Houston, July 28, 2018 (MEI 10053)

This report began as a search in the Mexican constitution for anything that would prevent the development of a secondary market in upstream leases, that is, new investors who would bring additional capital, talent and jobs to portions of existing CNH leases. For this, the original leaseholder must be free to negotiate terms and be protected from liability in case something goes wrong.

Such a market is not presently possible in Mexico.

In the United States, such a market is driven by the legal divisibility of a lease by area or depth. Inside Mexico, the contract area in leases issued by the National Hydrocarbon Commission (CNH) are not divisible. The main impediment is a requirement in Art. 27 that the State have “direct dominion” over lands and waters. We urge consideration of unifying the minerals and hydrocarbon regimes based on the figures of concession and farm-out.
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Written by

Mexico Energy Intelligence

Baker & Associates offers niche-market business and policy intelligence related to Mexico's oil and gas, power and chemical industries. Over 1,000 reports have been issued in the last 20 years. Subject matter expert and publisher George Baker, who directs the firm, has carried out consulting assignments starting in the late 1970s at the height of the Oil Boom in Mexico. He brings bilingual and bicultural skill-sets to understanding and responding to challenges of business and public policy, coupled with a deep familiarity with the history and idiosyncrasies of the Mexican operating environment.