Chihuahua, Chih., February 10, 2022.

Dear Clients and Friends,

We hereby inform you that in its plenary meeting of the Governing Body, the Energy Regulatory Commission (“CRE”) approved the Resolution number RES/163/2022 (the “Resolution”) on February 4, 2022, which amends the Resolution number RES/968/2016 which contained certain restrictions imposed the State productive companies (such as Comisión Federal de Electricidad (“CFE”) and Petróleos Mexicanos (“Pemex”) on certain transportation capacity in the National Integrated Transportation and Storage System (“SISTRANGAS”) which was assigned on a preferential basis by the National Center of Natural Gas Control (“CENEGAS”), in accordance with the provisional article twelfth of the Hydrocarbons Law:

For context, through the RES/968/2016, the CENEGAS allocated on a preferential basis to CFE and Pemex certain transportation capacity on a firm basis which was determined back then to be strictly necessary for the performance of strategic activities – of electricity generation activities of CFE, and of industrial manufacturing for the case of Pemex. Likewise, such RES/968/2016 also provided a special condition, consisting of a restriction to only use the capacity allocated on a preferential basis for the performance of strategic activities and to abstain from granting it a different use (e.g. natural gas marketing activities).

However, through the Resolution, the CRE eliminated the restriction imposed in the RES/968/2016 for the case of CFE, by means of which such State productive company will be able to give a different use to such reserved capacity on a firm basis, especially for marketing activities of natural gas.

In light of the above, the Resolution represents another fundamental regulatory shift which consolidates the CFE (thorough its affiliate, CFEnergía) as the largest marketing company of natural gas in the country, by holding the majority of firm basis transportation capacity in the main natural gas transportation systems in the country, now including SISTRANGAS.

In this sense, although the main direct effect that the Resolution has in the natural gas marketing industry in the SISTRANGAS may be unnoted, two relevant effects may exist.

On one hand, given that the Resolution would be de facto allocating transportation capacity on a firm basis to CFE for marketing purposes, without undertaking an open season or offering the capacity in the electronic bulletin (as provided under the General Terms and Conditions for the Provision of Services (the “GTCS”), other users (marketers) of the SISTRANGAS may be precluded of their right to have access available capacity (in this case, such which was unused by CFE) in a level playing field, in accordance with the non-unduly discriminatory open access principles enshrined in the Hydrocarbons Law and ancillary regulation. This, and other arguments, may be used by affected parties in the challenging of the contents of the Resolution before applicable courts.

On the other hand, assuming the Resolution in fact is divesting from the scope of the RES/968/2016 the assigned capacity on a preferential basis which is not being used by the CFE, then it may be inferred that the use of such capacity would be subject to the general terms of use under the GTCS of the SISTRANGAS. In this sense, to the extent that the CFE continues not to use reserved capacity on a firm basis (even for marketing activities); then the CFE may be obligated to offer such capacity on the secondary market, in accordance with the rules provided under the GTCS for these purposes (e.g. “use-it-or-loose-it” provisions).

For further information on this matter, please contact Mr. Jorge Raudel Almanza Ríos, Partner of the Corporate Area, at the following e-mail address: jalmanza@iclmx.com.

Lic. Jorge Almanza Ríos.

ICL