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On August 3, 2020, the National Hydrocarbons Commission (the "CNH") published through the Federal Official Gazette, the resolution whereby the CNH establishes several measures in order to promote the development of petroleum activities (the "Resolution")1 approved at the Extraordinary Session of the Board of Commissioners of the CNH dated July 16, 2020.
The purpose of this Resolution is to promote the development of petroleum activities and to grant legal certainty in order for the Operators to perform the petroleum activities efficiently and continuously in accordance with the plans and programs approved by the CNH. Among other aspects, the following items were established:
- CNH acknowledged the existence of a force majeure event due to the health emergency caused by COVID-19; therefore, by virtue of the Resolution, the Exploration and Evaluation Periods, the Development for Extraction periods related to a Minimum Work Program, of the Hydrocarbon Exploration and Extraction Contracts currently in force, and the effectiveness of the Transition Programs, are suspended from March 23 to July 24, 2020 (the "Suspension Period")2, as follows:
a) The Suspension Period shall not be considered as a modification of the effectiveness of the relevant contracts or any of its clauses, neither as an extension of the periods and programs.
b) Except for the obligations related to compliance of the Minimum Work Programs, the Operators shall comply with the rest of their obligations under de relevant contracts, including without limitation, the payment of the considerations set forth in the Hydrocarbon Income Law, as well as complying with their relevant tax obligations.
c) Notwithstanding the suspensive nature of the aforementioned periods and programs, the Operators may continue performing the petroleum activities, during the Suspension Period.
d) The Operators shall submit to the CNH an update to the schedule of their petroleum activities, within 20 business days following the conclusion of the Suspension Period.
- NH has requested the Operators to preserve the effectiveness of the Performance Guarantees, pursuant to the provisions set forth in the relevant contracts, considering that:(i) the Performance Guarantees that expire during the Suspension Period shall be submitted to the CNH within 20 business days prior to its maturity date; and (ii) the Performance Guarantees that do not expire during the Suspension Period, shall be submitted again with an effectiveness that contemplates the suspension of the Exploration, Evaluation and Development Periods, within 20 business days following the conclusion of the Suspension Period.
- CNH decided to provide technical advice to the Ministry of Energy to extend the Exploration and Evaluation Periods, as well as the period set forth for the compliance of the Minimum Work Commitment in the Extraction activities of the Allocations for a term equal to the Suspension Period, or for the term that is considered necessary, pursuant to the following:
a) The effectiveness of the Allocation Titles will not be modified, neither the rest of the terms and conditions established therein; and,
b) The Assignee (Petroleos Mexicanos) may continue performing the petroleum activities, under the terms of the plans or programs approved by CNH.
In the event that the Ministry of Energy determines the extension of the period, the Assignee shall submit to CNH an update to the schedule of its petroleum activities within 20 business days after such determination.
- CNH decided that the deviations in the Evaluation and Pilot Programs, as well as in the Exploration and Development Plans for Extraction established in certain provisions of the Guidelines that govern the Exploration and Development Plans for the Extraction of Hydrocarbons, and that have occurred during the Suspension Period , will not be considered as modification events to such plans or programs.
- CNH decided to terminate the procedures related to Force Majeure notifications, as well as the extension requests to the exploration or evaluation periods, since the CNH considers that the Resolution satisfies such requests (lists of the Operators that submitted these notifications and requests are included in the Resolution).
- The Resolution will be effective as of the day of its publication in the Federal Official Gazette.
1 Available at: http://www.dof.gob.mx/nota_detalle.php?codigo=5597681&fecha=03/08/2020
2 Resolution concluding the suspension of time limits and terms in the acts and procedures carried out in the National Hydrocarbons Commission, available at: https://www.dof.gob.mx/nota_detalle.php?codigo=5597267&fecha=24/07/2020
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