Carlos de Regules
Executive Director
View from the Top

ASEA Works to Ensure a Healthy Sector During Challenging Times

Wed, 01/20/2016 - 14:15

Q: What progress has ASEA achieved in the Mexican oil and gas industry?

A: ASEA began operations in March 2015 with the ample mandate of supervising the activities within the entire value chain of the hydrocarbons sector. The scope of our reach forced us to think outside of the traditional institutional model, which is why we decided to create an agency with a robust architecture and well-defined processes. One of the first actions we undertook was the designing of our new risk management model based on the administration of operational risk, which relies on five premises. Firstly, those covered by the regulations are under the obligation to operate in accordance with the Industrial Safety and Environmental Protection Administration System. They are also bound to meet the required guarantees to ensure their financial responsibility in light of any possible accidents. The third premise concerns the issuance of technical regulations that are created according to objectives, rather than in a prescriptive manner, and the fourth one requires the enforcement of a legal policy that favors performance over penalties. Finally, the model relies on the deployment of risk-based programs that allow the optimization of the state’s inspection resources and their complementation with third parties.

The model allows us to optimize both our financial and human resources while simultaneously providing certainty that the operations carried out by Mexico’s various operators are executed in a safe and environmentally responsible manner. The Energy Reform modified the industry’s previous institutional scaffolding. The energy sector is now structured by a regulatory framework governed by two federal laws and their respective regulations. This configuration is distinctly reflected in the environmental sector, as ASEA operates in accordance with the legal framework of eight federal laws and nine regulations. In this context, the Agency is creating a regulation specialized in the hydrocarbons sector, the objective of which is to serve as ASEA’s operation base in addition to being a comprehensive document that integrates de institution’s areas of competence.

Q: What are the main implications of this for PEMEX and the new operators entering Mexico’s oil and gas industry?

A: The use of ASEA’s risk management model is not exclusive to new operators, therefore PEMEX is also subjected to the new operating framework. The reason behind this is ASEA’s aim to develop a culture of industrial safety and environmental protection that respects two main directives: performance and the compliance with international best practices.

Q: What have been the main activities that ASEA initiated as a regulator in the upstream, midstream, and downstream segments?

A: The General Administrative Dispositions of the Guidelines for the Establishment, Implementation, and Authorization of the Industrial Safety, Operational Safety, and Environmental Protection Administrative Systems were published in the Federation’s Official Gazette on May 13, 2016. These measures aim at establishing the minimum requirements for the creation, operation, implementation, and authorization of the Systems for the Hydrocarbon Sector’s Regulated Parties. The design of the guidelines comprised the creation of various technical consultations with the industry and US regulators, as well as a public consultation through the Federal Commission for Regulatory Improvements (COFEMER) with the central aim of designing regulations that would provide the hydrocarbons market with certainty, while configuring it as the spine of an integral regulation based on risk management.

We are currently working on other technical regulations based on performance, such as the guidelines for exploration and production activities in onshore settings, shallow waters, deepwaters, and unconventional resources, as well as regulations for the transportation of hydrocarbons by pipelines, third party accreditations, root cause analysis, incident and accident reporting, and insurance and guarantee guidelines. Moreover, we are working on NOM-004 for the recovery of service station fumes and on NOM-005 for the design, construction, maintenance, and operation of service stations.

Q: Is there currently enough legal certainty for operators to find the risks associated with deepwater activities to be acceptable, a critical success factor for R1-L04?

A: The Agency is currently developing a regulatory framework for deepwater operations that incorporates the best practices observed at an international scale. For this purpose, ASEA is currently working hand in hand with the industry and homologue regulatory bodies, such as the US Bureau of Safety and Environmental Enforcement (BSEE), in order to generate offshore regulations that are familiar to both sides of the border, bringing certainty to the companies interested in R1-L04. Moreover, ASEA signed a memorandum of understanding (MOE) on May 3, 2016, with the American Petroleum Institute, aiming to access its referential norms and standards that would be applicable to the Mexican sector.

Q: How can the cooperation between ASEA and the operators assure that industrial safety and environmental performance is not negatively affected?

A: The industry faces a scenario with low oil prices and high operating costs resulting from increasing complexity, great geological risks, and the value of money, as well as a growing penetration of other energy sources. Under these challenging circumstances, it is paramount that the companies in the industry clearly understand that it is not the best moment to economize at the expense of industrial safety and environment protection. On the contrary, it is an appropriate time to take care of what they have, mainly a reliable operation and a stable coexistence with the communities where they operate.

Q: Which priorities will ASEA address in 2016 in order to successfully start working with private operators?

A: A challenge of the utmost importance to the Agency is to be prepared to work with private operators and to continue advancing with the Energy Reform’s objectives, with the intention of promoting an environment that meets international standards and regulations. Likewise, one of the Agency’s main priorities, given the implementation of this deep Constitutional Reform, consists of executing a regulation that allows operations which guarantee industrial safety and environmental protection. In this sense, the institution is focused on increasing efforts in the development of an ambitious regulatory program that brings legal certainty in the operations of all the hydrocarbons value chain. For the development of the regulation pertaining to unconventional resources, a multidisciplinary work group made up of different sectors of the Federal Public Administration, such as the Ministry of Energy, CNH, and CONAGUA, is operating in order to create the best possible framework given their specific areas of expertise. The regulation is expected to be issued for public consultation in the third quarter of 2016. This expert group works with the Alberta Energy Regulator, given its broad knowledge and breath of expertise in the subject.