Injunction granted by Federal Court against Mexico’s governmental strategy in the natural gas sector

On July 17, 2022, the Second Administrative District Court, Specialized in Economic Competition, Broadcasting and Telecommunication matters, issued a permanent injunction relief (the "Injunction") in favor of the companies that filed amparo against the strategy for the natural gas transportation capacity and supply optimization issued by the Ministry of Energy (Secretaría de Energía) ("SENER") on June 14, 2022.

The Injunction mandates the relevant authorities to refrain from enforcing the Strategy to the users of the Integrated National Natural Gas Transportation and Storage System (Sistema de Transporte y Almacenamiento Nacional Integrado de Gas Natural) ("SISTRANGAS") which is managed by the Mexico's instrumentality National Natural Gas Center (Centro Nacional de Control de Gas Natural) ("CENAGAS").

Some of the relevant features of the Strategy issued by SENER, include:

• It encourages the Energy Regulatory Commission (Comisión Reguladora de Energía) ("CRE") to amend the Terms and Conditions for the Provision of Services of the SISTRANGAS Independent Management Permit number G/21317/GES/2018 in order to reflect the public policy criteria of the Strategy.


• Requests to the CENAGAS that in order to provide natural gas transportation services in those import points at SISTRANGAS where a state productive company (or its subsidiaries or affiliates) have reserved capacity in the upstream transportation systems of such points, the following is met:

• To submit evidence by the users, within a 60 calendar days term, that the natural gas supply is received from the Federal Electricity Commission (Comision Federal de Electricidad) ("CFE"), Pemex or any of their subsidiaries or affiliates. Preference is given to those points where CFE, subsidiaries or affiliates have reserved capacity in the transportation systems.


• That the provision of transportation service in any of its modalities in SISTRANGAS is guaranteed by contracting transportation capacity in upstream pipelines with CFE or Pemex or any of its affiliates, respecting the priority in favor of CFE.


• Authorize the transportation service requests subject to prior compliance by the users or interested parties with the above items.

In light of the Injunction , SENER has publicly expressed its disagreement, arguing that the control and planning of hydrocarbons matters are of exclusive authority and jurisdiction of the Federal Government in charge of SENER. Thus, industry regulators such as CENAGAS and/or CRE must observe and coordinate the criteria issued by SENER as part of the energy policy. Likewise, it points out that in its opinion, the Injunction is illegal, for which reason it will challenge the resolution issued by the Federal Court.

On July 15, 2022 the Federal Economic Competition Commission (Comisión Federal de Competencia Económica) ("COFECE") issued an opinion against the Strategy, explaining the implications of the Strategy vis a vis the competition conditions in the natural gas market and the applicable law. COFECE's considerations are as follows:

1. Limited capacity and efficient use of infrastructure

The open access obligations and unduly discrimination prohibition established in the Hydrocarbons Law are aimed at allowing competition. Therefore, CENAGAS' compliance with the Strategy implies that the limited transportation capacity of SISTRANGAS is not managed in market conditions.

2. Establishes exclusive advantages

The Strategy imposes restrictions on users by establishing exclusive advantages for state-owned productive enterprises, their subsidiaries and/or affiliates since it does not allow users to contract with the suppliers of their preference. Moreover, the Strategy requires that users are obliged to use the services of state-owned productive entities, their subsidiaries and/or affiliates. This barrier hinders investment and participation in the natural gas market, by strengthening state-owned productive entities companies in detriment of private investors in the industry. This combination results in a detrimental impact in the natural gas supply conditions and unduly allows state-owned productive entities to fix prices and unduly displace their private competitors in a market that is legally open to competition.

3. Other effects

SISTRANGAS users could be affected by the scenario proposed in the Strategy, since import control would be held by the state productive entities, which could result in an advantage over private users, as well as price discrimination. Another effect is the generation of distortions to the efficient operation of the electricity market, since natural gas is an essential input for the production of electricity in the country. In this sense, the energy produced by the CFE would benefit from having lower costs than its competitors in the sector, which translates into damaging the competition process among electricity generators.

COFECE recommended not to implement the Strategy by SENER, CRE and, CENAGAS, as well as to observe the free competition, open access, and not unduly discriminatory principles governing the operation of SISTRANGAS, which are embedded in the legal framework in effect as of today.

For further information, please contact:

César Fernández | International Partner
Norton Rose Fulbright US MX, S.C.
Tel +52 55 3000 0604 | Cel +52 1 55 5438 2601

Special thanks to Associate Sandra Bernal de Loera (Mexico City) for assisting in the preparation of this content.