News Article

Clarity Needed to Boost National Content

Thu, 07/18/2019 - 12:15

In 2013 and 2014, industry players were worried about how the Energy Reform would impact the national industry. Now, investor worries are focused on the new administration’s plans for the industry, the cancellation of rounds and farmouts and the impact all this will have on the supply chain, said Francisco Vargas, Finance and Legal Committees Adviser at AMEXHI and moderator of the Procurement Strategy and Supply Chain Interaction panel of Mexico Oil & Gas Summit 2019 at the Sheraton Maria Isabel hotel in Mexico City.

According to Marcos Ávalos, Head of the National Content and Productive Chain and Investment Promotion Unit in the Energy Sector at the Ministry of Economy, one of the biggest challenges in the determination of proper national content strategies is the lack of verifiable information available in the current national supplier registry. “Nothing is verified, which can lead to overestimations in certain supply areas,” he said. The ministry calculates that approximately 30 percent of the companies registered in its portal as oil and gas suppliers could be fake.

To tackle this issue, the Ministry of Economy is redesigning its national content policy and building a new registry to properly assess the country’s capabilities. “National content is crucial because of the cashflow and economic development it can generate in oil-intensive regions,” said Ávalos. The ministry is in the process of developing a technological platform that will allow not only registration of new suppliers, but also the verification of all companies’ capabilities to participate in the industry. “It will be the first platform of its kind in Latin America. It will be georeferenced and will foster interaction between SMEs and large national and international IOCs,” he said.

Methodologies and percentages in national content requirements will also be revised, according to Ávalos. Although contracts already established based on the original percentages will be respected, the ministry believes this update is necessary to truly consider the needs of the industry and better include factors such as technological transfer and training of human capital. Antonio Juárez, Director General of AMESPAC, said participation of the private sector in the definition of these new standards was key to ensure proper compliance. “Service providers can represent up to 50 percent of the expenditure in an E&P project, which makes these players key in the definition of industry policies.”

AMESPAC participated in the definition of the original percentages for national content and already has experience working with PEMEX, which will come in handy due to the new government’s strategy to make the NOC the leading force in Mexico’s oil and gas industrial growth. However, Juárez said private companies will also have a role to play in this new scheme. “These players will soon have a significant contribution to the national industry,” he said. The association is already capitalizing on its members’ experience in international best practices to help medium-sized players incorporate to the industry. At the moment, the focus is on exploration activities, said Juárez, but as operations evolve, drilling services, well determination and infrastructure development will gain importance.

As new companies start to participate in the industry, new opportunities will appear and Ávalos sees greener pastures in manufacturing activities. “The ministry is working on studies to understand the opportunities to locally manufacture components,” he said. However, Juárez warned players to keep a cool head when analyzing potential areas of development. “The market must develop enough for companies to delve into manufacturing,” he said.