Boosting Local Content and Supplier Development Strategies

In the oil and gas industry, procurement plays a pivotal role in ensuring optimal supplier selection, cost efficiency and quality assurance. To achieve these objectives, operators in the industry must navigate a complex web of challenges and opportunities, keeping in mind the need and requirement for a stronger local supply chain.

One of the primary objectives for operators in the Mexican oil and gas industry is to foster local content participation. Given this administration's emphasis on strengthening PEMEX as the linchpin of its energy policy, local content has taken on significant importance. The development of the Dos Bocas refinery, for instance, was executed with a mandate to employ as much local labor as feasibly possible. According to data from the Commission of Economy of the Chamber of Deputies, PEMEX awarded contracts worth MX$25.77 billion (US$1.51 billion) to MSMEs in 2022, underlining its role in supporting these businesses. “Within the next year, local content will become one of the most important variables not only for the public sector but also for privates. We need to learn how to navigate this new environment,” said Marcos Ávalos, General Director, TUVANSA.

Local content goes beyond components, however. According to Héctor Canizales, Mexico Country Sourcing Manager, Baker Hughes, the lack of specialized workers in the US is urging Mexico to develop this workforce, which also works to attract more investment to the country. “The conditions are set, now it is our time to work on harnessing this environment,” Canizales added. Similarly, Joel Zúñiga, Purchasing Manager, Fieldwood Energy, maintains that education is for workers, but also for companies. Zúñiga emphasized that Fieldwood Energy focuses on getting to know each of the areas of the operation in which suppliers can be educated to comply with local content requirements. “We let companies know that if they hire 100% Mexican staff, the company will be treated as national,” he added. 

Canizales said that investing in engineering majors over these years has finally paid off, as supply chains are relocating. He said that under this scenario, Mexico is set to be a western supply hub for the sector. “We are creating a China in Mexico from where we will sell to everyone, even to  China and the Middle East,” he added. 
While developing a stronger local content network, operators can enhance their supplier diversity by engaging in a combination of local and international suppliers. This strategy enables them to satisfy local content regulations while capitalizing on cost-effective global sourcing. To this end, long-term partnerships with suppliers are important. During this process, Ávalos stressed the importance of developing an industrial policy consisting of training programs and resources. 

The digital revolution is also transforming the procurement landscape within the Mexican oil and gas industry. Operators are now leveraging digital platforms, such as supplier portals and e-procurement systems, to streamline their operations, enhance transparency and foster effective collaboration with suppliers. “Digitalization of operations has boosted our capabilities to understand what our final client is looking for.  Moreover, it has provided us with access to reliable and valuable information, thereby contributing to our overall operational effectiveness,” Rafael Rodríguez, Board Member Consultant, Grupo Industrial Águila added. 

Nonetheless, Mexico has not performed well in the digital economy. Ávalos noted that Mexico ranks 49 among over 50 countries in the operation of digital platforms. Under these circumstances, experts recommend not only investing in technology but in proper training to manage such systems, which will impact the decision-making process of companies when choosing a supplier. “It is a fact that we will not be able to do business with a supplier that cannot prove its ability to manage digital platforms,” Canizales added.