Law Firm Gains Expertise on DeepwaterWed, 01/21/2015 - 22:45
Q: How has Woodhouse Lorente Ludlow’s strategy evolved as a result of the Energy Reform?
DW: We have to focus on the segments in which we can offer a superior value proposition, since we understand that the oil and gas sector is now a collection of subsectors due to the Energy Reform. Consequently, we are going to put all of our efforts in the deepwater subsector, where we can add the most value to our clients’ transactions. The main reason behind our ambition to focus exclusively on deepwater is that our main partner, CMS, has one of the strongest legal practices for this segment. CMS has people who began working on offshore matters in the North Sea 30 years ago. These are the same lawyers who have developed the standards and models for agreements that the global oil and gas industry is still using today. By being able to leverage CMS’ global expertise, the amount of resources that we can use to provide a combined service to any of the major oil companies puts us at a significant advantage. When I worked at the CMS offices in London, I advised many clients in the deepwater area, particularly one of the world’s most important companies regarding its deepwater and ultra- deepwater exploration and production projects in Angola.
In order to anticipate the new framework that deepwater operations will have to adhere to, we are keeping a close eye on every regulation that is being issued in the reformed offshore oil and gas industry. While everything is still pretty unclear at the moment, the pace at which the current administration has pushed the reforms forward and the timeframe under which these should unfold is amazing. Today, the firm is providing support and feedback to its clients while also trying to get on the radar of key deepwater players that may come in to operate Mexico’s assets. Even though we are on standby, we are being proactive in paying close attention to the needs and concerns of these players. We decided to refrain from advising the government or its entities so we could focus our efforts on the private sector. We want to cater to BP, Shell, Total, and BG Group, among others. There are many private players but very few law firms that can cater to them in Mexico.
Q: How is Woodhouse Lorente Ludlow working on the bidding rounds that are part of Round One?
DW: The medium-term nature of deepwater developments requires us to keep a close eye on the assets being tendered in Round One. Many of the aspects currently being developed and discussed will eventually have an impact on deepwater contracts. We are using this transition toward a reshaped legal framework prescribed by Round One’s tenders to gain a full understanding of the new operating environment. .
Q: What are companies most concerned about as deepwater contracts are still yet to be released?
GS: Two of the industry’s main concerns are local content and liabilities. Companies are doubtful of how liabilities will be managed, who will assume what kind of risk, and what risks the government is willing to take. Other important concerns that we have seen are related to the tax regime and its role in the contracts, as well as the environmental matters derived from those activities. Even though there are some indications in the legislation, and in the model contracts for Round One, these liabilities are a key topic that needs to be defined on each project. Judging by international precedence, there are various ways of addressing liabilities, and one must consider what has happened over the last decade in the US Gulf of Mexico to understand how liabilities can be dealt with on the Mexican side. Everything is related to the amount of risk that can or cannot be insured.
While most incoming companies have taken on projects in different parts of the world, thus having the team to carry out a new venture in a new country, local expertise will remain a challenge. There are simply not enough qualified people in Mexico, which means local content will be a big challenge. Nonetheless, the most important obstacle will be finding the right executives to work in Mexico. It has been difficult to fill top management with candidates that meet company requirements. Given this scarcity, companies are bringing in people from Argentina or Spain but these are not familiar with the Mexican culture. These companies need to staff their teams with people that understand how things work in the country. Mexicans are needed to deal with other Mexicans. In my opinion, the local industry needs to speed up and be ready in the coming months to cater to foreign players. This will impact lawyers, accountants, and other professionals because the operating environment is brand new.