Mexico: An Energy & Natural Resources: Oil & Gas Overview
A New Legal Framework and the Path Forward
Mexico’s oil and gas sector has entered a new legal phase. After constitutional amendments in 2024 and a major package of secondary legislation published on 18 March 2025, Mexico has reshaped its hydrocarbons framework and increased the State’s control over policy and approvals.
The Sheinbaum administration has completed the most comprehensive overhaul since the 2013 reforms that first opened the upstream and downstream segments of the sector to private investment. The reforms created new institutional bodies, reclassified Pemex and CFE as Empresas Públicas del Estado (State Public Enterprises) and introduced a mixed-contract framework intended to attract private capital, while keeping the State, and especially Pemex, as the central actor.
This matters because Mexico’s approach is no longer best described as the post-2013 liberalisation model. Instead, it is a State-led model with defined channels for private capital and technical capacity, paired with more active supervision of permits and compliance. For foreign investors, a key question is how these domestic changes interact with international protections, particularly the United States–Mexico–Canada Agreement (USMCA).
To understand the shift, some context is essential. After the landmark 2013 energy reform, which opened exploration, extraction, and downstream activities to private and foreign participation, left-wing President Andrés Manuel López Obrador (AMLO) systematically rolled back many of those legal developments during his six-year term (2018–2024). AMLO halted new licensing rounds, strengthened Pemex’s monopoly position, and sought to undermine the independent energy regulators. His successor, President Claudia Sheinbaum, has continued the emphasis on State control but has taken a more structured approach, enacting a heavily regulated legal framework that, while reinforcing Pemex’s primacy, also creates defined channels for private participation.
A constitutional and legislative reset
By the end of 2024, Mexico enacted constitutional reforms affecting the organisation of its energy sector. Secondary legislation followed on 18 March 2025, when Mexico’s Federal Register (Diario Oficial de la Federación, or DOF) published a comprehensive package that replaced key elements of the 2014 hydrocarbons framework. Three new laws form the backbone of the current regime: the Hydrocarbons Sector Law (LSH), the Petróleos Mexicanos Law, and the National Energy Commission Law (LCNE), later supplemented by the Regulation of the LSH (3 October 2025).
Institutionally, the two independent energy regulators that had operated since the 2013–2014 reform, the Energy Regulatory Commission (CRE) and the National Hydrocarbons Commission (CNH), have been abolished, and their core regulatory functions partially transferred to the newly created National Energy Commission (CNE). The Ministry of Energy (SENER) now holds primary authority over upstream permitting (including exploration and extraction assignments) as well as refining and import/export activities. The CNE is an órgano administrativo desconcentrado (ie, part of and subordinate to the SENER but with technical and operational autonomy). It regulates the processing, transportation, storage, distribution, and sale of natural gas and petroleum products.
Operationally, permit holders are facing closer oversight and enforcement risk, including potential revocation where legal grounds exist. Marketing (ie, commercialisation) permits originally granted for 30-year terms are now subject to periodic review, and holders are required to demonstrate actual marketing activity. New applicants face shorter initial terms (including terms as short as two years) and stricter thresholds for financial capacity and compliance. The Regulation of the LSH also introduced a traceability requirement: the obligation to track hydrocarbons from origin to final destination across regulated activities. Open-access obligations are framed as obligations of the relevant permit holders under the applicable regime; in practice, how they apply can vary depending on the specific permit and the regulatory treatment of the asset.
Separately, the September 2024 judicial reform replaced the appointment and merit-based system for key federal judicial positions, including Supreme Court justices, with popular elections. The first round took place in June 2025.
The amparo, a constitutional remedy that allows private parties to challenge government acts violating their fundamental rights, has historically been the principal tool to contest unlawful regulatory action. Subsequent reforms to the Amparo Law have materially revised standing and suspension rules and, more broadly, tightened aspects of interim relief. The Supreme Court itself is, as mentioned above, transitioning to a bench selected through the new electoral process. The long-term implications for judicial independence in energy disputes remain to be seen, but practitioners should factor these developments into their risk assessments and dispute resolution strategies.
