Cautious Optimism in the Mexican Oil and Gas MarketWed, 01/22/2020 - 08:35
Sometimes a little luck can go a long way. For Seaway 7, that luck was absent during the bidding rounds, says Business Development Manager Marco Gutiérrez. Yet, he remains pragmatic in his outlook on Mexico which, he says, continues to be an interesting proposition despite his company’s run of unsuccessful bids for PEMEX and private contracts. “To bid successfully, the stars have to be aligned. We have been unlucky with our schedules since our vessels have been busy in other markets, but we are developing two tenders for the next year and we are very excited to see what happens.”
Seaway 7, which in 2017 became a subsidiary of the UKbased offshore services company, Subsea 7, was a victim of bad timing when PEMEX released its tender for the A and B marine construction packages in February 2019. Its fleet of two heavy-lift vessels could not be in the Mexican Gulf for the dates needed and opportunities were therefore lost. But Gutiérrez says that as a T&I operator, scheduling difficulties like these are part of the job and achieving a balance between confirmed contract work and future possibility is always a delicate process. “Not everything comes down to price. When we have all our vessels occupied, we cannot offer the flexibility that IOCs demand. This is one of the common problems for companies like us, Heerema and Saipem. We have to bring our vessels from as far as the North Sea, and for that, planning far in advance is required,” he says.
Despite a limited fleet, the company has the muscle when heavy lifting is required. Its two vessels, the Seaway Yudin and the Seaway Strashov, are both modern, monohull vessels that deliver efficient lifting capabilities for a wide range of T&I activity. The ships have participated in over 150 offshore installations, including module and float-over installations, and offer Mexico’s offshore operators a robust option for transport to construction. The larger ship, the Seaway Strashov, can handle lifts of up to 5,000tonnes and places the company in a strong position to handle the coming FPSO development in Mexican waters. This lifting power is what the company will leverage in future contract bids. “The Seaway Yudin provides lifting capabilities up to 2,500tonnes, while the Seaway Strashov boasts double that. This range of lifting ability and the variety of jobs our vessels can work on is our competitive edge in Mexico,” says Gutiérrez.
Seaway 7 has worked on several Mexican projects in the past and will draw on that experience when carrying out new contracts. Between 2014 and 2015, it installed the Kab-C, Tsimin-D, KU-B topside and Kuil-B jacket for PEMEX, working under the Mexican marine construction firm Permaducto. Although the company does provide full EPCI services in the renewables market, it will continue offering T&I to larger operators in Mexico rather than being a full partner in future bids. “If you agree to bid in a partnership, the company effectively agrees to the T&Cs of the PEMEX contract, regardless of the size of the contract your company is working on. You take on that exposure to risk, and PEMEX penalties are harsh. We do not sign these contracts because we prefer to focus on T&I and only 10 percent of a contract’s final value goes toward our side. For example, if a contract is worth US$500 million, the company would be risking itself for only US$50 million and that makes no sense for us,” says Gutiérrez.
Although the risk as a bidding partner is not worthwhile for Seaway 7, Gutiérrez believes that PEMEX’s recent preference for integrated proposals works to the benefit of private operators and to the benefit of competitivity in Mexico’s oil and gas industry. “In the past, companies faced huge risks because, as PEMEX contracts were split by scope, contractors could never be in full control of the project and penalties were a constant risk. There is now more certainty and costeffectiveness. Previously, our vessels would be required to be in dock at a certain date even if there was nothing to move. An inactive vessel can cost US$500,000 a day,” says Gutiérrez.
With the dust beginning to settle from the change in federal administration, Gutiérrez is cautiously optimistic that the future of country’s oil and gas industry, and that Seaway 7 in Mexico, is on the upswing. “Mexico is our most difficult market but remains an interesting and important market for us. We are interested to see how the administration plans to increase production. The evolution of Round 3.1, which included many shallow waters, will be particularly interesting to us. We are hopeful.”