Oscar Scolari
President and CEO
Rengen Energy Solutions
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View from the Top

Oil, Gas Players See Big Prospects in Open Market

Wed, 02/22/2017 - 13:39

Q: How has your portfolio evolved since the beginning of the Energy Reform?

A: The market has opened up in an incredible way and it has been a great opportunity for players in the oil and gas industry as well as in the energy sector. I did not believe I would see such a wide range of opportunities in my lifetime. We are happily surprised with all the options out there, even though they are accompanied by many challenges. Companies must invest in maintenance and upgrades but that is not appealing in the current political climate. There are so many pressing issues in Mexico that the private sector must step in and come up with more economically feasible ways to make these refineries profitable again.

Q: What solutions could Rengen offer to revamp PEMEX’s refineries as it partners with private firms?

A: Many major players like Exxon and Shell may be interested in getting involved in the operations at PEMEX’s refineries but there are many smaller players like Rengen that can offer power generation and steam solutions. The provision of these services is something we are actively pursuing, particularly at the Minatitlan and Salamanca refineries. A large sum of money has been invested to revamp the refinery in Minatitlan but it is still short of electricity and steam. Rengen is predominantly focused on providing steam and electricity to the refining industry.

Q: What is Rengen’s area of expertise in energy?

A: Rengen has been involved in the energy sector for many years, from supplying products and services to providing complete plants built from scratch. Today we are working on three plants for CFE and we are happy to report the success of these projects. We do not envisage working on big power plants in the near future but on smaller, more efficient plants. In Mexico some nodes have more needs that others so the possibility of constructing plants on a smaller but more efficient scale is appealing. To survive today, a company’s KW/h must be more competitive than anyone else’s. Niche markets with smaller, more efficient plants is where Rengen sees the most potential for the next five to six years.

Another area is the distribution of power. Once it has been generated, it must be transmitted to the end user. Unfortunately, Mexico’s infrastructure is very old and in need of a serious facelift. Efforts and economic resources must be directed at improvements in this area. CFE and other industry players are well aware of the opportunities in power distribution and transmission. Rengen is active in two projects in transmission and distribution lines. We hope to see these opportunities and our participation increase in the near future.

Q: Does Rengen see itself working with the recent winners of the power auctions?

A: Rengen is already working with winners in the sector. Some want to start generating power, and others are already doing so and want to increase their production. We can offer them solutions that will add power to their existing equipment and make the existing plants more efficient. Another group has asked us to complete two new plants for them. The companies we are working with are operating at around 150 to 200MW and that is what Rengen sees as the expansion market.

We are also working to convert existing fuel-oil machines in plants so they can use Liquefied Petroleum Gas (LPG) instead. LPG is a much more efficient and clean energy source. CFE is aware of the need to increase efforts to reduce emissions and in this respect LPG presents a great opportunity. Additionally, it avoids the need for a large investment in a completely new plant. Higher levels of efficiency can be reached simply by replacing the type of fuel used. Rengen also represents a large US company that deals with technology and equipment for coal-fired plants. We work on solutions to reduce emissions to basically nothing more than hot air. These solutions make up around 30 to 40 percent of the total cost of a coal-fired plant but alternative fuels are a strategic decision and must be used, so coal, LPG and natural gas are all options.

Rengen is also proud to be working on a waste to energy project. The question of what to do with municipal waste is becoming more and more critical every day. Cities are at risk of polluting the water supply and increasing greenhouse gas emissions by disposing of refuse in landfills. This is simply not viable anymore. Waste to energy technologies are not the cheapest or most efficient way to generate power but they are the best alternative for disposing of waste and generating power as a byproduct. The solution is the education of municipalities so they see the value and benefits of employing waste to energy solutions, which is the only economically feasible way to dispose of municipal waste. Rengen is working on this in Mexico.

Q: What would be Rengen’s advice to its allies to be a productive partner?

A: Rengen’s strategy has been to establish long-term relationships with state-of-the-art suppliers who stick with us, work with us and help us solve problems. This has been key in our market development because we enter with firm and strong associations. We offer the best solutions at the best price and our clients are aware of this quality. Rengen is loyal to the companies it represents and likewise they are loyal to us. Like PEMEX’s director said, strategic alliances are key to development. You cannot go it alone in this industry; it is too expensive and too dynamic.

Q: With which new players does Rengen see opportunities for more business?

A: We see possibilities in offering power, compression and turbines, as well as steam and electricity packages for pipelines and gas distribution. As a result, the winners of the various onshore licensing rounds could pose an opportunity for Rengen. With over 38 years’ experience in the Mexican market, we know what we are doing and can offer incoming companies local expertise based on a proven track record. Rengen offers high-quality services at competitive prices and we are proud to say we are a 100 percent Mexican company.

Q: How do you expect the Mexican energy matrix to look in 10 years?

A: We believe the price of oil will definitely rise again because it is a cyclical market. It is not stable at the moment but it is not going down either. Since 70 percent of the cost of a kilowatt is fuel, it is inextricably tied to oil prices. When the price of oil is high, the tendency to invest in electrical energy plants goes down as a result. Green energy is going to play a very important role in the future of the energy sector. Wind and solar both become more attractive as investment options when the price of oil rises. If Mexico is going to produce 30 percent of its energy needs through renewables in 15 years, we need to start building now.

Q: By the end of 2017, how will Rengen look?

A: CFE’s six power generation units will be competing against each other in the new energy market in terms of price and reliability. They will be Rengen’s main clients in the coming years because they will seek new and more efficient ways to supply electricity to the market. With over 120 million people living in the country, consumption is not going down, so the energy sector definitely has the potential to grow.