Law360 Quotes Steven Otillar on Tips for Energy Companies Doing Business in Mexico
Law360 has quoted Akin Gump oil and gas partner Steven Otillar in the article “5 Tips For Energy Cos. Looking To Tap Into Mexico.” The article comes as the Mexican government continues to open its energy sector to outside investors.
The article suggests that companies looking to do business in Mexico ensure their contracts can be adequately enforced under local law. Otillar said joint operating agreements are commonplace within the oil and gas sector and figuring out how Mexican law governs them should be a priority for oil and gas companies before they make a deal.
“We’re looking at the allocation of risk among the parties and the allocation of liabilities for the parties,” Otillar said. “There hasn't been a joint operation for oil and gas in Mexico in decades — how will Mexican law apportion liability for gross negligence, for example? Every company is dealing with those concerns.”
Those concerns, Otillar noted, become more complex if a company partners up with state-owned Pemex. A key question to ask, he said, is whether they will be “subject to the same obligations that a private company will be involved in.”
Land use is another concern for companies seeking to build an energy infrastructure project in Mexico, according to the article. Whether it’s a natural gas pipeline or a transmission line, for example, Otillar said, “Paying attention to land issues and indigenous issues is really going to be an important factor because it drives costs significantly. The costs can skyrocket. If you’re wrong on those numbers and the inherent costs, you’re going to find yourself in an unprofitable project.”
Otillar added that some midstream oil and gas companies are so concerned about land issues in Mexico that they are buying up land rights before proposing their projects. He warned, “You have to have a sense of where things are being built, in advance.”