Background on Key Players and Relevant Context
In October 2024, Mexico’s President Claudia Sheinbaum signed a constitutional decree redefining state-owned energy companies Pemex and CFE as “public enterprises” to grant them more favorable treatment in Mexican energy markets. This reform, enacted alongside ten energy bills on March 18, 2025, restructures Mexico’s energy sector to benefit state enterprises while restricting private sector participation, including that of US companies.
US Department of State’s Perspective
The US Department of State (DOS) stated in its “Declaration on the Investment Climate in Mexico 2025” report that this favorable treatment for Pemex and CFE puts US companies at a disadvantage. The DOS claims that these changes largely reverse the energy sector liberalization of 2013, which, according to Sheinbaum, promoted harmful privatization and weakened the energy sector.
US Efforts to Address Investment Barriers
The DOS noted that US diplomatic and consular representations abroad work to identify investment barriers highlighted in Investment Climate Declarations. Addressing these barriers could create opportunities for US companies and stimulate their growth and expansion in the United States and among partner countries.
Impact on US Companies
As a result of the constitutional energy reform and subsequent legislation, Pemex now has preferential rights in exploring and extracting new oil and gas blocks. The new legal framework allows Pemex to partner with private companies when facing technical or financial limitations, such as deep-sea or heavy oil projects. However, Pemex must maintain at least 40% ownership in any new development.
Mexican Government Priorities
Under Sheinbaum’s administration, increasing Pemex’s oil, natural gas, and refined product production has been a priority for Mexico’s hydrocarbon sector. Additionally, plans have been developed to expand into new areas of work, including clean energy production through wind turbines and solar panels on oil platforms and lithium extraction from abandoned wells.
Significant Changes in Energy Reform
Among the most significant changes in the 2024 energy constitutional reform and implementing laws was the requirement that at least 54% of electricity dispatched to the grid over a year come from CFE state assets, leaving no more than 46% of the market for the private sector.
Government Oversight
Moving forward, Mexico’s Secretariat of Energy (SENER) will publish an annual binding energy plan to ensure CFE’s dominance in the electricity market and prevent private sector participation from exceeding 46% of Mexico’s dispatched electricity.
- Restriction on Import Permits: The Mexican government drastically reduced the issuance of refined product import permits to decrease competition for Pemex gasoline, diesel, and other products.
- Limiting Private Sector Participation: The government of then-President Andrés Manuel López Obrador sought to restrict private sector involvement in energy generation using regulatory procedures to halt or cancel private projects.
- Supreme Court Ruling: A 2024 ruling by Mexico’s Supreme Court clarified that the Center for National Energy Dispatch (CENACE) electricity dispatch decisions must be based on merit, not favoring CFE as López Obrador had proposed in his March 2021 plan to amend Mexico’s Electricity Industry Law.
