Mexico promises “one-stop shop” for oil-gas safety regulation

Mexican officials, including the executive director of the Agencia de Seguridad Energia y Ambiente (ASEA), recently outlined Mexico’s reform efforts and highlighted issues on which the country is working including Transboundary field development rules and spill control at a Baker Institute forum at Houston’s Rice University. Bruce Nichols reports.

Baker Institute Energy Studies Director Ken Medlock introduces day-long forum on Mexico energy reform, Gulf of Mexico transboundary hydrocarbon issues and Mexico-US offshore safety collaboration.
Images from OE.

 

The director of Mexico’s new safety and environmental regulator for the energy industry promised attendees at a Rice Baker Institute seminar that he is building a competent agency with clear rules and certainty in its permitting process.

Carlos de Regules, executive director of the Agencia de Seguridad Energia y Ambiente (ASEA), said the agency aims to provide legal, procedural and cost certainty for international oil companies that become involved in a reformed Mexican energy industry.

“We have to guarantee safety and the environment, but we also are responsible for effective implementation of energy reform,” de Regules said in a presentation to the forum.

Entitled “Mexico’s Energy Reform: Opportunities and Challenges for International Engagement in the Gulf of Mexico,” the day-long series of panel discussion detailed Mexico’s ongoing energy reform, transboundary development in the Gulf of Mexico and readiness to respond to accidents and spills.

De Regules, a former Pemex environment and safety executive, said he plans to emphasize effective management systems for safety and environmental protection and de-emphasize compliance with task-specific rules.

“We don’t want to be prescriptive. That lasts about a day and a half. Technology evolves and the prescription is already dead. We want to be goal-oriented, which means maintaining acceptable levels of risk,” De Regules said.

ASEA is an agency of the Secretariat de Medio Ambiente y Recursos Naturales (SEMARNAT), Mexico’s environmental protection ministry. It was created by a federal act in 2014 and is in the process of organizing.

De Regules said in the early stages, ASEA is dependent on SEMARNAT for support staff, but he said he intends to build an independent agency. He is pushing the government for better pay, which he said is currently insufficient to draw skilled personnel.

ASEA will be a “one-stop shop” for oil and gas companies seeking safety and environmental permits, de Regules said. He contrasted that with multi-agency permitting required in other countries.

Contract terms a work in progress

From left, international attorney Fernando Cano-Lasa, Mexico energy safety and environment regulator Carlos de Regules and Mexico director of hydrocarbons Luis Fernando Herrera Fallas discuss energy reform with Dr. Duncan Wood,  Mexico director at the Wilson Center.
 

A representative of the Mexican ministry of energy (SENER), Luis Fernando Herrera Fallas, deputy director for hydrocarbons, outlined the history of the reform and plans for Round One, the first opportunity for international companies to bid on projects in Mexico.

There has been concern about the contract terms proposed, but forum co-host Duncan Wood, director of the Mexico Institute at the Wilson Center in Washington, D.C., said he is encouraged by Mexico’s taking feedback from industry and promising flexibility.

In informal conversations with OE at lunch, officials said they are less concerned now about being able to book reserves, a sensitive point in Mexico where the constitution reserves ownership of minerals in the ground to the Mexican people.

It appears that the production sharing contracts offered in the first round will create an asset bookable on balance sheets under securities regulations, industry officials said.

Of more concern are the government’s share of production, seen as too high, and requirements for local content in manufacture and construction of infrastructure.

There are questions about Mexico’s industrial capacity to build energy equipment and anticipation a foreign manufacturer will have to set up shop in Mexico for operators to meet the 13% exploration phase and 30% production phase goals.

Fernando Cano-Lasa, a former Pemex procurement executive practicing law with the international firm of Squire Patton Boggs, said Pemex has been replaced by the government as de facto owner of Mexican resources and that it will now have to become more efficient and compete in an open marketplace.

Cano-Lasa said Pemex will not compete in the first stage of the First Round auction, which involved 14 shallow-water tracts in the Bay of Campeche, but will bid on deepwater and shale prospects.

Richard McLaughlin, a research professor in marine law at Texas A&M-Corpus Christi, led a panel on maritime transboundary issues including Guillermo Sanchez of the University of Houston’s Center for US and Mexican Law, and Robert Sebastian of the US Bureau of Ocean Energy Management.

Transboundary development, spill control

Dr. Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars, co-hosts a Rice University Baker Institute forum on Mexico's Energy Reform: Opportunities and Challenges for International Engagement in the Gulf of Mexico.
 

The focus was the US-Mexico Transboundary Treaty, signed in 2012 and in effect since mid-2014. It is intended to resolve exploration and development issues along the boundary separating US and Mexican waters in the Gulf of Mexico.

Currently, the most active area along that boundary is the Perdido Fold Belt, where Shell already operates the Perdido hub on the US side, and Pemex has discoveries on the Mexican side dubbed Trion, Maximus and Exploratus.

The treaty provides for shared information, unitization where fields cross the boundary and allocation of resources by an expert in the event of disputes. The treaty created a joint commission, which will interpret the treaty and resolve disputes. Arbitration is provided for but is not binding.

Shell’s Philip Smith, general manager of emergency management and deepwater regulatory affairs, keynoted lunch, called for collaboration among all parties, US-based and Mexican, to accomplish safe development of both countries’ resources in the Gulf of Mexico.

“I’m an optimist. Operators, contractors and regulators agree more than disagree. They may differ on ways to get there, but they don’t differ on goals,” Smith said.

One question from the audience was whether the Marine Well Containment Corporation will deploy capping stacks on the Mexican coast. Smith said discussions were underway and that, given the growing number of stacks around the world, Mexican deployment is “less contentious.”

In the afternoon session, Charlie Williams, director of the industry-backed Center for Offshore Safety, touted the value of SEMS – the Safety and Environmental Management Systems approach – as better at maintaining safety than checking compliance boxes and keeping score on lost-time incidents.

Judith Roos, marketing vice president at the Marine Spill Response Corporation, said her group would respond to customers operating in Mexican waters but had questions about availability for non-customer-involved incidents across the border.

David Miller, director of standards at the American Petroleum Institute, said API has a memorandum of understanding with Comision Nacional de Hidrocarburos (CNH), the Mexican hydrocarbon regulator, on development of operational standards and has gone to Mexico to consult with officials there.

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