Edmond Grieger
Head Partner in Energy and Environmental Practices
Von Wobeser & Sierra
View from the Top

Transparency at the Core of the New Framework

Wed, 01/21/2015 - 17:20

Q: How will the Reform’s emphasis on transparency make doing business in Mexico more efficient?

A: Transparency is a very important aspect that needs to be considered by all those planning the major investments we will be seeing in this sector. International operators, which are regulated by legislations such as the Foreign Corrupt Practices Act and European guidelines related to anticorruption practices, will need certainty and transparency in their investments and projects. Transparency will also wield a significant impact on the projects that we are seeing, a logic which also extends to corporate governance and accountability. For public bidding procedures, all the information is available on the Round One website. This is a very good start by the government to prove its commitment to transparency by providing immediate and simple access to the most relevant information of these bidding procedures. It must be said that this environment of transparency is essential for all oil companies to rest assured that everything will be done in a clear and fair way.

Q: Will the contracting regimes create a level playing field for all companies looking to operate in the Mexican market?

A: It will depend on the specific projects. Projects in deepwater or ultra-deepwater are only aimed at the bigger companies with the capacity to carry them out. After all, they entail certain risks that not all companies can respond to. Therefore, as Mexico moves forward with the bidding rounds involving unconventionals, deepwater, and ultradeepwater projects, it is only natural that not all companies will find themselves on an even keel. However, we will see different contracting regimes created specifically for the different types of blocks being tendered taking into consideration, among others, the risks they comprise. For example, production-sharing contracts will apply equally to all companies bidding at the same level in the Round One tenders. At least, this is certain since CNH cannot implement or tailor a specific contract model for the benefit of only one company. 

Q: Which services is Von Wobeser & Sierra providing to meet the needs of the Mexican energy sector?

A: The main asset of our firm is that we have several partners specialized in different practice areas related to the oil and gas sector, such as the arbitration, litigation, corporate, finance, environmental, administrative, and regulatory areas. When we take on a big project, we involve six or seven of our partners and work as a team to ensure a successful project from the beginning. In this way, we can take into account the structuring of the financial scheme, the legal corporate strategy needed to carry out the project, the bidding process, the execution of the contracts, and environmental and regulatory compliance. We are a full-service law firm that has developed significant experience in the oil and gas sector over the years.

Before the Reform, we had clients that participated in bids with PEMEX and CFE. Today, we have divided our practice in two areas to cover the oil and gas industry and the electricity sector separately, because we have to attend to these clients in different ways. We have been hiring lawyers and paralegals to look after these particular sectors and to specialize in the specific topics related to these sectors. Also, we are trying to address some of the specific concerns of our clients through face-to-face meetings with our colleagues and partner law firms in the US, Europe, and Asia, where our clients are based. For example, one main concern is the very broad administrative rescission clause provided under Article 20 of the Hydrocarbons Law. An amendment could be made to Article 20 to narrow it down and give certainty to operators. Another problem is that once CNH declares the administrative rescission, it will not be subject to international arbitration. These are some specific concerns that we are trying to address.

At this initial stage, our law firm is providing preventive legal counsel to our clients to help them become familiar with the way the Mexican legal framework is being put in place. This will enable them to assess the risks and advantages of executing contracts or making investments, either directly through tenders with CNH or through alliances with private players and PEMEX. In the medium term, I see our law firm continuing to provide legal counsel for the execution of projects and for compliance with regulatory aspects, such as the new environmental permits that ASEA will grant. In the long run, we may start seeing more litigations and arbitrations at the national and international level.