Canadian Lawyer InHouse

21 CANAdIANLAwyERMAG.COM/INhOUSE october 2014 known as Pemex, has managed the oil and gas industry on behalf of the Mexican state; private ownership of oil and gas reserves was constitutionally barred. But over the years, Pemex became a cash cow for the govern- ment, providing an enormous percentage of the country's budget. While production skyrocketed on the American side of land and sea border, Pemex wasn't able to ad- equately fund new exploration initiatives or develop current fi elds, leading to declining oil and gas production over the past decade. "They've realized for a number of years now that they've needed foreign capital and foreign expertise to come in to help reju- venate their production levels," says Ryan Keays, an oil and gas lawyer for Norton Rose Fulbright Canada LLP, who has been going down to Mexico for the past year and a half in order to follow the development of the reforms. Previous administrations have made in- cremental changes. In 2000, foreign compa- nies were allowed in as contractors and were paid on a fee-for-service arrangement. But since they couldn't book reserves and didn't have a share in the upside of any projects, interest was limited. In 2008, an attempt at more signifi cant reform was watered down in the Mexican Congress. It wasn't until the election of Peña Nieto in 2012, who ran on a platform of sweeping economic reform, that real change looked possible. Last year, the government amended the Mexican constitu- tion allowing private ownership for the fi rst time; the August legislation fi nalized the rules, which foreign companies would have to play by, and Pemex's role in the system. The opening up of Mexico's oil and gas industry will put in place a number of steps, with differing opportunities, for Cana- dians to get involved along the way. The reforms opened with the "Round Zero" process, which has already kicked-off and will determine what acreage under its control Pemex gets to retain. Pemex will clearly retain their currently producing fi elds since they've already in- vested signifi cantly into the infrastructure of those fi elds and have developed them to the current point," says Keays. But the ultimate fate of exploration blocks, and blocks in which Pemex has made discoveries but hasn't started producing, is still up in the air. Some of these will be re- tained solely by Pemex, while other portions will be auctioned off in a joint-venture bid round, where foreign companies will be able '' '' they've realized for a number of years now that they've needed foreign capital and foreign expertise to come in to help rejuvenate their production levels. ryAN KeAys, Norton rose Fulbright canada LLP.

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