Eckhard Hinrichsen
Country Manager
View from the Top

Bringing a World-Class Regulatory Regime to Mexico

Wed, 01/20/2016 - 09:16

Q: How have the Energy Reform and Round One impacted the market in which you operate?

A: The new agencies CNH, ASEA, and CENAGAS, have good intentions, but the enactment of these will depend on the budget they receive. The implementation of a modern regime for operating and safety standards will also largely depend on the influence of companies. DNV GL is in contact with the authorities, offering help to establish a world-class regulatory regime, given our knowledge of international standards and the work conducted with regulatory bodies worldwide. So far, these organizations have not been as responsive to our offer as hoped, as they are in the process of establishing their structures and implementing the mandate given to them by the state. CNH and the other authorities are concerned with transparency, which is extremely reassuring, although this may complicate the exchange of ideas during the critical initial phase. Complying with these regulations will be a challenge for PEMEX and we plan to apply our extensive experience to help the NOC adapt to these changes. Modern regulations are usually more competitive, typically goal-oriented in nature, allowing companies to be more innovative and find more appropriate solutions. I consider Mexico to be one of the most interesting investment opportunities worldwide, and the interest shown in each phase of Round One, and particularly the second phase, was quite promising. Last year, we worked to identify projects and companies of interest, and have moved to offer our services to these companies. For example, we have strong links with CENAGAS and are supporting the pipeline system operator in the takeover of 12,000km of previously PEMEX-owned gas pipelines.

Q: How can DNV GL help companies winning contracts in Round One to be successful in Mexico?

A: Success in the current environment requires knowledge of the industry and a supportive network. DNV GL can offer companies over 20 years of experience in the Mexican oil and gas industry, as well as contacts with PEMEX and the authorities. We are expecting strong demand from foreign companies, such as ENI, Shell, and Statoil, which work with us in Europe. Locally, we can support newly formed companies and elevate these unexperienced firms to the required level by certifying their management systems or training their personnel. Mexico should have world-class standards, and we can help all firms conform to these. We expect our Reliability Availability Maintainability (RAM) solution to be particularly valuable in the present and the near future. We plan to apply the same technique as the operations of US shale gas companies, which battle in a competitive industry, to operations in PEMEX. Moreover, we have various initiatives 74 and joint industry projects underway that aim to standardize equipment, and subsea infrastructure in particular.

Q: How will the market adapt to R1-L04, and what does this phase mean for DNV GL?

A: The fourth phase, which tenders deepwater blocks, is the most important, and the one that will attract most investment. The exploratory drilling performed by PEMEX so far corroborates the presence of significant volumes of oil, similar in quality to the ones found on the US side of the border, in the Perdido area. The country has some of the world’s deepest waters, reaching depths of over 3,000m. The development of these fields will require companies with considerable technology, experience, and capital to support the risk. DNV GL’s experience is extensive, having worked for Shell in the Perdido area and in most other deepwater fields around the world. As a leading consultant in deepwater, we are working with a large group in Houston, Norway, and Petrobras in Brazil. Rig supply is a real concern, given that rigs reaching 3,000m are sparse, but PEMEX is currently working with Seadrill and Grupo R. Local service companies will race to offer their support to winning operators, but only the large companies will have sufficient expertise and resources to compete with the majors.