Current operating conditions
The LSH introduces two upstream modalities. Under own-development assignments (asignaciones para desarrollo propio), Pemex operates exclusively with service subcontractors compensated in cash. Under mixed-development assignments (asignaciones para desarrollo mixto), Pemex retains at least a 40% participation interest while partnering with private firms. In December 2025, Pemex awarded the first five mixed contracts to four domestic companies (Consorcio Petrolero 5M del Golfo, Geolis, Petrolera Miahuapan, and Cesigsa), covering onshore fields in the Tampico-Misantla, Burgos, Veracruz-Puebla, and Tabasco basins. As Reuters reported, the expected production uplift of approximately 70,000 barrels per day is modest against the target of 1.8 million barrels per day by 2030. No major international oil company participated.
According to Pemex’s SEC filings (Form 6-K, FY2025), total financial debt stood at USD85.2 billion as of 31 December 2025. Pemex has USD19.2 billion in debt payments due in 2026. In 2025, it received MXN395.3 billion (approximately USD22.0 billion) in government support and reported a MXN45.2 billion net loss (approximately USD2.5 billion). Pemex remains highly leveraged, raising questions about its capacity to fund its share of mixed-contract investment without continued support.
The USMCA and Mexico’s Energy Framework
For many foreign investors, the USMCA is one important source of treaty-based protection and a practical reference point for how Mexico’s domestic energy framework may interact with international commitments (alongside other applicable treaties, depending on investor nationality and structure).
The USMCA establishes two distinct tracks for investment disputes between US and Mexican investors. Under Annex 14-D, which applies to investments generally, an investor may submit a claim to arbitration only for breaches of national treatment, most-favoured-nation treatment, or direct expropriation (ie, a government “taking” akin to eminent domain), and only after first pursuing the claim in domestic courts for at least 30 months. Claims for indirect expropriation or violations of fair and equitable treatment are not available under this general track.
Annex 14-E, however, carves out a broader set of protections for investments in five “covered sectors”, one of which is oil and natural gas. For investors who hold a “covered government contract” (a written agreement between the investor and the host government), the full range of Chapter 14 protections applies, including fair and equitable treatment and protection against indirect expropriation. Critically, these investors are exempt from the requirement to exhaust domestic remedies before initiating arbitration.
This distinction matters enormously. Private operators holding exploration and production contracts, mixed contracts, or other government agreements in the oil and gas sector may access the full ISDS (Investor–State Dispute Settlement) mechanism under Annex 14-E without litigating first in Mexican courts. Given the concerns about judicial independence following the 2024 reform, this direct path to international arbitration is a significant protection.
In addition, Article 32.11 of the USMCA contains a most-favoured-nation (MFN) provision that some commentators characterise as having “ratchet”-like effects in certain scenarios. Mexico has committed to treating US investors no less favourably than investors under any other trade agreement, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Because Mexico incorporated its 2013 energy reforms into its CPTPP annexes, any rollback of investor protections could trigger obligations under both treaties, regardless of what Mexican domestic law now provides. This has been described as a “lock-in” mechanism for the 2013 reforms’ investment protections.
Outlook
Over the next year, the key question is how the mixed-contract framework works in practice. Whether international operators return will depend on contract competitiveness, Pemex’s ability to fund its share, and workable dispute resolution. Many technical standards (Normas Oficiales Mexicanas, or NOMs) and implementing rules are still pending.
In practice, permit defence and compliance will be a priority. The new framework subjects existing permits to heightened scrutiny, including periodic reviews of legacy 30-year marketing permits and significantly shorter terms for new applicants. For practitioners, the role here is fundamentally protective: identifying which client permits qualify as grandfathered rights under the LSH’s saving provisions, ensuring that the conditions for their continued validity are being met, and building the evidentiary record to defend them against non-renewal or revocation. The Regulation of the LSH recognises acquired rights of existing permit holders, but conditions their exercise on compliance with the new regime. That distinction, between the right itself and the conditions for its exercise, is where disputes will arise.
International protections also remain relevant. In light of the judicial reform and the evolving regulatory landscape, careful contractual structuring – including choice-of-law provisions, stabilisation clauses, and clearly defined dispute escalation mechanisms – has never been more important. Investors with covered government contracts in the oil and gas sector retain access to the full ISDS protections under USMCA Annex 14-E, which provides a meaningful safeguard.