Talanza Energy Consulting

enero, 2020

SASISOPA Regulatory Compliance for Upstream

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The majority of Exploration and Extraction of Hydrocarbons Contracts (E&P Contracts) in Mexico are moving into  appraisal and development stages. This represents a change in their projects’ risk profile. Therefore, it becomes relevant  to address some common issues to comply with the requirements in the Mexican regulations for the health, safety and  environmentriskmanagementsystems (SASISOPA, perits initials in Spanish) beforethe Agencyfor Safety, Energyandthe  Environment (ASEA).

1. NOT TELLING ITS STAGES APART

SASISOPA consist of four stages, which are often confused (see right column):

  1. Registration — 2. Authorization — 3. Follow up — 4. Modification

Even E&P Contracts have confused stages 1 and 2. In Rounds 1.1 to 1.4, the  National Hydrocarbons Commission (CNH) was accepting the sole  registration to comply with contract clause 4.1. Later, E&P Contracts expressly  requested the authorization of the SASISOPA (stage 2), which was impossible  to comply with at such an early point in the project. TALANZA successfully  engaged in advocacy efforts before ASEA and CNH to protect Operators from  incurring in a contractual breach, which resulted in a communication from  CNH to Operators stating that the SASISOPA registration would be acceptable  instead of its authorization.

Concurrently, more often than not, Operators believe they are in a more  advanced stage of their SASISOPA, being in a state of non-compliance  out of confusion.

2. LOSING TOUCH WITH THE PROJECT’S REALITY

SASISOPAs shall always be consistent with the current status of the project. Thus, Operators must update their SASISO-  PA’s file via a request for modification whenever a project undergoes changes that alter the risk profile of the project, such as moving from exploration to appraisal or development stages or any modifications to their respective plans.

3. KEEPING IT IN THE DRAWER

Most of ASEA’s findings during an inspection or supervision procedure can be attributed to a common cause: Operators  obtain the authorization oftheir SASISOPA tocomply withthe legal requirements andthen store the authorized SASISOPA  in the drawer and use their own Corporate HSE Risk Management System instead. Why? This happens for several reasons:

  1. To accelerate the start of operations, some Operators request the SASISOPA authorization by presenting procedures or mechanisms that are not systematically related with their Corporate HSE Risk Management System.
  2. The person in charge of obtaining the authorization does not fully understand the different stages of SASISOPA and  its requirements or, if done by an external, the consultant doesn’t care to understand the Corporate HSE Risk  Management System and therefore, neither the person in-house nor the consultant can interlace both systems.
  3. Not embracing the SASISOPA as the tool it’s meant to be, that links the Corporate HSE Risk Management System  with the Mexican requirements.

This entails a high risk of regulatory non-compliance, because although the authorized SASISOPA is aligned with the  applicableregulations, ASEA, throughanauthorizedthird-party, will evaluate thesystem that is actuallybeingusedandwill  most likely lead to observations in the report.

4. DOWNSIDES

Ultimately, these malpractices may lead to a series of negative consequences, ranging from:

  • Wasted resources;
  • Penalty fees;
  • Partial closure of its facilities, equipment or processes;
  • Total closure of its facilities, equipment or processes, and
  • Administrative rescission of the E&P Contract in case of a serious accident  that could cause damage to facilities, fatalities and loss of production,when it is demonstrated that the SASISOPA was not updated or aligned  with the applicable regulations.

5. RECOMMENDATIONS

Overall, these risks can be avoided with a correct understanding of the SASISOPA’s regulatory requirements per stage.  This will allow creating a regulatory compliance strategy that systemically intertwines the Corporate HSE Management  System with SASISOPA’s regulatory requirements. An authorized SASISOPA like this, will allow Operators to  implement the system they’re experienced in while complying, thus, minimizing not only operational risks but also  legal and compliance risks.

SASISOPA STAGES:

1. REGISTRATION. During this stage, Operators  must register their Corporate HSE Risk  Management System to obtain their Sole  Regulated Party ID (CURR, for its initials in  Spanish). ASEA grants the registration once the  Operator demonstrates through the opinion of  an authorized third-party, that its Corporate HSE Risk Management System has  correspondence with each of the 18 elements  established in the ASEA Law.

2. AUTHORIZATION. Prior to the start of  hydrocarbons activities, Operators must have  the authorization of SASISOPA, which consists  in demonstrating that the registered SASISOPA  contemplated in stage 1 will be implemented  according to the specific activities of the project.  At this stage, a risk analysis of the extended or  detailed basic engineering is performed, and the  evaluation of environmental aspects and other  impacts are contemplated. SASISOPA’s  authorization requires an implementation  program, that must be completed in no more  than two years.

3. FOLLOW UP. This stage applies to the entire  project’s life-cycle to keep ASEA informed of the  progress in the implementation and  performance of SASISOPA through the  following reports:

> Biannual progress of the implementation programs where Operators must present  fulfilment evidence of the commitments  established in the authorization;
> Annual performance report through which the ASEA evaluates the performance of  SASISOPA, with its indicators, and
> Biannual report of the results of the external audit and the attention of findings plan where  the Operator must take special care in the  attention of the observations of the detected  findings.

4. MODIFICATION. Operators must keep their  SASISOPA updated at all times by submitting to  ASEA the description of the SASISOPA  modifications appropriate to the new risk  profile, at least 30 business days before carrying  them out.

In Talanza, we have successfully advised interested  firms in business opportunities by giving analysis of  supply, potential demand, logistics availability, and  providing a regulatory compliance plan for energy  projects.

 

Como firma internacional con presencia en Estados Unidos, México y Colombia, encaminamos empresas del sector energético hacia un correcto cumplimiento normativo y asesoramos gobiernos a diseñar e implementar regulaciones que impulsen la sostenibilidad en el largo plazo para dicha industria.
Resultado de la sinergia entre líderes Canadienses y Mexicanos, en Eminent nos especializamos en la cuantificación, control y reducción de emisiones de metano. Como pioneros en México en aplicar la tecnología OGI, potenciamos la sostenibilidad de la industria petrolera internacional.