Merlin Cochran
Director General
AMEXHI
/
View from the Top

Cooperation at the Heart of Industry Success

Tue, 01/21/2020 - 12:13

Q: How does AMEXHI define its role within today’s oil and gas industry?

A: AMEXHI’s role is to be the voice of the industry, particularly that of the upstream sector. Our goal is to create consensus among our members in order to voice a message, concern or opportunity to the government and society. In the last year, a new federal government was elected but none of the long-term contracts that our 43 members signed have changed. These contracts last between 30 and 40 years and the government’s commitment remains exactly the same.

AMEXHI is working along two tracts. The first is supporting the operations of our members that have already signed contracts for farmouts or blocks during the bidding rounds. A contract is only a right to begin work. We ensure that any regulatory concerns our members have are addressed and all areas of opportunity are communicated to the appropriate authorities.

The other area of focus within AMEXHI is in new opportunities for the industry. AMEXHI believes in the presence of farmouts and bidding rounds as part of Mexico’s energy strategy. Our diverse membership encompasses many different companies with distinct investment portfolios and expertise, all of which add value to Mexico. A central goal for AMEXHI is to prove our members provide this added value so that further opportunities can be opened to them.

Q: How can the federal administration ensure the private sector remains allied to its goal of energy sovereignty?

A: Private companies in Mexico are partners of the government and this partnership is accompanied by a dual obligation to deliver production. But the companies within AMEXHI, all of which want to continue to invest in the country, need to know that their partner is committed to the target. They need to know that the government is as dedicated as they are. During the election campaign, the government stated it would review contracts signed with private players, which it did, and said it would let companies operate. So far, the government has kept its word on not changing these contracts. Now, the private sector must uphold its part of the bargain to move as quickly as possible to reach production and increase oil production for the benefit of the nation. Investment figures have shown that private players are doing as they said they would, and now Eni is delivering 15Mb/d. This is in addition to our members that won contracts in Round 1.3 and are already producing around 30Mb/d. This is a start.

AMEXHI’s Five-Year Plan targets 280Mb/d production by 2024. This is based on the potential we see within the industry today, from only a handful of operators within the entire 107-contract spectrum. These are the companies that won contracts during Round 1.2, 1.3 and farmouts. The companies that started later will be included in our production goal once the results of their exploration wells are known. Therefore, this target will continue to grow as more operators inject new production. However, if there are no new opportunities added to the pipeline, this production rate will eventually stall before falling in 2027.

Q: How will investment into new fields announced in PEMEX's Business Plan impact the investments of the private sector?

A: Increase in investment from the public sector will be accompanied by a year-on-year investment increase from the private sector. Between 2015 and 2018, US$8.21 billion was invested by private industry into Mexico. We estimate that US$20.57 billion will be invested by private companies up to 2024. This clearly demonstrates the commitment of private companies to Mexico. They are here for the longterm. Companies are willing to take on the financial risk, which can be large considering oil and gas is not an industry that yields success all the time. Even when companies have not been successful with their exploratory wells, they have improved the knowledge network for Mexico’s oil and gas industry.

 

The Mexican Association of Hydrocarbon Companies (AMEXHI) is a non-profit association. Its goal is to develop Mexico’s hydrocarbons industry to the highest international standards. The association includes 43 companies and PEMEX.