Wallace Pescarini
President Mexico & Central America
Schlumberger
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Adjusting Strategy for the Mexican Market

Wed, 01/20/2016 - 15:11

Q: How are you planning to turn your arrival as President of Schlumberger Mexico into an opportunity at such a challenging time?

A: Positivity is crucial in times like these. I have a breadth of experience operating in the Middle East, Europe, Africa, and Latin America, and even though there is no strong country in which to be operating at the moment, Mexico is one of the most solid options due to the positive future perspective. All countries are suffering a great deal due to the low oil prices, especially those that are highly dependent on oil and gas, but the Energy Reform has generated great anticipation of the future changes. I worked in Mexico 15 years ago, and I was positively surprised by the impact that the government made with the Energy Reform in such a short period of time. Last year, the bidding rounds were the key milestone of the Energy Reform, and due to their success, I strongly believe that the future of Mexico’s energy industry is bright.

Q: How is Schlumberger modifying its global business strategy in an environment characterized by low oil prices and increasing price pressure on suppliers and service providers, and how is the positioning of Mexico within your global portfolio changing?

A: Mexico has always played an important role in Schlumberger’s operations, both at a global level and within Latin America. A few years ago, we decided to separate Mexico and Central America from our Latin American bracket in order to provide the appropriate visibility merited by the strengths of both regions. In the context of the current business environment, Mexico is suffering on the same scale as all other countries due to the pressure imparted by the current low oil prices. PEMEX faces challenges in terms of its budget restrictions, decline in production, and the limited amount of additional debt that the NOC can adopt. Despite these challenging times, Schlumberger is keen to negotiate this market, having been operating in the country for 80 years. We have a deep understanding of operations in Mexico. As a result, we have been gradually adjusting to the new environment, limiting our activities somewhat, but constantly keeping in mind the potential that the future holds, especially as the Energy Reform begins to attract the level of activity that was initially expected when the new legislation was introduced.

We are also taking advantage of this crisis in order to accelerate our “transformation program”, which is driven by our CEO Paul Kibsgaard, and this involves careful examination of our operations, and our methods for generating business success. In 2011, when we began to notice that the industry required a complete transformation, we saw an opportunity to accelerate this by improving efficiency and drilling performance, which is helping greatly to mitigate the effects of the low activity level and the resulting pricing pressure. Simultaneously, we are passing on these savings to our customers, as we strive to become the best-run company in the oil and gas industry.

Q: To what extent will Schlumberger’s structure and strategy have to be modified in order to operate effectively in the country, given the transformations in PEMEX’s structure and the entrance of new operators?

A: Schlumberger has always been able to adapt well to local cultures, even though our transformation program has been introduced at a global level. We have customized many services to adhere to Mexican needs and, due to PEMEX’s importance in our global vision, we have tried to align ourselves as closely as possible with the NOC’s changing structure. Lately, we have participated in interactions with PEMEX wherein both parties share details of restructuring plans in order to find synergies and provide mutual support in accelerating both transformations. Regarding the newcomers to the market, we have a global presence, meaning that many potential partners are accustomed to the way we work, so we are trying to localize the performance and efficiency levels to operate under Mexican conditions. As a result, our global standard means we can provide the same experience whether working in the Gulf of Mexico, or in other countries like Brazil, and we can provide assurances that we use the same state-of-the-art technology that we implement in other countries around the world.

Q: To what extent do you expect other private companies to have the same appetite as PEMEX for integrated solutions?

A: In my experience, even outside of Latin America, the tendency in the industry has always been to seek integrated solutions, so our customers, regardless of whether they are small independent players, IOCs, or NOCs, realize that the creation of synergies is conducive to generating savings. Another positive aspect of integrated services is risk management, and if there is anything the Macondo incident has taught the industry, it is the value in allowing the operator to focus on the well integrity and the reservoir. I am confident that the new players coming to Mexico will have an appetite for this kind of approach, mainly due to the fact that they will not yet have established the critical mass necessary in the country to liaise with several suppliers. In this way, integrated service suppliers like Schlumberger can facilitate the establishing of operations in a new country, and we have already witnessed this demand in places like Africa, for example.

Q: What are your main priorities for 2016, and how are you planning to achieve these?

A: With a volatile market, there is the need to focus on the aspects over which we have control, and it is difficult to predict what oil price fluctuations may occur over the next few months. In the last 12-18 months, erroneous predictions have been made regarding oil price recovery. The foundations of our business are Health, Safety, and Environment (HSE), service quality, and investment, and these factors will be vital to our continued success in the country. This year, we are finalizing investment in a base in Villahermosa in order to provide support not only for onshore operations, but also for offshore. We are also expecting to complete the multi-client seismic program by mid-2016, and we are working with new customers entering the market to guarantee a smooth transition.

One important contributing factor to our success is our diversity, and the fact that we do not only focus on oil and gas but also on working closely with the local communities. We make concerted efforts to develop large quantities of national content, and 90% of our employees are Mexican. In addition, more than 500 Mexicans work for Schlumberger in other parts of the world, and we always make sure we maintain this quota. We have also been focused on social programs, such as Schlumberger Excellence in Education Development (SEED), a volunteerbased initiative designed to invest in education and is focused on underserved communities where Schlumberger operates. The SEED action-learning methodology is based on science and technology experience through our volunteers, to inspire teachers and students to seek innovative ways, like robotics, to solve the world’s common problems, such as water scarcity, environmental issues and safety. To date 13 schools and more than 15,000 students have benefited from this program. In summary, success in Mexico requires a multi-faceted approach, which includes a close collaboration with local communities in the vicinity of the areas where we operate.