Mexico's Energy Industry: Midstream Regulations
By: Eduardo Canales
Midstream Regulations
On July 27, 2015, the Comision Reguladora de Energia (CRE) issued its proposed regulations for the pipeline transportation and storage of petroleum, LNG and petrochemicals (Midstream Regulations). They are currently under review and open for public comments at the Comision Federal de Mejora Regulatoria (“COFEMER”), a federal entity in charge of managing all procedural aspects of any federal regulatory proposals. Based on the timeline established in the Ley de Hidrocarburos enacted on December 2013, the Midstream Regulations must be published and enacted by August 11, 2015.
These Midstream Regulations’ main goals are (i) to provide open, nondiscriminatory access to existing transportation and storage infrastructure and (ii) to establish a legal framework that will promote the development of the midstream market. They will apply equally to all new or existing pipeline and storage operators, regardless whether they are State-Owned or private companies, foreign or Mexican. Overall, the Regulations provide the CRE vast authority to regulate the Mexican midstream sector to complete the transition from a state-owned and operated monopoly to a competitive and vibrant market-driven industry. Moreover, Petroleos Mexicanos is required to carry out a complete inventory of all its midstream assets and present market-driven Terms and Conditions for all its Transportation Systems and Storage Facilities within 90-days from the final publication of the Midstream Regulations.
The following summary presents some of the more relevant aspects of the Midstream Regulations including a clear distinction between transportation and storage, different midstream service modalities, cap on Carriers’ Reserved Capacity, open seasons, interconnectivity, expansion/extension, quality banks, guidelines for Carriers to prepare their Terms and Conditions, and their Rates/Tariffs schemes.
Services
Transportation
Scope: Includes (i) reception of petroleum and petrochemicals (P&P) at a designated entry point; (ii) their shipment through the pipelines; (iii) measurement and analysis of the quantity and quality of P&P; and (iv) delivery at a designated exit point.
Components: Transportation Systems may include “buffer facilities” like temporary storage or processing tanks as long as these buffer facilities are directly and exclusively necessary for the transportation of P&P. Buffer facilities cannot be used only for storage purposes and their capacity must reflect the “temporary” requirement.
Carriers:
- Must obtain a Transportation Permit from the CRE. The Permit shall include the Terms and Conditions (“TCPS”) for the Transportation System (similar to the Rules Tariff in the U.S.).
- Must limit their “corporate purpose” to the transportation of hydrocarbons.
- Must provide (i) Firm Commitment Services and (ii) Open Access Services.
- May only transport a limited quantity of their own P&P thorough their Transportation System.
- Must certify the Transportation System’s Capacity, Firm Commitment Capacity, Available Capacity and Open Access Capacity (if any).
Storage:
Scope: Includes (i) reception of P&P at a designated point for storage or depository purposes; (ii) measurement and analysis of the quantity and quality of P&P; (iii) any processing and mixing necessary to meet necessary quality standards; and (iv) delivery at a designated point.
Storage Providers:
- Must obtain a Storage Permit from the CRE. The Permit shall include TCPS for the Storage Facilities (similar to the Rules Tariff in the U.S.).
- Must limit their “corporate purpose” to the storage of hydrocarbons.
- Must provide (i) Firm Commitment Services and (ii) Open Access Services.
- May only store a limited quantity of their own P&P in their Storage Facilities.
- Must certify the Storage Facility’s Capacity, Firm Commitment Capacity, Available Capacity and Open Access Capacity (if any).