Steven Otillar Quoted in Upstream Magazine Series on Mexico

Steven Otillar, a partner in Akin Gump’s oil and gas practice, has been quoted in a three-part article series in Upstream magazine on the Mexican oil and gas sector.

The first article, “Presidential elections next year remain country’s great variable,” discusses what the 2018 elections in Mexico could mean for the country’s energy reforms.

“If a far-left party comes into power, all of a sudden any sort of executive branch function could grind to a halt and it would become a lot more difficult to do business,” said Otillar, who is also the incoming president of the Association of International Petroleum Negotiators (AIPN). “If it’s hard to do business, the money will go elsewhere.”

The article reports that whoever is elected will have to deal with declining oil and gas output, which will mean lost revenue for government budgets.

“Innovation at center of new approach to attract operators,” the second article, reports that oil and gas regulators in Mexico are using a variety of innovative refinements and tools to ease the way for the country’s new oil and gas operators. One big change is reported to be the decoupling of the pre-qualification process from that of the bid rounds, which would allow operators to avoid going through a lengthy and detailed process for every bid event.

One concern, according to the article, however, is how operators will manage resources discovered in fields adjacent to Pemex assets, as well as management discoveries that might cross the border into the United States. Otillar said Mexico’s energy ministry has issued initial guidelines on the matter that are “already more detailed and involved than you see in many jurisdictions.” He added, “I think this tells this industry that Mexico realizes [it] is an important issue, and we will see whether they can respond to industry concerns the way that they have done so in Round 1” of the bid offering.

The third installment of the series, “Contractors looking to complete migrations,” reports on the changeover in management expected for the different oil fields. The article notes that migration has taken longer than anticipated since the signing of implementation laws for the reform of the Mexican oil industry.

One reason for the delay, as the article reports, is a provision in Mexico’s law that requires a new contract, after migration, to provide an equivalent or better commission for the government than it did previously. With falling commodity prices, however, that’s been a tough sell.

“If you’re not making any money, or barely making money, it’s hard to give a greater percentage share to the government,” said Otillar. That’s why those contracts have stalled, because the demands have been somewhat unrealistic.”