We are on our way to developing great schemes and reinforce the existing legal framework and authorities that give us all the necessary tools to have clean, transparent and positive environmental projects.

Sergio BERISTAIN SOUZA CEO BERISTAIN + ASSOCIATES

The move towards a better regulatory framework

April 21, 2017

TOGY talks to Sergio Beristain Souza, CEO of Beristain + Associates, about the new legal and regulatory landscape of Mexico's hydrocarbons industry. Beristain + Associates is a Mexican law firm providing services to clients operating in the energy industry.

The firm specialises in oil and gas, electric power and environmental issues in the domestic energy industry and its clients include the Federal Electricity Commission, National Hydrocarbons Commission, Energy Regulatory Commission, Pemex, Gas Natural Fenosa, TransCanada, IEnova and many others.

• On developing the energy industry: “We must be wide open to bringing in the technologies, groups and consortiums necessary to rework our business in the energy industry. Most of the government authorities are willing to take the necessary steps to create a very safe and environmentally friendly energy sector, not only regarding the legal framework, but also in helping companies make a secure and guided market entry in Mexico.”

• On collaboration: “If we achieve a good level of understanding between the authorities, entrepreneurial companies, big energy groups and Mexican citizens, then we can match all of these factors with the needs of the international market. Thus, we will have incredible projects with a positive social impact with great revenue for companies. That is the only way. The key players must align under this perspective.”

• On Mexico-USA relations: “Mexico-US relations have had ups and downs, but business and commercial relations always prevail. Yes, there have been some tensions, but in any healthy commercial relationship this has to happen, so I don’t foresee any considerable impact in the domestic market for two reasons: With the energy reform, the Mexican market is becoming more independent and commercial relations between both countries will always find a way to make the best of the current situation.”

 

• On regulatory frameworks: “We are on our way to developing great schemes and reinforce the existing legal framework and authorities that give us all the necessary tools to have clean, transparent and positive environmental projects. All that is legal requires evolution. We have a new framework for energy regulation, but we are moving towards a more mature legal framework, a better regulation and judicial precedents. Of course, there are challenges and detractors. We are working very hard to overcome and remove all of them. We have the right tools, international support and economic resources to create a new, positive energy environment for Mexico.”

Beristain also discussed the investment risks faced by new entrants in the domestic market and the relationship between Mexico and the USA. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Sergio Beristain Souza below.

What must Mexico do to ensure the success of the energy reform?

We must be wide open to bringing in the technologies, groups and consortiums necessary to rework our business in the energy industry. Most of the government authorities are willing to take the necessary steps to create a very safe and environmentally friendly energy sector, not only regarding the legal framework, but also in helping companies make a secure and guided market entry in Mexico.
We as a law firm, and Mexico as a whole, only seek projects that are political, legal and socially correct. You must understand and respect all the geographic factors that are at play in Mexico and be sure that you are adding some value towards all the society and opportunity areas of the Mexican people.
If we achieve a good level of understanding between the authorities, entrepreneurial companies, big energy groups and Mexican citizens, then we can match all of these factors with the needs of the international market. Thus, we will have incredible projects with a positive social impact with great revenue for companies. That is the only way. The key players must align under this perspective.
The energy reform has given Mexico an opportunity to work with a new legal framework and expand our activities. There are still missing parts of the energy market that have not been explored and this represents an opportunity for law firms, as the business is relatively new. Mexico must develop new projects and markets.

Are regulatory bodies and law firms equipped to help foreign investors face the risks present in the domestic market?

At any moment, in any geographic area, there are risks. That is how it is. The positive factor is that we have solutions for all foreseeable problems. It is possible to create projects in a safe and healthy way in Mexico. I cannot see any big problems that exist without solutions.
As a firm, we were involved in most of the biggest problems the industry faces. We have solved these problems – not only the law firm, but the regulatory authorities as well. We all worked on these issues as a team. Right now, we are aligned to resolve any risk.

How will the tensions between Mexico and the USA impact the domestic energy industry?
Mexico-US relations have had ups and downs, but business and commercial relations always prevail. Yes, there have been some tensions, but in any healthy commercial relationship this has to happen, so I don’t foresee any considerable impact in the domestic market for two reasons: With the energy reform, the Mexican market is becoming more independent and commercial relations between both countries will always find a way to make the best of the current situation.

