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Better Port Infrastructure Fundamental for Mexico’s Growth

By Conal Quinn | Fri, 07/01/2022 - 09:58

Q: How does Energía Naviera commit to improving marine safety in Mexico?

A: For several years, Energía Naviera has been governed by the International Ship and Port Facility Security Code (ISPS). This code is endorsed by the International Maritime Organization (IMO) and dictates what companies must do regarding all marine safety issues. We have been implementing this code for several years now and fully comply with its regulations. Energía Naviera established the communication that this code requires. It is useless to have a trained crew if you do not have good communication from the ship outward, after all. At sea, each ship, platform and structure are isolated units. Therefore, you must have excellent communication with the outside to report any safety issues. Furthermore, our personnel are very well trained to react with the right decisions at times of risk, allowing them to follow previously established protocols. 

Q: How has Energía Naviera adapted its business model for greater sustainability? 

A: In terms of sustainability, we have little margin. Concerning fuel, our assets consume diesel, which is provided to us by PEMEX. Therefore, we depend on the sustainability guidelines that the state-owned company implements in its diesel production. It would be interesting to collaborate with PEMEX to increase the sustainability of diesel or to start designing an investment model to convert our ships to use biodiesel or natural gas. In addition, we have water treatment plants installed on all our assets, which prevent the discharge of polluted water into the sea.

Q: What risks do customs delays pose for Energía Naviera's operations? 

A: Currently, there are problems not only at customs but also due to logistical issues in the supply chains and with stock of materials, especially products coming from China. Customs presents a gigantic area of opportunity in Mexico to move toward a more automated and digital model. This will allow importing companies to speed up their operations. A classic example is steel. This material has an extra regulation that was recently implemented, which does not distinguish between importing steel for commercialization or consumption. This lack of discernment seeks to prevent the commercialization of international steel mills to reduce competition against the domestic steel industry. However, when steel is imported for domestic consumption, this regulation becomes meaningless. The lack of distinction in the markets created by generic regulations has slowed down imports, thus slowing down the business cycle of companies. 

Q: How can port infrastructure on Mexico's east coast be developed and improved to avoid bottlenecks and support the activities of service providers like Energía Naviera?

A: Two types of investment are needed to make trade in Mexico more agile. The first is more port infrastructure. We have few ports at the national level. With our coastal availability, we should have much more infrastructure of this type. Mexico has migrated from an import substitution model to an open trade model based on exports, so we generally have a favorable trade balance every month. However, when you export more, you also must import more products yourself. Both our exports and imports have grown exponentially in recent years, while the number of ports has stayed the same. We have the same ports we had under the import substitution model but we move double the goods. This has produced a major bottleneck that is approaching a critical level. 

Furthermore, we need to organize Mexican customs and ports to make them more agile. Mexico needs strong investment in electronic and digital infrastructure. Instead of checking every good that goes through customs, the most efficient operation would be to certify the importing company so that its goods have a freer passage through customs. This agility would help improve the competitiveness of our companies and the supply chains they belong to. 

Q: How does the remodeling and expansion of the port of Dos Bocas contribute to the improvement of Mexico's port infrastructure?

A: This port is more focused on oil and gas and will be ready at the same time as the Dos Bocas refinery. When the refinery becomes operational, the demand for products and materials will increase through the port. It will immediately be saturated by the demands of the refinery and other ports will not be able to relieve this saturation. Therefore, the modernization of this port does not help much to solve Mexico’s port problem. 

Q: How has the increase in oil production impacted the demand for offshore services, such as those offered by Energía Naviera?

A: The reality is that Mexico has not increased its oil production, unlike other oil-producing countries, so offshore services have not experienced an increase in demand. We have two problems that prevent us from increasing oil production as much as we would like. The first is that we still have an oil production monopoly through PEMEX, when we should have more competitors to increase domestic production. The second problem is that this monopoly is highly indebted, so PEMEX cannot pull in more debt to inject the investment needed to increase oil production. On the other hand, the NOC is focusing on paying off its debts. Despite the high oil prices, the surplus that PEMEX gains cannot be used for investment, since it is needed to cover the expenditure incurred by the government not charging taxes on the sale of gasoline. Therefore, the capital injection to increase production would have to come from the private sector. However, private companies are not investing due to the regulatory uncertainty that the current administration has generated.

Conal Quinn Conal Quinn Journalist & Industry Analyst