Mayer Brown has opened an office in Mexico City, a decision driven by Mexico’s opening of its hydrocarbons industry to the private sector in 2014. The firm will advise clients on oil, gas and power industry matters, including preparation and submission of bid proposals, and the drafting commercial agreements related to exploration and production. Partner Francisco Mendez, who is licensed to practice Mexican law, will head the new office, while continuing to advise clients from his existing base of operations in Houston. Other staff at the new office include partners Dallas Parker, Alexandre Chequer, Jose Valera, and Pablo Ferrante, as well as associate Gabriel Salinas.
Current and upcoming opportunities in both the upstream (exploration and production) and midstream (transport) sectors of the petroleum industry are expected to usher in a strong demand for legal counsel in Mexico.
In the upstream sector, there is a shortage of electricity, with electricity prices 25% to 45% higher than the US, which Parker attributes to inefficiencies in the electric sector.
According to Parker, a lack of incentive for Pemex, Mexico’s oil company to seek gas resources has aggravated this problem. Pemex has been almost entirely focused on oil. “Crude oil is readily saleable on the international market at prices that until recently were highly profitable and attractive. Meanwhile, gas is flared or otherwise not captured and distributed within Mexico, as a result of which CFE is importing natural gas to fire its electric generation facilities,” Parker explained.
Still, Parker is optimistic. Companies such as Fermaca and Howard Midstream Energy Partners are planning to build pipelines from Texas to power plants in Mexico. Now that other players can enter the market, Parker said, “Eventually, I’m convinced those power plants will be powered by Mexican gas.”
Upcoming biddings also have the potential to increase the demand for counsel. Mexico is attempting to extract hydrocarbons from the Gulf of Mexico. In the first phase of the country’s bidding on shallow water, on July 15, Mexico’s government hoped to sell at least four out of fourteen blocks, and was disappointed when it sold only two. In an effort to ensure better results in the future, “The government will relax its requirement that consortia bidding on oil parcels must have one member act as a guarantor and hold shareholder equity of at least $6 billion to protect the state’s interest in the event of a major accident,” according to a July 29 Reuters article. The country will also push the beginning of its deepwater process back to sometime in September.
While there is a lot of focus on the upstream sector, Parker believes the midstream sector will also be important. “Mexico is very short on infrastructure in the midstream sector. I think there [are] a lot of opportunities in the midstream,” he said. “People are starting to recognize that, and we’re starting to see increasing interest in midstream in Mexico, that will attract not only international players, but more Mexican players who have the expertise to provide engineering and construction services in the midstream area.”