ByFelicity Bradstock– Mar 01, 2025, 12:00 PM CST
- Mexico’s new energy reform, approved by the Senate, allows for increased private sector investment in the energy sector, with the state maintaining a majority stake in partnerships.
- President Sheinbaum aims to expand renewable energy to 45 percent of total power generation by 2030, signaling a shift towards a more diversified energy mix.
- Despite opening the door to private investment, recent constitutional reforms have raised concerns among private companies about regulatory changes and government control over key energy agencies.
After six years of energy nationalisation under former President Andrés Manuel López Obrador (AMLO), the new President Claudia Sheinbaum administration is expected to once again welcome more private companies into Mexico’s energy sector. While Sheinbaum plans to maintain some of AMLO’s nationalisation policies, she is expected to allow greater participation from foreign companies in both fossil fuels and renewables, to diversify the country’s energy mix and boost energy security.
President Sheinbaum came into power in Mexico in October as the leader of the Morena Party, which was voted in for a second term. In November, the government launched a new National Electricity Strategy, part of the National Energy Plan 2025-2030, which established rules to allow private companies to add up to an additional 9.6 GW from renewable sources by 2030. The new framework permits 46 percent of electricity generation to come from private investments.
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At the end of January, Sheinbaum sent a draft energy reform to Congress, which aims to accelerate the energy transition and improve access to energy, partially by allowing greater private sector investment in the sector. The Senate approved the reform on the 26th of February with 85 votes in favour, 39 against, and one abstention.
The law allows for new partnerships between private companies and Mexico’s state-owned utility Federal Electricity Commission (CFE) and national oil company Pemex, but only when the state holds a majority stake. The legislation states that at least 54% of all electricity supplied to the national grid must be provided by the CFE. The state-owned firm currently generates 57% of Mexico’s electricity. It is uncertain whether electricity produced by privately owned plants and sold to CFE will count towards CFE’s share or that of the private sector.
In terms of oil and gas, under the law, Pemex will no longer need to undergo a bidding process overseen by an independent regulator to migrate existing agreements to mixed participation contracts. It is worth noting that Pemex remains one of the most indebted oil companies in the world, with a debt of around $5.1 billion. The state-owned oil company has also had various safety failures in recent years. Pemex’s poor financial situation and safety concerns have led to a distrust of the company at the international level, which could make it difficult to foster public-private relationships.
Through the new legislation, Sheinbaum aims to ensure Mexico’s energy sovereignty and move away from former President Peña Nieto’s 2013 privatisation reform. However, she appears to be far more open to private participation in the energy sector than her predecessor AMLO, who sought to close Mexico’s energy sector off almost entirely from foreign investment. The legislation is expected to provide clear rules for private companies seeking to operate in the market.
Fluvio Ruiz Alarcón, a former Pemex board member stated, “The overall design is positive.” Ruiz added, “It is still early days, but they are on the right track. They will give more coherence to the sector by aligning legislation with institutional design and with energy policy. It gives more certainty and clarity to investors, which wasn’t there before.”
While Sheinbaum has generally continued on the same track as AMLO in terms of energy reform, the president has been more favourable about renewable energy. AMLO focused primarily on the expansion of Mexico’s oil and gas industry to ensure the country’s energy security, greatly overlooking the vast renewable energy potential. By contrast, Sheinbaum said in January that the government aimed to add 27 GW of power generation capacity between 2025 to 2030, with a large proportion coming from renewable energy sources. Sheinbaum vowed to expand renewable energy to 45 percent of total power generation by 2030, compared to around 24 percent in 2022.
While the new reform shows promise for greater private sector participation, some government decisions in recent months have left private investors uncertain about their role in the sector. In October, Sheinbaum signed a constitutional reform to alter the legal status of the CFE and Pemex, thereby making them “public companies” rather than “productive state companies”. This means that third parties will not be permitted to supply power transmission and distribution services.
Then, in November, Mexico’s Senate approved a constitutional reform dissolving the Energy Regulatory Commission (CRE) and National Hydrocarbons Commission (CNH), combining them within the government Energy Ministry (Sener). This will lead to seven autonomous agencies being dissolved in 2025. Private companies are concerned about what that means for them when partnering on energy projects, as they must work with government-controlled agencies rather than autonomous industry regulators going forward.
Mexico’s President Sheinbaum has begun to transform the country’s energy sector since coming into office in October, with new reforms opening the doors to renewable energy production and greater privatisation. While the role of foreign companies in Mexico is still expected to be limited, as state actors continue to dominate the country’s energy sector, the new law paves the way for more public-private partnerships and supports greater energy diversification.
By Felicity Bradstock for Oilprice.com
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