Challenging Assumptions of the National LandscapeTue, 01/21/2020 - 15:54
Q: What have been the key success factors of your relationship with PEMEX?
A: Consistency is one. There is a mistaken expectation that a relationship with PEMEX will have to be volatile due to the variable political nature of the NOC’s accounting. However, we have managed to keep our relationship with them stationed on a relatively even basis through a series of strategies. We have managed to successfully close the logistical and financial gaps that these processes and delays create through multiple lines of credit with very favorable conditions. PEMEX is acutely aware of the burden imposed on Mexican companies like ours by its internal requirements and its extended timelines, and it expresses this awareness by covering all your crediting needs. This year, the government made it clear that the stabilization of PEMEX’s finances is one of its main priorities. We were dragging outstanding invoices with PEMEX from last year worth US$25 million to US$30 million, and they were all covered during the first 15 days of the new government. In general, PEMEX has paid 80 percent of all bills remaining from the last administration.
Q: What would you highlight about your experiences as a block awardee that contrasts with the beliefs held by prospective bidders?
A: I would highlight the value of these blocks as simple short-term investments for companies of our size and even smaller, as opposed to the regular understanding of them as complicated long-term endeavors meant for larger companies. I can explain what I mean through the timeline of our involvement: six months was all the time that passed from when we began work on a mature field in the Burgos basin to when we completely sold our participation. This was the result of a process that began when we started making offers to each other after everybody involved in the consortium realized that they each wanted total control over the block. During those six months, we benefited from unproblematic production and profit from day one. You do not have to worry about business development or commercial responsibilities because you only have one client, PEMEX, and they are roped in from the start. You arrive at a field with between 20 to 40 producing wells and you simply build a maintenance and development plan for these existing wells and for the future drilling of new ones. With a small degree of investment and maintenance, 3Mb/d wells turned into 7Mb/d wells easily. Also, these six months were more than enough for us to take on the learning curve involved in this type of maintenance and development planning for mature fields despite our lack of substantial previous experience in this area as most of our previous work has been focused on refinery maintenance.
Q: What would you define as the crucial yet overlooked role that local content will play in the success of the Dos Bocas refinery?
A: The first one will be the clarification of cultural misunderstandings regarding the technical and technological capabilities of Mexican suppliers and service providers. The pronounced internationalization of bidding rounds and contracting in the last few years was done under the assumption that Mexico was hopeless without foreign technology and know-how. But in some areas, such as those relevant to the building of this refinery, that is simply not the case. We have proven this to ourselves and to our clients through our work with international EPC sector leaders such as Amec Foster Wheeler, recently acquired by Wood Group Outside of some narrow gaps to be closed in the areas of modular design and construction, Mexican fabricators and workshops are more than capable of building this refinery to international standards. When it comes to the fabrication of certain components, Mexican workshops are even better than their American counterparts. To dispel this confusion, you need to hire more Mexican EPC managers who are more likely to be familiar with these capabilities and thus trust Mexican companies more. Second would be the streamlining of logistical and maintenance duties. Prioritizing Mexican fabricators and components means you do not have to worry about dealing with multiple repair kits, multiple training programs for your employees and multiple design standards, which complicate and slow down your maintenance timelines.
Grupo Hosto is a Mexican EPC contractor. It is known for its participation in bidding rounds and tenders, such as the operating consortium in a Burgos Basin block and its involvement in the development of the Dos Bocas refinery.