Country
Assessment
Article 44 of the Hydrocarbons Law, 2014 , requires oil and gas producers to seek approval from the CNH for exploration and development plans. The CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons require the treatment of associated natural gas, including flaring, to be specified in exploration and development plans: Article 5 of the Technical Provisions states that the operator may utilize associated natural gas for the needs of its operation (e.g., as fuel for turbines, or to aid pneumatic pumping or other lifting systems that require gas injection). Article 10 requires the operator to submit to the CNH a program to use associated gas as part of the development plan for each assignment and contract area. Article 22 requires information on flaring facilities and volumes to be included along with a flaring program. Annex II of the provisions provides detailed instructions on all these requirements. Operators submit all information to CNH via the Programa de Aprovechamiento de Gas Natural Asociado (PAGNA). The programs must include month-by-month forecasts for associated gas use during the first three years and annual forecasts thereafter. The CNH website provides examples of development plans that include approved programs using associated gas. One example is contract CNH-M4-ÉBANO/2018. The ASEA Guidelines for the Prevention and Comprehensive Control of Methane Emissions from the Hydrocarbons Sector require a Program for the Prevention and Integral Control of Methane Emissions (Programa para la Prevención y el Control Integral de las Emisiones de Metano, or PPCIEM) for all new and existing facilities. The first three annexes of the Guidelines provide templates for the various requirements of a PPCIEM.
Article 6 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons allows flaring only when technical and economic analysis shows that it is the only viable option. Article 11 requires operators to conduct a technical and economic analysis to develop alternatives for the use of associated gas, to be carried out in line with the targets established and the criteria detailed in Articles 4 and 5 of the Technical Provisions. The analysis should consider the composition and volume of the gas; the proximity of the processing, transport, and distribution infrastructure; the value of the gas; and the necessary investments to utilize it. The guidelines contain case-by-case evaluation elements. The regulator and operator are expected to work together to find the best solution for a particular field. If operators wish to modify their associated natural gas utilization program, their proposal to do so needs to be supplemented with an update of the technical and economic analysis, justifying the actions, alternatives, and where appropriate, a new target to be adopted. Article 7 requires operators to maintain the financial resources to cover any damages caused by flaring. The allowed amounts of flaring are determined according to the Hydrocarbons Law, 2014 , or the project-related contracts. The CNH website provides examples of implementation experience. Two examples are the Tierra Blanca and the Muro fields.
Article 16 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons requires the operator to follow the standards established in the CNH Technical Guidelines in Hydrocarbon Measurement, 2015, for measuring and reporting the volumes of the associated natural gas used. These guidelines were subsequently updated in February 2016, August 2016, December 2017, and February 2021. Articles 23 and 24 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons require the operator to provide quarterly reporting of progress in implementing the associated gas use program. The report should follow the CNH format outline and include the volumes of associated gas used, justification for any deviations from the gas use program, and a summary of unscheduled events that had resulted in gas flaring. Article 25 requires the CNH to review the quarterly reports within 15 business days of receipt and authorizes the CNH to request additional information from the operator. The ASEA Guidelines for the Prevention and Comprehensive Control of Methane Emissions from the Hydrocarbons Sector require operators to identify the source and quantify the volume of methane emissions. The information must be reported annually.
Article 7 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons states that flaring of associated gas, a nonrenewable resource, outside of the approved utilization program would cause an economic loss to the nation and that operators must have the necessary financial resources to cover such losses. This compensation is in addition to any penalties that may be imposed under other laws and regulations. Article 34 provides that, based on monitoring and supervision, the CNH may initiate a sanctioning administrative procedure to determine whether there was noncompliance with the technical provisions. Article 35 provides that violations of these provisions will be sanctioned in accordance with Articles 85–87 of the Hydrocarbons Law, 2014 , or specific contracts. According to Article 85 of the Hydrocarbons Law, 2014, the seriousness of the violation will be considered when determining a sanction. SENER sanctions noncompliance with the terms and conditions established in the assignments and contracts, with a fine of 15,000–75,000 times the minimum wage. Operators failing to comply with an exploration plan or production development plan will be penalized with a fine of 150,000–3 million times the minimum wage. In the case of oil and gas development and production activities that do not have a measurement system approved by the CNH, a fine of three–six million times the minimum wage may be levied. The application of sanctions and payments are regulated by the Federal Law of Administrative Procedure, 2018. Article 25 of the ASEA Law, 2014 , also provides for penalties up to 3 million times the minimum wage depending on the severity of the violation of the environmental mandates.
