2017628 ResourceGovernanceIndex

2017 RESOURCE GOVERNANCE INDEX

Mexico
OIL & GAS

To improve the competitiveness of its oil and gas sector, MEXICO (OIL & GAS): RGI SCORE
AND RANK
Mexico launched energy reforms in 2013 that restructured
1st
state agencies and opened the sector to private investment.
Following these reforms, Mexicos oil and gas sector scores 61
of 100 points in the 2017 Resource Governance Index,
17th
performing satisfactorily in value extraction and enabling
environment, but weakly on revenue management. Mexico
has the worlds 16th-largest oil reserves, with just under 10
billion barrels of oil.1 In addition, Mexico has gas reserves
estimated at 13 trillion cubic feet.2 Depletion of historical oil
blocks along with public investment constraints have led to a
signicant reduction in government revenues from the
petroleum sector, from 34 percent in 2009 to 21 percent in
2016.3 Oil and gas have fallen to six percent of total exports4
and energy imports have increased.

89th

http://www.resourcegovernanceindex.org/countryprofiles/MEX/oilgas 1/6
2017628 ResourceGovernanceIndex

MEXICO (OIL & GAS): RGI AND COMPONENT SCORES

VALUE REALIZATION 64 /100

COMPOSITE
REVENUE MANAGEMENT 54
61 /100
/100

ENABLING ENVIRONMENT 65 /100

Average

Index results summary

ENERGY REFORM HAS IMPROVED THE MEXICAN OIL AND GAS REGULATORS PERFORMANCE, BUT CONCERNS
OVER ENVIRONMENTAL AND SOCIAL ISSUES REMAIN

Mexico achieves its highest component scores in enabling environment and value realization.
The latter is driven by strong licensing rules in Mexicos revised legal framework under the
energy reform. Good practices adopted by Mexicos hydrocarbons regulator, the National
Hydrocarbons Commission (CNH), tend to match if not surpass legal obligations in contract
allocation and management. These include prequalication of bidders, disclosure of contract
award criteria and rules and disclosure of contracts. Performance in licensing could be
improved by complementing these good practices with systematic disclosure of benecial
owners of license applicants and disclosure of key public ocials assets. While some agencies
like CNH have taken steps in this direction, others have not yet followed.

http://www.resourcegovernanceindex.org/countryprofiles/MEX/oilgas 2/6
2017628 ResourceGovernanceIndex

MEXICO (OIL & GAS): SUBCOMPONENT SCORES

100 100
80 80
60 60
40 40
20 20
0 0
n

Ta ing
on

rp t
es

w nu g

fu .
s
lth s . .
c

en

nd
ig ev tin
io

en pa

ris
ow Loc ati
ns
at

em

ea e
ge
im
iz

x
ce

ve rce ud
ag
al

te

e
n e al
Li
re

b
an

r
l
e

es na
m
d
lu

n
l r tio
e
Va

nu

So u
na Na

o
re
ve
e-

Re
at
St

tio a
bn
Su

100
80
60
40
20
0
t

ty

ss

ity

aw

...

ta
en

io

nc
e bili

da
ne

al

fl

pt
nm

se
qu
e

o
a

n
ru
iv
nt

ab

pe
e
ro

ry
ct

r
l
u

Ru

co
vi

O
to

d
co
en

an
of
la
ac

te

gu
g

ty
ol
en
d
lin

Re

ili
r
an

nt
nm
ab

ab
Co
e
En

st
ic

er
Vo

al
ov

ic
G

lit
Po

Best index score

Civil society organizations and academics have raised concerns that the 2013 Mexican energy
reform and opening of the sector to private investors may lead to tension around socio-
environmental issues.5 The index results show weak performance in local impact (46 of 100),
reinforcing this concern. General environmental laws require preparation and publication of
environmental impact assessments. Public access to environmental impact assessments is
guaranteed by law, but restricted to physical visits to Mexicos Ministry of the Environment and
Natural Resources (SEMARNAT). The hydrocarbons law requires a preliminary social impact
survey by the Ministry of Energy as part of the environmental impact assessment but not that
companies, or the authorities, disclose them. In practice, SEMARNATs online library and gazette
are dicult to search and navigate, and did not include recent environmental and social impact
assessment at the time of the RGI research. Additionally, neither resettlement requirements nor
procedures for project closure and rehabilitation are specied in legislation.

MEXICO (OIL & GAS): RESOURCE GOVERNANCE TRENDS

http://www.resourcegovernanceindex.org/countryprofiles/MEX/oilgas 3/6
2017628 ResourceGovernanceIndex

MEXICO (OIL & GAS): RESOURCE GOVERNANCE TRENDS

Issue Score 2017 RGI Direction

Contract disclosure 100/100

Company payment disclosure 50/100

Revenues shared disclosure 100/100

Due to falling oil prices and lack of investment, the extractive sector contribution, mainly
comprising revenues from oil and gas, to overall government revenues has fallen from 34
percent in 20096to 21 percent in 2016.7 As a result, the Mexican government has grappled with
balancing the national budget. It has executed budget cuts that have hit infrastructure
investment and also limited the state-owned oil company, Petrleos Mexicanos (Pemex),
budget. Despite attempts to control spending, the Congress modied the annual expenditure
ceiling set in the Budget and Fiscal Responsibility Law in 2015 in order to accommodate
expenditure growth. The law does not set a legal requirement for external oversight of
compliance with the ceiling, but Mexicos supreme audit oce (ASF) and Center for Public
Finance Studies (CEFP), oversee compliance in practice. This results in weak performance in
scal rules and the overall national budgeting subcomponent. However, the Ministry of the
Treasury and Public Credit adequately publishes budgets and received revenues. Government
openness is also demonstrated by Mexicos 16th place in the Open Budget Index in 2015.

