Mexico reforms may make US offshore industries look south, Luthi says

Mexico’s continuing energy reforms could make US offshore oil and gas producers consider leasing there if more of the US Outer Continental Shelf is not opened for exploration and development, National Ocean Industries Association Pres. Randall B. Luthi told a Washington audience on Sept. 27.

Mexico’s continuing energy reforms could make US offshore oil and gas producers consider leasing there if more of the US Outer Continental Shelf is not opened for exploration and development, National Ocean Industries Association Pres. Randall B. Luthi told a Washington audience on Sept. 27.

“If the US doesn’t open more of its federal offshore areas, operators probably will start looking elsewhere, and areas that are closer may be appealing. This puts Mexico into a very interesting position,” he said during a panel discussion at the 2017 North America Energy Forum at the Woodrow Wilson International Center for Scholars.

Government regulations can provide consistency and certainty, but some which were imposed following the 2010 Macondo deepwater well blowout and crude oil spill went too far, according to Luthi, who previously directed the US Minerals Management Service from July 2007 through January 2009.

Noting that 94% of the US OCS is closed to oil and gas activity, he said that this created a heavy offshore oil and gas concentration in the central and western gulf. “The good news is that when Hurricane Harvey came through a few weeks ago and platforms were shut down, no oil and gas was spilled,” Luthi said. “But access elsewhere is denied not just geographically, but through regulations that make it impossible to go forward.”

A second panelist, Luis Angel Martinez-Montoya, chief advisor to Carlos Regules, executive director of Mexico’s National Agency for Industrial Safety & Environmental Protection of the Hydrocarbons Sector (ASEA), said the agency has emphasized workplace and environmental safety first in its stakeholder engagement efforts while trying to provide more regulatory certainty.

Since ASEA began to operate in 2015 it has tried to identify risks and find best practices to minimize them not only from other governments but also from oil and gas producers “because these can emerge more quickly in the field,” Martinez-Montoya said. The goal is to make regulations in Mexico’s portion of the gulf familiar to offshore operators so they can work well on both sides of the border, he said.

Energy is more partisan

That contrasts with what a third panelist, Christopher Guith, senior vice-president for policy at the US Chamber of Commerce’s Global Energy Institute, called a huge federal energy regulatory overreach during the Obama administration. Energy also has become more partisan, with both major political parties being pulled to extremes by vocal minorities without achievable agendas, he told the Wilson Center audience.

“There’s a very vocal minority on the left that has made it quite difficult for any Democrat to be elected to Congress on a pro-energy platform,” Guith said. “While the federal government keeps changing its energy direction from administration to administration, 80% of these decision now are made at the state and local level. The anti-fracing groups have moved down to that level to attack the infrastructure for moving molecules to markets from the wellhead.”

He said that since the beginning of 2017, the Trump administration and 115th Congress have respectively used executive orders and Congressional Review Act bills to reverse several regulations imposed late in the Obama administration’s final term which appeared excessive. “A lot more was done on energy than on other parts of the economy in the first 6 months,” Guith said.

A fourth panelist, Chief Alberta Energy Regulator Jim Ellis, said that improved technology is making it necessary to make decisions more quickly. “Regulators need to be fast, agile risk-takers. Companies come in every day with new technologies. We can’t wait 3-4 years to make decisions now,” he said, adding that Alberta has adopted an integrated decisions approach to make the process quicker.

Protests increasingly center on transportation and emphasize social responsibility more than environmental concerns, he reported. “Who wouldn’t want to take a shot at the part of the system that moves energy from the wellhead to the refinery or burner tip?” Ellis asked.

Contact Nick Snow at nicks@pennwell.com.

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