Sergio Beristain
Founding Partner
Beristain + Asociados
View from the Top

Local Expertise Needed for Land Access

Wed, 01/18/2017 - 14:56

Q: How should companies operating onshore fields deal with rights of way challenges?

A: Each challenge must be addressed in its own, unique way but there are some universal solutions that can be applied to a variety of cases. The first is to have good lawyers, which are not necessarily the most expensive but local lawyers who know how to work in the field and understand the needs of the inhabitants of a specific area and who have experience in litigation of very complicated court cases. A second solution is the use of a social witness, for which the best candidates should have qualities similar to good lawyers, such as a comprehensive understanding of the law and local insight into the needs of the people in the region.

Insurance is another relevant topic. The application of jurisprudence in civil cases through a particular focus on how the energy industry works in the country is another crucial element when facing a legal challenge. A long-term perspective is key when addressing rights of way since the social aspect will be the most relevant. Developers are going to be involved with the communities and individuals surrounding their projects for a long time, so to be socially sensible is a must.

Q: What problems will companies face during the commercialization of hydrocarbons and what do you recommend?

A: The main problem is taking over and using some of PEMEX’s infrastructure with an unclear set of rules on how to deal with PEMEX as an infrastructure owner but not as the owner of the field. Bidding companies do not have access to the same competitive prices for using the infrastructure that PEMEX had for several years, which impacts the companies’ business plans.

Cross-field infrastructure also presents a problem because sometimes different companies own or manage one area’s infrastructure, making it difficult to maintain contact with them all. Additionally, the metering norms in Mexico are still nonexistent and international rules for metering are not well known in the country. An additional problem is the sale of permits, which impliesan expensive and bureaucratic process that makes selling to parties other than PEMEX too complicated. The lack of infrastructure because of PEMEX’s underinvestment is another issue for companies entering the Mexican oil and gas industry. CNH strives to help these companies succeed in the industry but it has not fought PEMEX as much as is necessary.

Q: Where do you detect gaps in Mexico’s oil and gas regulations?

A: Some of the key elements missing from the regulations pertain to rights of way and commercialization, for which PEMEX’s insight and expertise are always important for other companies. The financial regulations still lack a clear scheme to approach optimal solutions. For Round One, Mexican authorities strived to perfect a process carried out in the country for the first time. We are addressing major challenges such as corruption, a monopolistic scheme under which the oil and gas industry had been regulated for over 70 years and the natural evolution of human resources requirements.

A major challenge for the industry has been the transition from when fields and assets are handed over to private companies to when production begins. This is when issues such as safety, infrastructure, the geographic limitations of wells and many others arise. Ultimately the successful solution to these challenges involves the participation and collaboration of all interested players such as PEMEX, CNH, private companies, local governments and very importantly, the law firms. Law firms are particularly important as the analysis of the Energy Law needs to be widened to include an in-depth look at merchant solutions as well as international norms and good practices. The new law is fairly complex, which is why understanding it is so important to find a legal solution despite not having a completely defined regulation.