Are the existing regulatory agencies capable of enforcing a more efficient oil and gas market in Mexico?
We are on our way to developing great schemes and reinforce the existing legal framework and authorities that give us all the necessary tools to have clean, transparent and positive environmental projects. All that is legal requires evolution. We have a new framework for energy regulation, but we are moving towards a more mature legal framework, a better regulation and judicial precedents.
Of course, there are challenges and detractors. We are working very hard to overcome and remove all of them. We have the right tools, international support and economic resources to create a new, positive energy environment for Mexico.

How can the country’s pipeline development become more streamlined?

Many of us at the firm were lawyers at natural gas distribution and transport companies, so we have litigation experience in similar cases and understand how to develop these projects in Mexico. In the past, we faced challenges from the Workers Revolutionary Party because the federal government’s natural gas projects were related to the Institutional Revolutionary Party. Developing and co-ordinating these two forces in harmony was not easy.
Today, we are very open with local and federal authorities that offer energy products. There is a culture of promoting new energy projects among local and federal authorities. They understand the importance and know that they can save money instead of paying the CFE [Federal Electricity Commission] if they create a solar park or farm. They understand that this is a huge business and a very important part of the evolution towards creating new jobs.
It is now far easier than it was in the past. We don’t have the best legislation in the world, but there are expert lawyers that can be put on this right away and give the best solutions.
Gas companies have the perfect picture of how to develop pipeline projects. It is a matter of hiring Mexican companies that understand this kind of programme and performance. It does not work so well if you hire an international firm to handle domestic issues.

Do local legal firms possess adequate energy expertise?
It is necessary for lawyers to specialise in the energy industry. Even though Mexico has several firms that offer this service, the country does not have the general experience. For example, there are firms that took intellectual property lawyers and told them that they need to be experts on energy. That is not serious.
We need Mexican universities to create Master’s degree [programmes] including all the knowledge related to international studies and experts in foreign energy institutions. We must create a new training bubble to have the best lawyers, technology and engineers. It is hard work, but we are not starting from zero. Mexico is on its way to achieving the necessary legal training.

What should companies looking to enter the domestic energy market be aware of?

Any foreign company that wishes to come and invest in Mexico’s energy sector or any other market, should bear in mind that the energy projects, for example, have the potential to be a successful as they want if they ally themselves with serious local law firms and companies that understand the landscape and have the experience to provide them with the best counseling and strategy. Hiring local law firms with global perspectives will be key to provide the properly guided market entry that all companies coming into a new marketplace desire. In other words, foreign companies will need efficient allies with boots on the ground.

What are some of Beristain + Associates’ primary projects in 2017?

Our firm is involved in many cases. We cater to every energy vertical except for geothermal and nuclear. We have worked with the most important players in the industry in all of their fields, including Gas Natural Fenosa, IEnova, CFE, TransCanada and Pemex.
We are doing currently working on some projects with the National Hydrocarbons Commission bidding rounds, which are very new for us.
Most of the firm’s experience comes from civil regulations. If you create risk in the land because of drilling, civil regulation has a solution created over many years with wise judicial decisions in Mexican courts. Our firm has several cases in court related to civil regulation, not only in the drilling industry, but also in others such as natural gas, among others. The new energy regulation is very well supported.
Right now, we have one of the biggest projects in the world related to petrochemicals, the Braskem-Idesa [Ethylene XXI] petrochemicals complex. We have more than 100 international technical norms within that field. This is something new for us because there is no authority or entity in Mexico that has this much information.
We are learning and understanding all about the international perspectives and technical knowledge. One of our clients brought international technicians to help us understand these technical norms. All of it was taught to local people, who are the ones that build and operate the project. We have all the related information and share it with local universities and technical institutes for training.

What are Beristain + Associates’ objectives in the short-to-medium term?

Our vision is to incorporate the best legal practices in the world. Law firms in Mexico do not represent a huge market because Mexican companies are not always focused on receiving the best legal counseling. It is a new culture that is growing.
We are also trying to take the law firm abroad, meaning that we are in the process of teaming up with other law firms and companies outside of Mexico. So far, we have several very strict training programmes to create this model.
Training is very important. Any energy lawyer that does not have basic technology training and knowledge is not going to be a good energy lawyer. If you put down a pipeline, you have to understand the process to build it. You need the technicians and the technicians need lawyers. Sometimes our knowledge is not mature enough to understand that.

For more information on Beristain + Associates and Mexico’s evolving energy regulations, see our business intelligence platform, TOGYiN.
TOGYiN features profiles on companies and institutions active in Mexico’s oil and gas industry, and provides access to all our coverage and content, including our interviews with key players and industry leaders.
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