Legal Expertise for Shale Development

Considering the significant amount of companies already operating right across the border in Texas’ shale reservoirs, law firm López, Velarde, Heftye & Soria (LVHS) is certain that Mexico’s northern territory will go through an opportunity boom sooner rather than later. Its main objective is to replicate the models that proved successful for companies operating on the US side by tropicalizing these to the operating environment created by the Mexican regulatory and legal frameworks. “We have to understand, and companies must be mindful, that the operating environment will not be the same in Mexico as it is in south Texas. Typically, a shale operator buys or leases significant portions of land, which would grant them surface land rights as well as rights to the subsurface reservoirs located within that area, which is going to be different in Mexico. In parallel, licenses will likely include certain rights for companies to gain easy access in the acquisition of the necessary land rights for production,” explains Jorge Jiménez, Partner at LVHS.

Besides new operators coming in to tap into these opportunities, Jiménez also outlines that service providers will also be needed for the entire chain to be successful. “At the moment, there are a very limited number of service companies in the Mexican oil and gas industry with experience in shale oil and gas. Additionally, the market is not very attractive for new entrants given that the risks are high since PEMEX remained the only customer until recently. Once CNH awards blocks to private operators, the conditions will change dramatically and the market will become much more attractive for local and foreign companies to develop and offer their services,” Jiménez describes. “Another benefit are Mexico’s numerous trade agreements with countries around the world. Given the new legal framework, these will spark the interest of the global investment community as well as key providers to the oil and gas industry,” he adds. LVHS is planning to help companies in this process from various angles. For example, land acquisition is critical for shale development projects. Based on the firm’s long-term relationship with regulators and the relevant industry players, he is certain that LVHS has a competitive advantage in fully grasping the regulations, risks, liabilities, upsides, and downsides of contracts and licenses that will be relevant to shale production. “At the same time, we believe that we will also be complementing the technical experience of foreign shale operators with our local proficiency in operational requirements and legal expertise,” he states.