© 2012 The Texas Lawbook.
By Natalie Posgate
Staff Writer for The Texas Lawbook
Jones Day scored two hits when it hired Scott Schwind for its Houston office: a new partner for its energy practice and an expert in the Latin American and African transaction markets for oil and gas.
Schwind is a cross-border oil and gas transactions lawyer who comes to Jones Day from Thompson & Knight’s Houston office, where he was a partner. He advises clients with upstream, midstream and downstream deals both in the U.S. and around the world.
His experience includes exploration and production projects, foreign and domestic acquisitions and divestitures of oil and gas producing properties and infrastructure developments – particularly in the energy and petrochemicals industries.
Schwind knows that cross-border transactions involve speaking many different tongues. He speaks Spanish, Portuguese and French. He is a graduate of the University of Texas School of Law.
The Texas Lawbook did a Q&A with Schwind to discuss his expertise and what the industry currently has to offer.
The Texas Lawbook: What are the current hot issues and/or challenges in the cross-border oil and gas transaction sector?
Schwind: The phenomenal North American shale developments over the last few years have really revolutionized the oil and gas sector in the United States in a way that could have a significant geopolitical impact around the world. The fact that there are resources of shale gas and shale oil in lots of places around the globe will certainly be a factor too, and much has been written and said about when and how the shale boom will expand beyond the borders of the U.S. and Canada. For now, though, there hasn’t been much actual shale activity of significance outside of North America. I think there are a number of reasons for that, including real property regimes, environmental concerns, and the availability of rigs and others, but I think this is something to keep an eye on in the next several years.
In Latin America, I’ve been paying close attention to developments in Mexico. Mexico’s reserves and production have been steadily declining for several years now, despite the fact that the country has plenty of oil in the ground. Unfortunately, aging oil fields, years of underinvestment in exploration, and short falls in technology and know-how are beginning to catch up with Mexico. If those declines continue, Mexico is on the road to becoming an oil importer in just a few years. While the logical solution would be to allow international oil companies to invest in Mexico alongside PEMEX, the Mexican regulatory framework, including the country’s constitution, doesn’t allow anyone other than the government to own production or book reserves. Although Mexico has begun to allow private companies to explore for and produce oil and gas under multiple services contracts with PEMEX, most experts think that additional and politically controversial reforms are needed to reverse the declines. Mexico’s newly elected president, Enrique Peña Nieto, said encouraging things about oil reform during his campaign, but what will he do once he takes office?
The industry has also been closely watching developments in Brazil. A dispute in the Brazilian congress over the Brazilian states’ share of royalties from offshore oil and gas production has delayed the 11th bid round, which will be the first meaningful auction of offshore blocks since 2008. It now looks unlikely that the bid round will take place during 2012. The 11th bid round doesn’t include any blocks in the pre-salt formations offshore of Brazil, which have been widely trumpeted as the crown jewels of Brazil’s oil and gas resources, and there is currently no timeframe for when the first auction of pre-salt blocks will take place. There is also no publication date for the model production sharing contract that will be used for those pre-salt blocks. The industry has been fascinated by the allure of Brazil’s pre-salt resources for several years now, but when will that promise become a reality? Even more troubling is the fact that these delays come at a time when the Brazilian government has been perceived by some observers as taking steps to consolidate government control over the country’s oil and gas industry and make the sector less friendly to foreign investment. This bears watching too.
TLB: Talk about some of the recent deals you’ve been working on, specifically your expertise in Latin American and African transactions, and what these markets have to offer.
Schwind: One especially interesting deal that worked on recently was the development of a diamond mine in Angola. I’m used to dealing with colorful characters in the international oil & gas industry, but that’s nothing compared to the people that you meet in the African diamond industry!
Over the past several years, some of the most significant oil and gas activity has focused on the Western Hemisphere. A lot of that has been in the U.S. and Canadian shale plays, of course, but there has generally been a lot of activity throughout the Americas. I think this reflects the fact that international oil and gas companies are looking for opportunities in their own backyards (at least for U.S. companies) and in jurisdictions that are relatively stable and friendly to foreign investors. I think that trend will continue. I also think that the opportunities to develop natural resources in Africa are so alluring that there will always be companies who are willing to do the hard work needed to overcome the challenges to doing business in that part of the world.
One of the challenges facing the development of Brazil’s oil & gas resources is the need for rigs and drill ships that are capable of drilling the deepwater wells needed to reach the hydrocarbons that are locked in the country’s pre-salt formations. By implementing some heavy local content requirements, the country has encouraged these assets to be built in Brazil, and I’ve been working on some of those construction contracts. In particular, I’ve helped clients understand, manage and negotiate the risk allocation schemes and indemnities under those contracts.
TLB: What has been the biggest deal or accomplishment so far in your career?
Schwind: Marrying my wife, Elizabeth, of course! Career-wise, it’s hard to point to a single cross border oil and gas deal that was more significant than the others, at least in terms of what I learned or how the deal impacted my career. Each deal, whether big or small, simple or complex, has its own character and brings unique challenges. I’ve learned from every single one of them. Overall, I feel truly blessed to have the opportunity to do what I do. Every day, I get to work with tremendously smart and extremely talented people who are doing really neat things. The energy industry is a constant source of fascination for me, and I absolutely love working on international transactions with people from different countries, cultures and backgrounds. Building bridges with people and speaking foreign languages are two of the things that really make me come alive, and my job lets me do both.
TLB: What do you hope to contribute in your practice at Jones Day?
Schwind: It’s a real privilege for me to be a part of the Jones Day team. The firm’s reputation for client service is well known, and its global scale makes it a great fit for me. I hope to contribute to both of these core strengths – providing clients with a level of service that is second-to-none and helping the firm extend its critical mass around the globe with my particular experience in energy matters and in Latin America. We have a great team here, and I think we’re going to have a lot of fun.
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