MEXICO: An Introduction to Energy & Natural Resources

Mexico’s Energy Transition: An Evolving State-Oriented Model

Mexico’s approach to the energy transition is marked by a deliberate shift in institutional design and policy priorities. While the global trend favours market liberalisation and decentralisation, Mexico has opted for a distinct model in which public institutions play a leading role in planning and execution. Recent constitutional and legislative reforms have redefined the sector. The 2024 constitutional amendment and the 2025 Hydrocarbons and Electricity Sector Law reaffirm the state’s pre-eminence in energy matters, introducing a model that combines sovereign planning with limited, co-ordinated participation by private actors.

This policy orientation reflects a broader institutional realignment within Mexico’s energy sector. The initial phase of the reform prioritised state leadership in planning and operations, reinforced the role of Mexican Petroleum (Petróleos Mexicanos; PEMEX) and the Federal Electricity Commission (Comisión Federal de Electricidad; CFE), and involved regulatory restructuring, the suspension of bidding rounds and a more limited role for private actors. In its current phase, the model maintains its foundational design but has evolved in terms of its operational approach. The framework now seeks to integrate private participation under structured rules of engagement, where public institutions retain a guiding role and private investment is incorporated when aligned with national development objectives.

This evolution does not constitute a shift in direction but rather a formalisation of a hybrid model – one in which public entities define the trajectory and scope of energy development, while private capital and technical expertise contribute as complementary tools to achieve long-term goals. The emphasis has moved towards strategic co-ordination and planned collaboration across the electricity, natural gas and clean energy segments.

Legal and institutional realignment

Under the 2024–25 reforms, PEMEX and CFE are no longer classified as “productive” enterprises subject to market logic. They are now defined as public state-owned entities entrusted with implementing national energy policy. Their mandate is strategic rather than commercial, with their operations being embedded in long-term planning led by the Ministry of Energy (Secretaría de Energía; SENER).

The reform also dissolved the Energy Regulatory Commission (Comisión Reguladora de Energía; CRE) and the National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos; CNH), transferring their functions to a new decentralised body – the National Energy Commission (Comisión Nacional de Energía; CNE) – under the direct authority of SENER. This institutional realignment centralises oversight and consolidates control within the federal executive branch.

Electricity sector

Generation

The 2025 Electric Sector Law (Ley del Sector Eléctrico; LESE) establishes a 54–46% split in generation capacity: the CFE must maintain control over at least 54% of national generation, with the remaining capacity available to private developers under co-ordinated mechanisms. This structure preserves existing contracts but redefines the terms of future investment: all new developments must align with SENER’s planning instruments and may no longer be allocated through open competition.

In 2023, national generation reached 351,695 GWh, of which 24.3% came from clean sources. The government has set a target of 21.5% clean energy by 2030 – below earlier goals but accompanied by new infrastructure. In April 2025, authorities announced 76 new generation projects totalling 29,074 MW, of which 22,674 MW (78%) will be developed by CFE.

Transmission and distribution are being expanded at an unprecedented rate. Between 2025 and 2030, 158 transmission projects are planned, representing 15,720 MW of additional capacity and MXN124.5 billion in investment. Of these, 34 are completed, and 33 are under construction. For 2025, 77 new projects are expected to be tendered.

In terms of distribution, the 2030 target includes 97 new substations, 95 upgrades, nearly 6,900 modernisation projects and over 4 million electrification works. For 2025, the government has allocated MXN23.4 billion to expand distribution capacity by 3,045 MW.

Decentralisation measures

The permit-exempt generation threshold has increased from 0.5 MW to 0.7 MW, reducing regulatory burdens for small-scale projects. This change supports decentralised supply and reflects the government’s intention to desaturate the national grid.

Just before its closure, the CRE issued administrative rules for energy storage, formally recognising it as a new permittable activity; storage is also recognised as a regulated activity under the LESE. These provisions define the types of storage systems allowed – linked to generation or consumption centres, or being independent – and seek to reduce intermittency and improve reliability, particularly for renewable sources.

Oil and gas sector

Upstream

Private investment in upstream oil and gas continues under the legal framework established by the 2013 energy reform. Of the 111 contracts awarded between 2015 and 2018, 108 remain active as of 2025. These contracts produced 181,750 barrels of oil per day in March 2025, while PEMEX’s assigned areas contributed 1,251,140 barrels. Natural gas output totalled 3.65225 billion cubic feet per day, with less than 5% from private contracts.

Despite the ongoing operation of these contracts, no new bidding rounds have been announced since 2018. Under the new Hydrocarbons Sector Law, upstream development is structured through three mechanisms:

• exclusive PEMEX assignments;
• mixed-development assignments with at least 40% PEMEX participation; and
• exceptional exploration and production contracts.

All modalities are subject to national planning and require SENER’s approval. With the CNH being eliminated, SENER is now the direct counterparty in contracts, centralising decision-making and aligning project design with public policy goals.

PEMEX’s 2025–30 Work Plan includes 269 exploratory wells, over 38,000 km² of seismic studies and MXN220 billion in exploration investment. The plan aims to identify 2 billion barrels in new reserves and ensure long-term supply stability.

Midstream and downstream

Public infrastructure remains dominant. CENAGAS operates the National Natural Gas Pipeline System (Sistema de Transporte y Almacenamiento Nacional Integrado de Gas Natural; SISTRANGAS), covering 87% of the country’s high-pressure network. PEMEX Logística controls over 8,900 km of pipelines and 73 storage terminals. In terms of liquefied natural gas (LNG), all three regasification terminals (Altamira, Manzanillo and Ensenada) remain under private operation.

Mexico consumes around 8 billion cubic feet of natural gas daily, with 70% being imported from the United States. In 2024, the country exported over 0.5 billion cubic meters of LNG from Altamira’s floating unit.

In terms of refining, PEMEX maintains 100% of national capacity (1.98 million barrels per day) through its six domestic plants, the new Olmeca refinery and the Deer Park facility in Texas. Despite recent upgrades, Mexico still imports over 60% of its gasoline and more than 50% of its diesel.

The new law removes open-access obligations for PEMEX but maintains them for private operators. This asymmetry, combined with stricter permit controls and slower approvals, has raised concerns among market participants.

Conclusion

Mexico’s evolving energy model represents a deliberate departure from liberalised market frameworks towards a state-led, strategically controlled approach. Rather than disbanding private participation altogether, the government has formalised a hybrid system in which public institutions retain control, while private actors operate under policy-aligned conditions. This model reflects greater – and politically and historically imperative – energy sovereignty, institutional centralisation and infrastructure expansion but also faces important tests in terms of regulatory clarity, investment stability, environmental responsibility and international compatibility. As the model matures, its long-term viability will depend on whether it can balance sovereign planning with the technical, financial and operational demands of a rapidly changing energy landscape.