Talanza Energy Consulting

agosto, 2022

Considerations in the regulatory compliance oversight process

Companies that carry out hydrocarbon exploration and extraction (E&E) activities must comply with several obligations concentrated in 13 current regulations issued by the National Hydrocarbons Commission (CNH), in addition to their Entitlement, Contracts (CEE), Authorizations and Licenses of Use.

To efficiently supervise compliance with such regulations, CNH published the Supervision Guidelines (Guidelines)1, which standardize supervision procedures and actions, carried out directly or through accredited third parties. The Guidelines allow CNH to execute these activities jointly with other authorities with whom it may share information.

CNH Supervision Process

Recommendations

At Talanza we recommend the following actions to help regulated parties identify risks, mitigate them, and avoid possible sanctions:

Conclusion

The Guidelines are a critical regulation to ensure compliance with all CNH regulations. Not being prepared for supervision opens the possibility of sanctions2 such as the following:

  1. Failure to submit the information within the indicated term (fine between 7.5 to 150 thousand UMA3 = 36 to 720 thousand USD).
  2. Failure to comply with the Guidelines (fine between 15 to 450 thousand UMA = 72 to 2,100 thousand USD).

In addition, due to the supervision, other sanctions may be applied for non-compliance with specific regulations. Finally, we emphasize the relevance of these Guidelines lies in their cross-cutting application to the Applicable Regulations and that is an instrument that provides certainty regarding the supervision process.

1/ Official Gazette of the Federation, February 5, 2021.

2/ Pursuant to Article 85, Sections II and III of the Hydrocarbons Law.

3/ Unit of Measurement and Updating, daily reference value 96.22 MXN. Source: INEGI

Supervisions carried out

Even though CNH was already supervising its regulations, since the publication of the Guidelines, it has systematically prioritized and intensified supervision in activities such as: well drilling, metering of hydrocarbons, delivery, and use of information, follow-up on plans, work programs and budgets, obligations of the CEE or the Entitlements, and abandonment activities, among others.

During 2021, the CNH conducted 18 scheduled verification and inspection visits. It supervised 42 wells and 12 facilities, and initiated 7 PAS. (Source CNH Gazette No. 028, Jul-Sep 2021).

Derived from the supervision process, initiated in 2021 which included cabinet and field activities, CNH detected non-compliances in Ixachi Development Plan and its regulation, regarding gas flaring. In 2022 the PAS against Pemex continues, which could result in the application of a higher fine. (Source 42nd Extraordinary Session of the Governing Body, May 24, 2022).

Relevant definitions in the Guidelines:

Audit: Systematic process in which evidence is obtained and evaluated to determine whether the actions carried out by the regulated party were performed in accordance with the Applicable Regulations and in compliance with its Obligations.

Databases: Set of systematically stored data, about actions, procedures, activities, forms, documents, or any digital information, related to E&E.

Inspection: Act of authority whose purpose is directly verifying compliance with the Applicable Regulations through any mechanism.

Applicable Regulations: All laws, regulations, administrative provisions of a general nature, decrees, administrative orders, administrative resolutions, as well as other rules in force at the time when an obligation must be complied.

Obligations: All those duties to be performed by the regulated party following the provisions of the Applicable Regulations, the Contract, Entitlement, Authorization, and License of Use.

Supervision: The exercise of the CNH’s powers within the scope of its competence, with the purpose of verifying compliance with the Obligations.

Verification: Revision, which is carried out to review, corroborate and/or confirm compliance with the Obligations through the evaluation of objective evidence.

At Talanza, we offer regulatory auditing services, CNIH supervision, design of solutions for regulatory compliance, risk identification, and implementation of actions to avoid sanctions derived from supervision.

Como firma internacional con presencia en Estados Unidos, México y Colombia, encaminamos empresas del sector energético hacia un correcto cumplimiento normativo y asesoramos gobiernos a diseñar e implementar regulaciones que impulsen la sostenibilidad en el largo plazo para dicha industria.
Resultado de la sinergia entre líderes Canadienses y Mexicanos, en Eminent nos especializamos en la cuantificación, control y reducción de emisiones de metano. Como pioneros en México en aplicar la tecnología OGI, potenciamos la sostenibilidad de la industria petrolera internacional.