The Mexican Energy Reform: Interested in Doing Business Under … · 2016-11-18 · squirepattonboggs.com 1 The Mexican Energy Reform: Interested in Doing Business Under the New Rules?

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The Mexican Energy Reform: Interested in Doing

Business Under the New Rules?

Fernando Cano-Lasa

Houston, Texas, September 3, 2014


Table of Contents

1. Legal considerations related to the Reform.

2. Myths and Reality: What the Government has done well.

3. The Oil and Gas Industry Scenario: Prior and Post Reform.

4. Business Opportunities by Sector of the Industry.

5. Conclusions.

6. Copyrights.

The Mexican Energy Reform: Interested in Doing

Business Under the New Rules?


Spent 12 years following development of the O&G Industry.

The 2008 effort.

2013 and majority consent.

Legally speaking, one of the best pieces of legislation I have witnessed.

What has happened so far:

CONSTITUTIONAL AMENDMENT: December 2013.

SECONDARY LEGISLATION: August 2014.

ROUND “0” RESOLUTION: August 2014.

ROUND “1” GENERAL INFO: August 2014.

CREATION OF CENACE AND CENEGAS: August 2014.

1. Legal Considerations Related to the Reform


MYTH

There is no way the Constitution will be

amended

Secondary legislation will be significantly

delayed

Secondary legislation will not follow

international standards

Resolution of Round “0” will be significantly

delayed

All feasible resources will be granted to

Pemex

Rules on Midstream and Downstream will

not be clear

Corruption will not be prevented

SO ON AND SO FORTH

2. Myths and Reality: What the Government has

done well

REALITY

Constitution was amended on December,

2013

Legislation was enacted in record time and

effective August, 2014

Legislation clearly follows best practices

internationally

Resolution was issued one month before

required by Law

Round “1” is a very well accomplished mix

of available resources

Legislation is very precise in every aspect

of private participation for these sectors

Serious Compliance measures

POSITIVE MESSAGES

Right Message at the Right Time


3. The Oil & Gas Industry Scenario: Prior to the

Reform

UPSTREAM

- No private investment

- Only services

- No production sharing

- Insufficient Investment for

country potential

MIDSTREAM

DOWNSTREAM

- Limited private investment.

- Only transportation of Gas

- Insufficient infrastructure

- Insufficient investment

- Limited private investment

- Secondary petrochemicals

- Gas stations (Pemex brand)

- Insufficient infrastructure

PEMEX

Regulators- Limited faculties and structure

- Subject to executive branch

- Limited by Pemex

Figure 1


3. The Oil & Gas Industry Scenario: Post Reform

UPSTREAM

MIDSTREAM

DOWNSTREAM

Mexican

StateRegulators

- Private investment

permitted

- Via permits

- Full competition (in stages)

- Based on market needs

- No private investment

- Round “0” is the basis

- Only to Governmental Companies

- Only services contracts permitted

- May be transformed into E&P

- Strong faculties

- Autonomy to make decisions

- Act in benefit of Industry

- Private investment permitted

- Via Public Tender

- Agreements:

Production Sharing

Profit Sharing

Licenses

Others

Assignments E&P Agreements

CN

H

CR

E

Ministry of Energy

Others

Figure 2


Round “0”

Joint venture with Pemex.

Pemex cannot freely associate.

Public tender.

Mexican company needs to be incorporated.

Round “1” and Subsequent.


Joint venture with others.

Individual participation.

Public tender.


4. Business Opportunities by Sector of the Industry

Operator Interested in Reserves

Figure 3

Figure 4

UPSTREAM


Round “0”


Pemex cannot freely associate.

Public tender.


Round “1” and Subsequent.


Joint venture with others.

Individual participation.

Public tender.



Operator Interested in Revenue

Service Contracts

Figure 3

Figure 5


General principle:

Their current rights are respected.

Companies have shown interest in industry.

They may participate as any other company.

Special rights:

Associated gas.

Right to request direct award of agreement.

Must do so in 90 days.


