MEXICO: GENERAL METADATA
Data documentation
General notes
The fiscal year in Mexico coincides with the calendar year.
Producer Support Estimate
Following the constitutional reform of the energy sector, the Mexican government signed a new fiscal regime for the oil and gas sector into law that took effect on January 2015. The new regime is two-fold collecting a corporate income tax of 30% plus a set of taxes and fees varying depending on whether extraction and exploration is conducted as: (a) assignments (asignaciones) which are only granted to Pemex or a “state productive company” or (b) contracts signed with Pemex, either in association with private entities or with private entities entirely on their own.
Under the assignment regime, state-owned companies pay three different types of federal fees: (i) a shared profit fee, (ii) a hydrocarbons extraction fee and (iii) a hydrocarbon exploration fee. The shared profit fee applies to the value of extracted hydrocarbons during the corresponding fiscal year (including consumption of these by the assignment holder, spillage and flaring) minus deductions. The fee initially amounted to 70% in FY2015 and will be lowered to 65% by FY2019. Next, the hydrocarbons extraction fee is determined in a similar way to the royalty payments charged under the contractual regime with fees varying on a sliding scale depending on the type of hydrocarbon extracted and the prevailing international price. Finally, the hydrocarbon exploration fee, also known as surface rental fee, will be charged on a monthly basis depending on the surface area being explored. The fee is aimed at incentivising companies to fulfil their exploration plans within a specified time frame.
With respect to the contractual regime, there will be four different contract types: licence, production sharing, profit sharing and service contracts. Similar to taxes, fees and royalties will apply to different contract types, except in the case of service contracts where contracted companies do not receive any profits from the hydrocarbon extraction project:

Licence contracts: contract signing bonus, royalties, exploration phase tax, and a compensation on the value of hydrocarbons

Profit sharing and production sharing contracts: royalties, exploration phase tax and a compensation on net operation profit

Royalty rates are determined on a sliding scale basis varying according to the type of field, its production level and the prevailing international price of oil and gas (similar to the hydrocarbon extraction fee under the assignment regime). Under this approach, royalties will go up if production or prices move above a certain threshold; the exact amount will only be published in the signed contract. Additionally, companies will also have to pay an exploration phase tax whose value is determined similar to the hydrocarbon exploration fee under the assignment regime. Profit sharing and product sharing contract will pay a compensation based on their net operational profits (the value of hydrocarbons extracted minus royalties and cost deductions) as defined in the signed contract. Licensors, on the other hand, will make payments based on the value of hydrocarbons they produce.

In order to encourage oil and gas production, the new regime provides a royalty discount for natural gas not associated to crude production. Under this regime, coast deductions will usually be capped at USD 6.10 for each barrel of oil produced at 12.5% of oil revenues for onshore and shallow water assignments. Furthermore, a cap of 60% will be observed on oil revenues from deep water production and the Chicontepe field, currently operated by Pemex. There will also be a cost deduction cap of 80% for revenues in the production of gas. Compared with the previous fiscal regime, foreign firms were only allowed to operate under service contracts monopolized by Pemex and in addition pay a corporate income tax plus 10 additional taxes. Among the changes, the new system will be much simpler allowing profits to be shared with foreign oil and gas companies.

Under this regime, the Mexican government estimates that Pemex can save 36% in tax and royalty payments annually, totalling to about MXN 90 billion. Furthermore, the government will assume one-third of Pemex’s social security contribution liabilities for its 15 000 employees, worth around USD 127 billion. Pemex and the Union of Petroleum workers have come to an agreement to modify the pension scheme by raising the retirement age from 55 to 60 years for employees with less than 15 years of seniority and to transfer the currently defined benefit plan to a defined contribution type on an individual basis.