Noé Pascacio
Partner, Head of Energy and Infrastructure
BGBG Abogados
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Insight

Dramatic Evolution for Legal Firms

Wed, 01/18/2017 - 14:37

Law firms were not spared from the far-reaching impact of 2013’s historic institutional change in the country’s energy policy. Noé Pascacio, Partner and Head of Energy and Infrastructure at BGBG Abogados, says the way legal agencies deal with energy cases has evolved dramatically.

“Five years ago, the top 10 law firms in Mexico did not have a specific energy practice,” Pascasio says. Now they all have specialists in these laws and regulations and are working side by side with new players to keep up with the rapidly changing landscape of Mexico’s energy sector. While other participants wait on the sidelines for the market opening to affect their operations in real terms, law firms have taken an early role during the development of a new regulatory and legal framework for Mexico’s oil and gas industry.

This has not been an easy task, given industry difficulties such as low oil prices and the subsequent downturn that accompanied the market opening until 2016. But Pascacio sees the bright side because the lack of activity was in fact a benefit for firms like BGBG. “The Energy Reform actually came at the perfect time for us because it gave us time to work through all the regulatory procedures and the legal framework,” he says.

As a boutique law firm, BGBG specializes in offering judicial services in a variety of sectors from energy and infrastructure, telecommunications, finance, intellectual property and more. With its international specialists in hydrocarbon E&P, BGBG helps its clients as they participate in licensing rounds, obtaining public and private project financing and resolving technical disputes. The firm is also active in the natural gas sector, assisting its clients as they take on pipeline construction projects, for example.

Pascasio praises developments on the government’s side, specifically the transparency of CNH’s first phase of bidding rounds, which saw a variety of offshore and onshore oil fields auctioned to IOCs, NOCs, independents and smaller, private players. “CNH’s bidding procedures are state-of-the-art and other industries are striving to emulate them,” Pascacio says, adding that CNH’s employees are being headhunted by other governmental bodies seeking to increase their image of transparency.

The wide range of companies involved in Round One gives the sector a glimpse into how Mexico’s future oil and gas market will look. “Throughout Round One, we have seen oil heavyweights such as Chevron and BHP Billiton enter the market, particularly through the deepwater rounds,” he says. "On the other hand, there are the small, Mexican companies that are developing experience and will likely invest in onshore exploration."

Regardless of the size and scope of the company, many challenges lie ahead, Pascacio says. “In particular, facility, ownership, land access and community relations will require great attention from newcomers,” Pascacio says. He explains that although Mexico has relevant governmental institutions such as the Urban, Agrarian and Territorial Development Ministry (SEDATU), the Social Development Ministry (SEDESOL) and the Ministry of Agriculture, Livestock, Rural Development, Fishing and Food (SAGARPA), these responsibilities usually fell on PEMEX’s shoulders, which has more local experience and influence to deal with them. “But when you take PEMEX out of the equation, these institutions need to step in and do the job they are supposed to,” says Pascacio. Private companies will deal with social issues such as land access, taking into consideration not only Mexican but also international regulations such as the UK’s Anti-Bribery Act.

“Fortunately for new private companies, the E&P contracts they sign with CNH state that the Mexican government must support them in dealing with such issues,” he says. The Mexican government’s ability to abide by these promises will be a test for a country seen as facing corruption challenges, although Pascacio does not believe that negative image reflects the reality of the country. “Mexicans are not corrupt by nature,” he says. “CNH’s successful efforts to make the bidding processes 100 percent transparent have really helped to improve Mexico’s image already.”