State-owned enterprise governance

INCREASED TRANSPARENCY WILL AID PEMEXS TRANSFORMATION INTO A COMPETITIVE COMPANY

Following the energy reform, the state-owned Pemex, has undergone restructuring. In the rst
round of license allocations following the energy reform, The National Hydrocarbons
Commission (CNH) allocated oil elds to Pemex without competition. Since then, the company
has entered into joint production agreements with private companies. Pemex reports regularly
on its nances, operations and payments to government and in this regard, operates like a
private company. It reports on sales volumes and values in the aggregate and discloses general
categories of customers, although without detailed names. The companys good performance in
the index contrasts with reported secrecy surrounding the relationship between Pemex and its
service providers and subcontractors. In previous years, there have been cases of corruption
and the ASF has detected irregularities in accounting; there are ongoing investigations of alleged
corruption in investments on Pemex reneries.

The states share of production from production sharing contracts is to be sold by a trading
company hired by CNH. Provisions for sale prices and disclosure of these revenues exist, but
contracts are not yet in the production phase and thus CNH has not yet reported on sales.

http://www.resourcegovernanceindex.org/countryprofiles/MEX/oilgas 4/6
2017628 ResourceGovernanceIndex

State Rank
Name of state-owned Revenue Score Rank
ownership (/52 oil & gas
enterprise (USD) (/100) (/74 SOEs)
level SOEs)

52,241 million
Petrleos Mexicanos 100% 74 10 7
(2016)

Sovereign wealth fund governance

MEXICO'S FUND PERFORMANCE COULD BE IMPROVED BY STRENGTHENING OVERSIGHT MECHANISMS

Mexicos sovereign wealth fund, the Budget Revenue Stabilization Fund (FEIP), receives
allocations from a general account funded by petroleum revenues. FEIP scores 45 of 100 and
ranks 17th among 34 funds assessed in the index. There are rules on deposits into and
withdrawals from the fund and these amounts are disclosed in Mexicos budget law. However,
annual reports are not audited or reviewed by the legislature. Extending the rules from the
recently created Mexican Petroleum Fund for Stabilization and Development to the FEIP,
including requesting detailed annual nancial reports and external auditing, would provide
more transparency and better oversight. To go even further, Mexico could institute more
detailed disclosures about its funds investments and require a mandatory parliamentary review
of the funds nancial reports.

Name of Sovereign Wealth Value of assets under management Score Rank

Fund (USD) (/100) (/34)

Oil Revenue Stabilization Fund 5,901 million (2016) 45 17

Governance performance across oil, gas and

mining sectors
THE OIL AND GAS SECTORS COMPLEX REVENUE SHARING SYSTEM BRINGS THE SECTORS OVERALL
PERFORMANCE DOWN

The performance of Mexicos two assessed sectors, oil and gas and minerals, show that the
mining sector is lagging somewhat in governance. Gaps emerge in several policy areas,
particularly transparency around licensing and revenue collection. Mexicos oil and gas sector is
a top performer in taxation, scoring 81 of 100, whereas the mining sector falls behind due to a
lack of detail in reporting revenues by company and payment type. This gap in reporting has
persisted over time. The Mexican government reports on oil and gas reserves, production and
exports on a project-by-project basis through the Energy Information System (SIE). The mining

http://www.resourcegovernanceindex.org/countryprofiles/MEX/oilgas 5/6
2017628 ResourceGovernanceIndex

sector has two online information platforms, the mining management system and the Mexican
geological survey, but neither includes information as complete as that found on SIE oil and gas
platform.

MEXICO: OIL & GAS VS. MINING SCORES

MINING OIL & GAS

Composite

100 80 60 40 20 0 20 40 60 80 100

Value realization

Licensing
Taxation
Local impact

State-owned enterprises

100 80 60 40 20 0 20 40 60 80 100

Revenue management

National budgeting
Subnational resource reve...

Sovereign wealth funds

100 80 60 40 20 0 20 40 60 80 100

What is the Resource Governance Index?

The 2017 RGI assesses how 81 resource-rich countries govern their oil, gas and mineral wealth.
The index composite score is made up of three components. Two measure key characteristics of
the extractives sector value realization and revenue management and a third captures the
broader context of governance the enabling environment. These three overarching
dimensions of governance consist of 14 subcomponents, which comprise 54 indicators
calculated by aggregating 133 questions and external data.

Independent researchers, overseen by NRGI, in each of the 81 countries completed a

questionnaire to gather primary data on value realization and revenue management. For the
third component, the RGI draws on external data from over 20 international organizations. The
assessment covers the period 2015-2016. For more information on the index, how it was
constructed, and references to external data, review theRGI Methodology.

Revisions have been made to scores in this assessment after the calculation of the index. See
RGI Methodology for more information.

http://www.resourcegovernanceindex.org/countryprofiles/MEX/oilgas 6/6