Steve Otillar, an energy partner at Akin Gump, is quoted in an Associated Press article about a change in Mexico’s energy sector that would, for the first time, permit overseas investment in that country’s oil and gas fields.
The proposed constitutional amendment would end a longstanding monopoly held by Petróleos Mexicanos, or Pemex, the Mexican state-owned oil company, and allow other companies to share in the production of oil or contract independently of Pemex. The amendment has passed both houses of Mexico’s Congress and now awaits approval by the legislatures of 17 of Mexico’s 31 states.
Otillar, who focuses on upstream projects in emerging markets, observes there are “a lot of naysayers who thought the constitution would never be changed. People are [now] going to acknowledge that this is real and will happen and are going to start moving.”
The structure of new agreements signed with private companies will likely be based on the oil and gas assets being developed, according to Otillar. He told Law360, “If there’s a lot of exploration risk, or there’s a high technology component … you’re going to see a certain regime that will be structured in a way to incentivize an international oil company.” If the oil and gas fields are mature or the projects have a lower exploration risk, he said “you’ll see more of a service contract model, where you’ll have payment based on production.” (Click here to read this article.)
In a Houston Chronicle article that appeared before the votes in Congress, Otillar commented that this move “will help Mexico enjoy the energy renaissance taking place in the United States and modernize its economy on the back of energy reform.”