFIN, SEMIP and, since the 1990s, SENER). Given the prohibition on independent commercial actors, all retail prices were set by the State, either directly by committee, or by algorithm (as in the case of netback pricing for natural gas based on U.S. price benchmarks).

But there is much that is new to Mexico that has happened in the past two presidential terms: New energy sources include LNG and renewables, and, on the horizon, are shale gas and deep-water oil production. The Energy Reform of 2008 created a Hydrocarbons Commission (CNH) as a quasi-regulator for the upstream. Article 51 of the Pemex Administration Act of that year carved out an area for Pemex procurement outside of the traditional rules of the Public Works and Federal Procurement Acts of 2000.

Where before, in 2000, there had been only a drilling moratorium with the United States regarding oil exploration along a portion of the maritime border, by 2012 there was an agreement as to how to administer a cross-border oilfield. The list of what is the same and what is different goes on (Table 1).

In anticipation of the needs of a new team of presidential appointees in SENER, Pemex and CFE, over the course of 2012 we have prepared a series of reports on what the next government should be told? The reports are the synthesis of field consultations in Mexico and discussions in Houston; they offer a view-from-Houston perspective, which is likely to differ from views in Mexico.

To date we have addressed that question in relation to CRE, CNH and PMI.  Pending still are reports on the Pemex independent board members, PEP, PGPB, CFE and SENER.

• For the remainder of the initial commentary herein, link to "What the PRI must learn About the Energy Sector."


Mexico Energy Intelligence,, Baker & Associates, Energy Consultants, Houston, TX.  George Baker is the director of, a publishing and consulting firm based in Houston.  He can be reached via e-mail at  Reprinted with permission.

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