No specific nonmonetary penalties for flaring or venting were found. However, Article 85 of the Hydrocarbons Law, 2014 , states that within the scope of their oversight, SENER and the CNH should sanction serious or repeated violations of the Hydrocarbon Law with suspension or revocation of contracts or removal or disqualification of the personnel who provided their services to an operator, assignee, or contractor. Article 70 of the Federal Law of Administrative Procedure, 2018 , states that administrative sanctions should be provided in the respective laws and may consist of the following: warning fine additional fine for each day the violation persists detention for up to 36 hours temporary or permanent closure, partial or total closure of facilities others indicated by the laws or regulations. Article 99 of the Regulation of Hydrocarbons Law, 2014, details the procedures and timelines the administrative authorities must follow when imposing fines. Sanctions should be applied without prejudice to the civil, criminal, or administrative liability that results from the application of sanctions by other legal systems and, where appropriate, from the revocation of the assignment, permit, or authorization, or the termination of the contract. According to Article 25 of the ASEA Law, 2014 , ASEA can suspend or revoke licenses, authorizations, permits, or registrations in case of repeat or serious violations or nonpayment of financial penalties. However, ASEA reportedly favors a “corrective enforcement” scheme under which operators can find a solution to achieve the required reduction.
Article 4 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons requires operators to conserve associated natural gas and sets technical standards. SEMARNAT and ASEA have technical and environmental standards regarding emissions from oil and gas operations. Articles 71–85 of the ASEA Guidelines for the Prevention and Comprehensive Control of Methane Emissions from the Hydrocarbons Sector cover emissions control measures, such as requirements regarding fugitive emission detection systems and equipment, including the following: quarterly comprehensive leak-detection-and-repair programs replacement or installation of zero-emitting venting equipment prioritization of capture technologies over flaring to reduce emissions from tanks and other equipment standards for monitoring and reporting.
No evidence regarding fiscal and other incentives for emission reductions could be found in the sources consulted. In fact, there is a disincentive to capture associated gas, because the value of associated gas calculated for royalty purposes is higher than the value of nonassociated gas until the contractual price of natural gas reaches a certain level. The formulas for calculating the value of associated and nonassociated gas can be found in Article 24 of the Hydrocarbon Income Law, 2014 , which sets US$5.5 per mmBtu as the natural gas price above which associated and nonassociated gas attain the same royalty rates.
Mexico is working on an Emissions Trading System (Sistema de Comercio de Emisiones) Test Program. In 2018, an amendment to the General Law on Climate Change (under SEMARNAT) established an emissions trading system that promotes emission reductions at the lowest possible cost. A three-year trial program began January 1, 2020. Operators of the installations associated with the development, production, transport, and distribution of hydrocarbons can participate in the trading scheme. Only operators of those facilities with annual emissions of 100,000 tonnes of carbon dioxide or more can participate in the trial program.
The Pemex Law, 2008, created a new legal framework for the national oil company. At the same time, responsibility for upstream regulation was shifted to the CNH, and the functions of SENER and the Energy Regulatory Commission were strengthened. In 2013, amendments to Articles 25, 27, and 28 of the Constitution, 1917, were adopted. They allowed for the participation of private firms in activities previously reserved for the state. In 2014, additional transitory articles were signed into law outlining the main aspects of the secondary legislation needed to implement the different sector legislative changes. The Hydrocarbons Law, 2014 , updated in 2021, reemphasizes the role of Pemex and empowers SENER and regulatory agencies to suspend activities. Pemex or other state entities may be allowed to take over suspended activities. The 2014 secondary legislation created two bodies—the National Center for Control of Natural Gas (Centro Nacional de Control del Gas Natural) and the National Energy Control Center (Centro Nacional de Control de Energía)—to operate, monitor, manage, and coordinate the gas and electricity networks. The National Center for Control of Natural Gas was tasked with managing the old Pemex gas pipeline network. Pemex withdrew from natural gas transport, and private investors carried out a rapid expansion of the gas pipeline network. The pipeline transport capacity was tendered to interested shippers bidding through the open season process, and open access to the natural gas network was established. Interconnections with the US pipeline system were strengthened.
The Associated Gas Re-injection (Continued Flaring of Gas) Regulations, 1984, set criteria for when flaring is allowed. No evidence of enforcement is available in the sources consulted. The National Effluent Limitation Regulation, 1991, issued by the Federal Environmental Protection Agency, placed limits on the concentrations of hydrocarbons in atmospheric emissions. According to Section 12.3 of the Emissions Regulations , the regulator will establish biannually the gas flaring threshold for licensees, lessees, and facilities.