Issue No. 23, May 2014
3 Things I Learned in Mexico - Non-technical Risks in the Oil Industry
Acorn International President Dean Slocum recently returned to Mexico for a series of meetings and shared his thoughts on the non-technical risks companies will face in entering new energy and hydrocarbon opportunities there.
1. Resolution – Everyone I talk with in Mexico feels that the opening of the industry to foreign firms/investors is a done deal. Of course, many aren’t happy about it, and the reasons for this appear to be far more complex than just national pride/fear of change. One person I spoke with said there’s concern among the average Mexican that this will create more opportunity for government corruption.
2. Regulation – The critical secondary legislation for governing the Apertura was presented to Congress – almost on schedule – at the end of April. To date, PEMEX has largely self-regulated on environmental and social performance. A new agency* is being formed to oversee policy, standards and emergency response, but not permits and approvals for new activities. But as in Colombia and other countries facing increased production, the capacity of this agency to meet its governance responsibilities could be a critical challenge for those entering the opened market.
3. Resilience – Fundamental government support for increasing oil production added to the tradition of self-regulation by a monopoly may mean that communities, NGOs and other stakeholders turn to the media or other channels vs a regulatory review process to raise concerns. Understanding these stakeholders and their influence networks, and building the capacity and flexibility to engage effectively with them, may prove to be a critical competency for new players.
It is still too early to tell how this will all play out, but I am convinced that understanding the environmental and social (non-technical) risks that are becoming increasingly important challenges for E&P activities in other countries will be critical to success for those interested in Mexico’s Apertura.
Acorn International is presently accepting subscriptions for a multi-client study on NTR in Mexico’s Apertura. Participants will earn an indispensable platform of knowledge for making qualified decisions about if and how to proceed with investments in Mexico’s oil sector. Our team includes:
- Acorn International – Houston-based non-technical risk expert firm leading new-country entry risk assessments and related studies for oil companies worldwide, with extensive PEMEX experience
- Germán González-Dávila, Ph. D & Paloma Somohano – Mexico City-based consultants on environmental and social responsibility studies
- Juan Manuel Romero – Former PEMEX CFO, former Ministry of Energy Undersecretary for Planning
The study will provide a qualified overview of NTR by addressing challenges and case studies related to:
- Community opinions and concerns about oil and gas activities
- Sociocultural and environmental sensitivities
- Transparency and corruption
- Security and human rights
- Labor relations, capacity of local labor pool and local content expectations
- Emerging regulatory requirements and political realities
We will assess how each of these issues may impact successful foreign investments and what steps can be taken to minimize these risks and translate them to business risks.
Acorn International LLC delivers social and environmental risk management consulting services to the extractive industries and investors worldwide. With experience in over 50 countries, we look forward to engaging in continuous improvement for the industry and helping our clients better manage their non-technical risks thru proactive, context-driven stakeholder engagement.
*National Agency for Industrial Security and Environmental Protection in the Hydrocarbon Sector (ANSIPMASH)
Acorn International Notes
Acorn Notes is a series of periodic papers to share ideas regarding EHSS and sustainability management for international industry.
Issue 23 - May 2014: 3 Things I Learned in Mexico - Non-technical Risks in the Oil Industry
Issue 22 - April 2014: Capacity Building on Stakeholder Engagement
Issue 21 - March 2014: Above-ground Facilities and Stakeholder Engagement: Deploying the 'CAC'
Issue 20 - March 2014: A Starting Point for Shared Equity
Issue 19 - March 2014: What It Takes to Run a Great Consulting Firm
Issue 18 - February 2014: Considering Human Rights - Trends and Lessons in Oil and Gas Impact Assessments
Issue 17 - June 2013: Managing Environmental Health in International Development Projects
Issue 16 - January 2013: Integrating Environmental and Social Performance throughout the Project Lifecycle
Issue 15 - January 2013: The State of Shale Play in 2013
Issue 14 - August 2012: Building Environmental and Social Governance in Host Countries
Issue 13 - May 2012: Human Rights and Business: A New Era
Issue 12 - February 2012: Extractive Industries Confront Pressure for Greater Transparency
Issue 11 - January 2012: Key Updates to the IFC Sustainability Policy and Performance Standards
Issue 10 - June 2011: Oil & Gas and NGOs: New Rules of Engagement?
Issue 9 - February 2010: Annual Study of Sustainable Development Priorities
Issue 8 - January 2009: Annual Study of Sustainable Development Priorities
Issue 7 - May 2008: Top Ten Lessons Learned About Health Impact Assessment
Issue 6 - January 2008: Annual Study of Sustainable Development Priorities
Issue 5 - September 2007: Results of web forum with our International Partners
Issue 4 - January 2007: Annual Study of Sustainable Development Priorities
Issue 3 - May 2006: Suggestions and tips for safe international travel
Issue 2 - January 2006: Annual Study of Sustainable Development Priorities
Issue 1 - November 2005: The Top 10 “unspoken" criteria for determining the success of EIAs