Mining Companies

Figure 6



Authorities in Upstream

Economic expert.

Definition of economic conditions

for contracts.

Overall supervision.

Definition of rounds and fields.

Technical advisor.

Bids fields.

Executes agreements.

Supervision of agreements.

CHECKS &

BALANCES

Royalties from agreements.

Autonomous administration.

Defined destiny of resources.

Environmental protection.

Industrial protection.

Specialized for the sector.


No longer considered “Strategic”.

This allows for private participation.

Regulated free market conditions.

Procedure

Preparation of projects.

Permits issued by the regulator.

Public Tender for “Major Projects”.

Authorities:


MIDSTREAM

Figure 7

Figure 8


No longer considered “Strategic”.

This allows for private participation.

Regulated free market conditions.

Procedure

Preparation of projects.

Permits issued by the regulator.

Public Tender for “Major Projects”.

Authorities:


DOWNSTREAM

Figure 9

Figure 10



PROCUREMENT RELATED

COMPANIES

UPSTREAM MIDSTREAM DOWNSTREAM

Key factors Issues to consider

Needs will remain and will be similar

to others around the world

Pemex and its Procurement

regulations

Opportunities for the 3 sectors of

the Industry (more and diversified

players)

Procurement rules for upstream

issued by the Ministry of Finance

(SHCP).

Local Content (key players) Compliance in all matters

(permanent establishment, transfer

pricing and others).


Identify strengths.

Understand the market and identify business opportunity in Mexico.

Identify risks and mitigation measures associated to such opportunity:

Commercial

Technical

Economic.

Legal.

Prepare Strategy to implement business.

Due Diligence on prospective partners.

Execute.

5. Conclusions

CHECK-LIST


6. Copyrights

Copyrights

• Figure 1. © Squire Patton Boggs (US), LLP.

• Figure 2. © Squire Patton Boggs (US), LLP.

• Figure 3. © Lars Christopher Nøttaasen http://commons.wikimedia.org/wiki/File:Seadrill_west_epsilon.jpg

• Figure 4. © Ji-Elle http://commons.wikimedia.org/wiki/File:Pechelbronn-Mus%C3%A9e_du_P%C3%A9trole_(5).jpg

• Figure 5. © Selbstfotografiert http://commons.wikimedia.org/wiki/File:20_Dollars_art3.jpg

• Figure 6. © Stephen Codrington http://en.wikipedia.org/wiki/File:Strip_coal_mining.jpg

• Figure 7. © Rosemary Oakeshot http://commons.wikimedia.org/wiki/File:Gas_pipeline_internment-geograph.org.uk-899546.jpg

• Figure 8. © Roland Unger http://commons.wikimedia.org/wiki/File:IsmailiaSuezCanal.jpg

• Figure 9. © http://www.flickr.com/photos/keepitsurreal/ http://commons.wikimedia.org/wiki/File:Oil_refinery_canada.jpg

• Figure 10. © Re Al http://commons.wikimedia.org/wiki/File:Solohiv_natural_gas_plant_-_fragment.jpg

http://commons.wikimedia.org/wiki/File:Seadrill_west_epsilon.jpg

http://commons.wikimedia.org/wiki/File:Pechelbronn-Mus%C3%A9e_du_P%C3%A9trole_(5).jpg



http://commons.wikimedia.org/wiki/File:20_Dollars_art3.jpg

http://en.wikipedia.org/wiki/File:Strip_coal_mining.jpg

http://commons.wikimedia.org/wiki/File:Gas_pipeline_internment_-_geograph.org.uk_-_899546.jpg





http://commons.wikimedia.org/wiki/File:IsmailiaSuezCanal.jpg

http://commons.wikimedia.org/wiki/File:Oil_refinery_canada.jpg

http://commons.wikimedia.org/wiki/File:Solohiv_natural_gas_plant_-_fragment.jpg



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The Mexican Energy Reform: Interested in Doing Business Under … · 2016-11-18 · squirepattonboggs.com 1 The Mexican Energy Reform: Interested in Doing Business Under the New Rules?