International Best Practices for Transparency in Contract Management: Recommendations for Mexico

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Mexico’s National Hydrocarbons Commission (CNH) has made public disclosure a central part of its mandate to oversee oil and gas site assignments to the state-owned company Pemex (Petróleos Mexicanos), as well as contract allocations to private investors in the hydrocarbon sector. CNH now seeks to increase transparency in its monitoring of Pemex and private investor compliance with the obligations contained in the laws and agreements governing extractive rights.

CNH has the opportunity to help advance the government’s transparency commitments, set a new global benchmark for disclosures and empower interested parties—both experts and citizens at large—to access relevant, timely, and understandable information regarding adherence to legislative and contractual obligations and the government’s decision-making processes. Doing so could help increase public trust and accountability in the petroleum sector, and help CNH streamline and improve the efficiency of its management duties.

This report reviews what CNH has achieved so far and the transparency approaches of energy regulators worldwide. It offers CNH recommendations to make further advances in communicating information on how oil contracts are being managed. The main overall finding is that CNH can lead the global field in transparent contract management by providing answers to the following questions in an integrated and user-friendly format.

1. How does the regulatory system work? Without an understanding of how the entire system works, the complexity of regulatory structures can often lead to significant frustration with, and loss of trust in, regulators as a whole. CNH should explain the functions of all government agencies that have a role in the management of the sector to enable citizens to understand the interactions among these agencies and how an individual project moves through the system.
2. Who participates in the regulatory system? Citizen concerns about the identities and motivations of key players in the petroleum industry—whether they are bestowing or receiving extractive rights—are a common source of mistrust. CNH should identify all ministers, members of congress, and senior public officials that hold a formal role in important sector decisions, as well as disclosing their beneficial ownership and asset interests. On the commercial side, beneficial owners and chains of ownership of the companies active in the sector should be publicly disclosed.
3. What are the main outcomes of the regulatory system? Many types of information—including operational, social, environmental and financial data—are important to give citizens a comprehensive sense of a project’s progress, impacts on the economy, and compliance with rules and obligations. As with the other two questions, this information should cut across different administrative silos to give users a comprehensive, interconnected picture of how each project is functioning.