Steve Otillar Quoted by Law360 on the Impact of Declining Oil Prices
In Law360’s article “7 Things For Attys To Watch As Oil Prices Plunge” Akin Gump oil and gas partner Steve Otillar discussed the potential impact of declining oil prices on the oil and gas industry in Mexico, which had initiated an historic opening of this sector to private and foreign investment in 2013.
Otillar noted that the price decrease has been more significant than most people anticipated and added that, “Without a doubt, it’s going to have an impact: We see oil and gas companies across the board slashing budgets, service companies slashing headcounts. Combined with the new country entry risk, it’s going to impact development.”
Although bidding rounds for shallow and deepwater offshore exploration and production are moving forward, Mexican officials plan to curtail a bidding round for unconventional resources such as shale, something Otillar noted was unsurprising: “Those projects come on much quicker, they’re high cost and require continuous drilling. They’re highly sensitive to the cost of services and the price of oil.”
He added that, because of the significance of the opening of Mexico’s oil market, the price drop will not deter major oil companies, saying, “I think the bigger players don’t have a short-term view and their interest will be there. They’ll just want to see flexibility in their [contract] terms that will be able to deal with $40 oil as well as $100 oil and still allow companies to make a profit.”
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