News Article

Collaborating Toward First Oil

Wed, 07/17/2019 - 17:23

Bidding-round results and PEMEX’s goal to develop 22 new fields have put pressure on service providers to increase competitiveness in their operations. However, the cyclical nature of the oil and gas industry has provided companies with the necessary expertise to face these challenging conditions, said Luis Ocejo, Senior Managing Director Maritime Business of Grupo TMM and participant in the Drivers of Supply Chain Competitiveness panel at Mexico Oil & Gas Summit held on Thursday at the Sheraton Maria Isabel hotel in Mexico City.

“After the crisis of 2014, many projects were abandoned and close to 30,000 people lost their jobs. At some point, 60 percent of the Mexican ship fleet was docked,” Ocejo said. This forced companies like Grupo TMM to implement cost-reduction strategies to ensure continued maintenance and secure employment for workers, albeit with lower salaries. “If we had eliminated those jobs, we would not have been able to face the industry’s recovery when the time came,” he said.

Although the industry has somewhat bounced back from this crisis, there are still many issues that need to be addressed, especially to cover the energy demand in the country. “Energy is the main driver for social and economic growth and its development is the responsibility of both the public and private sectors,” said Juan Acra, President of COMENER. Electricity challenges, he said, include unbalanced distribution and a generation gap of 57GW that must be covered in the next 15 years. “Even though solar and wind power are gaining ground, fossil fuels are expected to keep growing in importance, at least until 2050.” Specifically for oil and gas, Acra highlighted that production keeps plummeting, while most of the 77 storage terminals have a zero-days inventory.

David Enríquez, Senior Partner at Goodrich, Riquelme y Asociados and moderator of the panel, highlighted the importance of national content development strategies to face these issues, particularly as new exploratory efforts herald increased operations. According to Acra, there are five key elements that must be considered to strengthen national content strategies: establishing proper limits for national content requirements based on a delimited value chain that can offer the necessary quality, providing enough resources to the National Content Unit at the Ministry of Economy to develop SMEs, creating a National Supplier Registry, developing a road map that incentivizes the proper use of human and monetary resources and eliminating trade barriers that work against the federal government’s priorities.

Promoting synergies and economies of scale is also a good strategy to boost competitiveness, according to Enríquez, including the use of common infrastructure solutions for neighboring fields and projects. However, companies must be mindful of the state of the infrastructure, said Sergio Charles, Director of Strategic and Institutional Relations at Grupo Protexa. “Mexico is among the biggest owners of marine infrastructure, particularly for shallow-water operations, but companies must follow strict inspections to ensure the infrastructure is up to the necessary standards.”

Cesar Vera, Chief Commercial Officer of Naviera Integral, said companies have for a long time focused on competition but what is needed now is interaction to establish proper due-diligence and elevate operations to the proper standards. “Competition is fine, as long as it is based on added value and not on price,” he said.

Enríquez brought PEMEX into the discussion, as well, and posed the question of how service providers can help the NOC increase production while preserving field sustainability. Ocejo said Mexican shipping companies are ready to serve the needs of PEMEX and any other company but under the right tariffs. “Tariffs are too low and they cannot be maintained at that level. There will be no service providers that can work under those conditions, which will weaken maintenance and eventually put contracts at risk,” he said.

Charles, meanwhile, highlighted that what the industry needs now is to understand PEMEX’s needs and how it wants to do things. “PEMEX wants accelerated development and it will now receive public funds to do so. We need to know how those resources will be used and how we can best align our interests as service providers with the true goals of President López Obrador’s administration,” he said.