Marco Oviedo
Director of Research

Security Issues for Private Operators

Wed, 01/22/2014 - 12:32

“One of the main factors that the secondary laws need to address is a security guarantee for private operators in the Mexican territory,” says Marco Oviedo, Director of Research of Barclays. “As a public company, PEMEX’s security has always been guaranteed by the army. However, private companies coming into Mexico will not have this benefit, making operations more hazardous than they already are for PEMEX,” he claims. News articles have emerged about PEMEX having army drones at its service to guard its pipeline system. These drones, piloted by army operatives, help in the detection of hydrocarbon theft and the securement of the facilities. The “public company” tag also gives PEMEX the privilege of using the army to protect its personnel.

“New operators will require certain security guarantees to venture into Mexico. This means that the oil and gas industry needs a strong legal framework, which includes a modification of local police operations in order to give private operators the kind of security that PEMEX currently enjoys,” Oviedo states. “The problems we saw in the past year with drug cartels taking control of certain areas in the country had to do with the fact that local police forces were unable to cope with all the illicit activities. This has come about as a consequence of the lack of resources, training, and human capital that currently haunts local police forces,” Oviedo explains. “The government needs to define, in coordination with each oil region within the country, the minimum requirements and standards of the police corps.” Another option would be for the government to opt for a civil police force to guarantee private operators’ security. “We could replicate what happened in France: building a special police force that would have civil command but military training,” Oviedo adds. “It is not the army’s mandate to protect Shell, ExxonMobil, Total, BP, Petrobras, or Lukoil, but only PEMEX. Therefore, we could also need a special police force to guarantee those players’ security if we want them to invest and operate in Mexico.”

Furthermore, an economic boom mirroring the shale gas boom right across the border in Texas is eagerly anticipated. However, this potential transformative development for northern Mexico could be delayed because of security risks in the region, which is something that large oil companies operating in conflict zones around the world are used to, while smaller operators specialized in fracking might not.