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Don’t lower your standards to attract investors – Mexican Regulator
Executive Director of ASEA, Carlos De Regules Ruiz-Funes
By Kiana Wilburg
Strong environmental regulations for the oil and gas sector will not hamper investor confidence.
In actuality, companies like ExxonMobil, Shell and Chevron, are used to operating in environments that demand compliance with the best safety standards. As such, Guyana’s authorities should not lower their standards in fear of scaring off rich oil companies.
This salient piece of advice was recently provided by Executive Director of Agency for Security, Energy and the Environment (ASEA) of Mexico, Carlos De Regules Ruiz-Funes.
In an exclusive interview with Kaieteur News, the Mexican official said he has noted some of the concerns regarding vague contractual terms for environmental protection. He stated, however, that from his experience, keeping a high standard and ensuring the implementation of best practices will benefit the country in the long run.
The Mexican official said, “If you start having considerations as to the competitiveness of your regulations, then you aren’t doing your job. You will end up lowering your standards to attract investments. It really won’t be good for investment decisions. In a previous life, I was the Vice President of Strategy Planning in PEMEX (Mexico’s National Oil Company). I was responsible for putting together the business plan for 20 years.”
Ruiz-Funes continued, “And one thing we looked at very carefully was the stability of the regulatory framework. We didn’t want it to go down and deregulate all things concerning the environment, because in the same way you deregulate for political or commercial reasons, you over-regulate for the same…Companies like Exxon, Shell, Chevron, they are accustomed to operating in global environments, and regulated environments.”
The Executive Director added, “So for Mexico, what we did was understand the best practices in the world, and we put them in the Mexican context. It has worked fairly well. We have a regulatory model with various components to it which have proven to be adequate…”
Ruiz-Funes said that prevention is an important aspect of Mexico’s regulatory model. He said that this component allows the ASEA to be proactive.
He commented, “You don’t want to react once the accident happens or when the pollution occurs. You want to have environmental and safety management systems in place that are mandatory for the operators and will prevent accidents from occurring.”
Reflecting on Guyana’s “clean sheet of paper with oil”, the Mexican official said he cannot emphasize enough, the importance of Guyana going with best practices as opposed to thinking it will scare off investors.
He reiterated, “They are used to best practices. They need good regulation.”
The Mexican official asserted that what scares away serious investors are whimsical political changes to regulations. He said it is therefore important that Guyana’s regulators are free from the influence of the political cycle, and that long term certainty resides in the regulatory body.
There are many examples around the world where the governments of nations ensure that oil companies provide insurance for oil spills. Unfortunately, Guyana is not one of those nations.
In the Production Sharing Agreement (PSA) signed between the Government of Guyana and USA oil giant, ExxonMobil, there is no provision for insurance to compensate for any adverse effects of an oil spill.
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