Mexican protest over regulations should not derail energy reform

HOUSTON — An opposition party protest in Mexico over proposed energy reform laws is not likely to significantly delay the opening of the nation’s oil and gas reserves to foreign companies, a legal expert said Monday.

On Thursday, the Senate leader of the National Action Party, or PAN, walked out of congressional negotiations on laws necessary to implement the reform legislation passed in December. The politician protested the amount of authority the Institutional Revolutionary Party, or PRI, has proposed to retain, according to Gabriel Salinas, an attorney at Mayer Brown focused on the Mexican oil and gas sector, who is closely following the progress of the reforms.

The PAN has since issued a list of concerns about the congressional negotiations over the  rules that will govern the opening of Mexico’s energy sector to private investment. Under the new constitutional amendments, Mexican lawmakers were given an April 20 deadline to develop more specific legal guidelines for how the energy reforms would be implemented, including how oil profits would be handled.

Energy companies such as Statoil have said they are closely following the development of these regulations to determine whether to invest in Mexico.

Salinas views the protest as a political maneuver and believes both parties will continue to negotiate the implementing laws, even behind closed doors.

“The PAN is thinking the secondary laws are not going far enough,” Salinas said, noting that much of the implementing legislation was laid out by the bills passed in December. “However, because the constitutional bill provides a detailed road map for the implementation of the secondary legislation, I don’t see this debate going on for very much longer.”

The PAN has raised concerns about the independence of the leadership of a proposed national sovereign oil fund. The PRI has indicated that it wants board positions for the fund to be appointed by Mexico’s president, while the PAN party insists that the board should be more independent.

Salinas says that these kinds of discussions could be an indicator of Mexico’s level of commitment to independent regulation.

“They underlying question seems to be: Is this a process that will generally be controlled by the executive or by more independent regulators,” Salinas asked. “Mexico has made significant steps to transparency and stronger regulators, but you still have this discussion underneath.”

But regardless of whether the implementing regulations are issued in April, there other key dates that will drive the pace of the reform, according to Carlos Sole, an energy attorney at Baker Botts, who is also closely following the reforms. Mexican regulators will have until September to identify which fields Mexico’s national oil company will get to keep.

International energy companies are waiting for this information, as well as the details of new environmental and safety laws governing the sector, which will be issued at the end of the year.

“These dates in the future have equally significant information,” Sole said. “If there is some slippage on this April date, they can still delay the April date and still achieve these backend dates.”