Acorn Ideas

Issue No. 47, February 2017

Social Risk Trends in Mexico’s Energy Industry

In 2014, we predicted that most significant obstacles to operators investing in energy sector opportunities in Mexico would be related to environmental and social considerations, rather than logistical, legal or financial risks1. Entering 2017, this certainly seems to be the case.

In the interim, Acorn International has had the privilege to be at the forefront of helping energy industry investors manage social and environmental risks in Mexico. We’ve learned a lot, and given how dynamic the industry and regulatory environment have been lately, we’re still learning. Here are three examples of what we’ve learned recently about social risks facing E&P investments, from our on-going work and engagement in Mexico:

Advantage: SENER
Obtaining review and approval from ASEA for environmental impact assessments (EIA/MIAs) is proving to be very difficult due in part to the continued learning curve of this new agency. Operators are generally having an easier path to review and approval with the Secretary of Energy (SENER) as it executes its responsibility to review and approve SIAs and, where needed, initiate prior consultation with indigenous communities. The latter point is important because many of Mexico’s indigenous and traditional people are dispersed throughout lands with unclear title/tenancy agreements, rather than concentrated in protected reserves. This means that  it may be more common than expected to have SENER’s prior consultation requirements applied.

Moving Beyond PACMAs
Operators (especially PEMEX) in Mexico have typically focused their social performance / social risk management efforts on offering social investment programs (PACMAs) for project-affected communities (PACs). Good practice dictates first building understanding and sustainable relationships with PACs. Successful operators will need to engage stakeholders in meaningful dialogue, planning and monitoring – and deliver social investment as a cooperative outcome of that dialogue. We recently worked with the developer of a power plant in Mexico to design community awareness, inclusive training/employment practices and a human rights policy that will be much less expensive to implement and build more public support than offering standard PACMAs.

Participatory Baseline Studies
Participation by PACs in social baseline assessment is required by SENER – nonetheless it is not a common practice in Mexico, particularly in the oil industry. So PACs, NGOs and other stakeholders will need to be not only allowed but guided in how to participate constructively. The advantage for E&P ventures in the Perdido area is that the fishermen, chambers of commerce, unions and other stakeholders of Tamaulipas will likely be more willing partners than in other coastal areas. Our team has already identified candidate stakeholder groups that might be good extended team members in conducting baseline studies and monitoring.

Navigating the evolving social risks facing energy industry investments in Mexico will continue to be a critical determinant of controlling transaction costs, keeping projects on schedule, and maintaining the sustainability of operations. We’re focused on providing solutions to these challenges, and we’re excited to be at the forefront of helping investors manage these risks.

 

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Acorn International LLC delivers social and environmental risk management consulting services to the extractive industries and investors worldwide. We work with local partners in over 80 countries worldwide. Use of these local specialists is paramount, particularly in developing countries, where information is often scarce, second-hand, and unreliable. We look forward to engaging in continuous improvement for the industry and building capacity with our partners.

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Issue 40 -A Multi-Stakeholder Partnership in Ghana: Marine and Fisheries Management
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Issue 37 -A Community Look-back on Ebola
Issue 36 -Ghana and the Voluntary Principles: Implementing the Human Rights Protection Framework
Issue 35 -Inundation
Issue 34 -Colombia: Local Hiring Requirement for O&G Industry
Issue 33 -Mature and Frontier Mining Geographies: Where does Greater Risk (and Reward) Reside?
Issue 32 -Local Content in Mining: Increasing Expectations and Potential Solutions
Issue 31 -Fast Money Beware: Non-Technical Risk Due Diligence
Issue 30 -Social and Environmental Performance - Considerations for Difficult Commodity Price Environments
Issue 29 -A Window into the Opposing View - Stakeholder Concerns about Oil and Gas in Mexico
Issue 28 -Why Non-Technical Risks Matter to the Mexican Apertura
Issue 27 -Equator Principles:Drivers of Sustainability in the Oil and Gas Industry?
Issue 26 -The Transparency Tightrope: Examining UNEP’s New Access to Information Policy
Issue 25 -July 2014: Bouston
Issue 24 - July 2014: Land Tenure and Property Rights - Where Legal Compliance May Not Be Enough
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

 

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Email: info@acornintl.net