Central & South America's Leading Oil and Gas Attorneys Reflect on Reforms and Trends

One of the distinct pleasures of directing the DU graduate program is the opportunity to meet and get acquainted with some of the brightest legal and policy minds in the natural resources sector. Recently I chaired a panel discussion of Central and South American lawyers who discussed oil and gas reforms and new trends in their respective countries.

The afternoon that I -- and the attendees at the Rocky Mountain Mineral Law Foundation International Institute in Buenos Aries -- spent with these individuals was particularly enjoyable and illuminating about the opportunities and challenges in the oil and gas sector in six key Latin American countries. These lawyers -- each an expert in his own country -- represent a wealth of experience and information about what surely will be enormously sought-after opportunities in Central and South America.

I'll talk about the speakers in the alphabetical order of their country-specific presentations:

• Argentina: Pedro Serrano Espelta is a partner at Marval, O'Farrell & Marial in Buenos Aries. He specializes in corporate law, mergers and acqusitions, shareholders' disputes, and oil and gas. Mr. Serrano Espelta provided a fascinating look at how the Argentine government, through the 2002 mandatory renegotiation of gas licenses, has attempted to make gas companies in Argentina and their shareholders responsible for any damages suffered by the government as a consequence of a series of international arbitration awards. He said, "Making the gas companies grant onerous indemnities as a condition to receive a deserved tariff adjustment is a dangerous proposition. If the indemnities are executed the gas companies could enter into insolvency or bankruptcy and, as a consequence, have their gas licenses terminated. In turn, foreign investors, particularly those that did not consent to the renegotiation agreements and the indemnities, could bring new legal or arbitration proceedings against the government."
• Brazil: Paulo Valois Pires is a name partner in the Brazilian law firm of Schmidt, Valois, Miranda, Ferreira & Agel. His practice includes representing clients in the oil and gas sectors, platform and pipeline finance and construction, biofuels, and power generation. He has authored or co-authored several books about the oil and gas sector. Mr. Valois spoke about the Brazilian Pre-Salt Layer. Among other things, he pointed out, "Certain different regimes are being considered as alternatives for the current regulatory regime with views of better regulating the exploration of the Pre-Salt Layer. Some of the regulatory regimes being considered are the Norwegian regime, the creation of a new national oil company to contract the exploration of these areas and the adoption of production sharing agreements...The discussions concerning the new regime for the exploration of the Pre-Salt Layer is expected to be the main issue concerning upstream activities in Brazil, and a decision is eagerly awaited by companies still interested in exploring these areas."
• Chile: Ali Shakhtur S. is the legal director of ENAP E&P and Enap Sipetrol S.A. He has been a frequent speaker about oil and gas matters. He said, "From the business point of view, we have to highlight that there is in fact a new oil and gas market in Chile for international oil companies and therefore a good source of opportunities. There is a great potential and the Special Operating Contract is a government contract with very attractive commercial terms. East of the border -- in Argentina -- we see very interesting basins with a history of success. Some of these proven geological [areas] are being studied and will be replicated in Chile. This is what the activities being now carried out will demonstrate and will probably determine the future of the oil and gas business in Chile."
• Ecuador: Francisco Roldan is a partner with Perez Bustamante & Ponce in Quito. He is a director of the Chamber of Industries of Pichincha and his practice areas include oil and gas. Mr. Roldan provided an overview of the new Ecuadorian Constitution as well as a reflection on the challenges and corresponding opportunities facing foreign oil and gas producers in his country.
• Mexico: Juan Manuel Sancho Rodrigo is a partner with Gonzalez Calvillo, S.C. in Mexico City. He has expertise in project finance and corporate issues involving energy projects. He noted that the Mexican Constitution reserves to the government all subsoil rights including hydrocarbon deposits. However, he said, "A new budget regime is in place. Pemex is entitled to invest the excess income it generates and make budget adjustments without the approval of the Ministry of Finance." Additionally, he noted that contractors may in some instances receive additional compensation under three scenarios: (1) savings based on having reduced the time of works performance; (2) benefits from new technologies provided by the contractor; and (3) other causes resulting in a higher profit for Pemex.
• Venezuela: Miguel I. Rivero Betancourt is a partner in the Caracas firm of Hoet Pelaez Castillo & Duque. He has special expertise in setting up oil companies in Venezuela, including the design and preparation of bidding and negotiation contracts of common use in his country's petroleum industry. He explained that "What has been happening in the regulatory framework of the oil and gas sectors of Venezuela is far more than a simple modification of legal regimes, but rather it is the implementation of a different conceptual framework for the sector as a whole." That being said, however, he went on to point out, "There are significant opportunities arising from this new scenario. We believe that the Venezuelan oil sector will need, more than ever, significant foreign investments to provide technology and capabilities that are diminishing inevitably as a result of the government's policies."