Bonatti Betting on LNG, E-Fuels and HydrogenBy María José Goytia | Mon, 06/27/2022 - 09:28
Q: How would Bonatti measure the impact of the changes of the past two years on its operations and portfolio?
A: The impact was significant. In our sector, there were few new projects and the very few that arose were heavily competed and featured narrow margins. During the pandemic, Bonatti continued its operations without interruptions at its ongoing projects. In Mexico, the company occupied itself with completion of the expansion network of pipelines started during the last administration, though there are still some pipelines under development. Bonatti has recently worked to construct storage terminals for refined oil products, too, but new projects were interrupted by policy changes. As a result, we must wait for a new cycle of infrastructure development to regain our previous levels of activity.
Q: How has your relationship evolved with regulators and governmental authorities regarding the policy changes for storage terminals?
A: Bonatti is a contractor, so it does not directly participate in relationships with the government. We accompany our clients on their investment plans and ensure strict regulatory compliance. Bonatti works mainly for the private sector. In Mexico we do not work directly with state entities even if we totally comply with the quality standards required from the state entities as they are usually the final client of our clients. Nevertheless, to the extent that some of these policies affected the activity of our clients, it also affected our activities.
The changes in labor legislation had more of an impact on the company’s operations because it strengthened Bonatti’s position. In our sector, companies that work with a high percentage of fully-contracted manpower are quite rare but Bonatti prefers to work this way. For us, it was easy to adapt to the new labor reforms that were approved in 2021. This enabled us to offer our clients full compliance with the new norms and give them the peace of mind that outsourcing practices are not an issue on our projects. This provides legal certainty to the projects because there are many follow-ups from the authorities to oversee compliance regarding these rules.
Q: What are the areas of opportunity for Mexico’s national pipeline system and what role can Bonatti play in these improvements?
A: We are seeing that a new development cycle is emerging. The company had the privilege to take on the first big pipeline construction contract after the pandemic, involving the construction of 215km. We are waiting for the approval of these projects, which would expand the network of existing pipelines. Bonatti retains hope that some anchor projects will be approved and detonate others, opening to door to another expansion of the system.
Furthermore, the company is pursuing the possibility of participating in the construction projects that aim to bring gas to the southeastern region of the country, where power plants are already under construction. We are better positioned than any other company in Mexico to play a key role in this development.
Q: How would you assess the importance of pipeline gas and LNG for Mexico toward the future?
A: We are firm believers in natural gas as a global transition fuel for the coming decades. Proof of this, the development of liquified natural gas (LNG) projects, which we are also betting on. LNG developments are flourishing due to the current geopolitical issues. Nevertheless, the world, independently of the spot price of natural gas, highly rates LNG’s efficiency as a fuel for power production as well as the opportunity it offers to mitigate the environmental impact of this production during the transition to new forms of energy. In Mexico, the demand for natural gas continues to grow. Nevertheless, at a domestic level, there are no short-term plans to substitute imported gas by nationally produced resources. CFE’s development plans do rely heavily on natural gas-fired power production, meaning the country’s energy matrix will be increasingly reliant on this fuel.
Q: How does this influence the momentum of LNG infrastructure developments?
A: The momentum in the market has picked up. We are working on several projects along the Pacific coast of the country and are supporting our clients there. President López Obrador has mentioned some of these projects, in which Bonatti is also involved in the development stage, providing feasibility, investment and basic engineering development studies. The momentum surrounding LNG has not reached its peak and we will see strong activity in the area.
Q: What lessons has Bonatti learned regarding its work with local communities to ensure its projects’ success?
A: Bonatti is a foreign company but operates with a robust local component, something many EPC firms claim but do not actually do. The diversity and integration of our labor force is an asset. Despite having arrived to the market only 10 years ago, many key positions are assigned to local talent. At the operational level, Bonatti bases much of its competitive advantages on research and development, leading to technology that we apply to our construction processes. We emphasize the use of local resources, so we are not dependent on outside resources. Furthermore, all the company’s welders are Mexican. Our projects have local management to oversee construction and our engineering director is a Mexican energy regulatory expert. Everywhere Bonatti works, it integrates into the community. We are the support system for these communities as well.
Q: What are Bonatti’s objectives for 2022 and beyond?
A: Since 2021, Bonatti has created business units for sustainable projects. We are working on carbon capture processes and clean hydrogen production, for example. The company has strong experience developing solar projects outside Mexico and we are trying to bring that model here, too. We are also exploring participation in some projects for production of non-conventional fuels outside the hydrocarbon’s spectrum. In Chile, the market has trusted Bonatti’s experience in developing the EPC full-cycle of water transmission pipelines, and we are eager to bring that experience into the Mexican market.
2022 has been a transitional year. We have completed the projects pending from the pandemic, which experienced many difficulties. The company has stabilized its operation and is satisfied with how work is developing. Bonatti is confident it can endure the impact from the pandemic and regain its usual work levels. Our objectives from today until 2024 are to surpass our pre-pandemic activity levels, while remaining anchored in the natural gas industry for the next five years as we continue to grow our sustainability-minded efforts exponentially.
Bonatti is an Italian EPC Contractor for the Energy Industry founded in 1946. It provides EPC, pipeline and plant construction, as well as O&M services. Bonatti arrived in Mexico in 2012 and has participated in the construction of several pipelines, CS and Storage Terminals.