Emilio Lozoya
Director General
PEMEX
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View from the Top

Creating an Efficient and Effective Organization

Wed, 01/21/2015 - 17:26

Q: What have been the main achievements in PEMEX’s transformation into a productive, value-driven enterprise of the state?

A: Last year, the Energy Reform established a great challenge for PEMEX: to transform itself into a productive enterprise of the state within two years. By 2016, we will be ready to face competition in a very different environment to what we have been used to. However, to achieve this, we need our efficiency levels to surpass the international standards in order to become leaders in all the markets we will be competing in from now on. In November 2014, the Board approved the corporate reorganization plan of PEMEX. This would see the transformation of its four existing subsidiaries into two new productive state-owned subsidiaries: Exploration and Production, and Industrial Transformation. Furthermore, five productive state-owned subsidiaries would be created, each of which is expected to become an affiliate of PEMEX: Drilling and Services, Logistics, Ethylene, Cogeneration and Services, and Fertilizers. We have also centralized the divisions related to procurement, human resources, legal, finances, and strategic planning, among others. These changes will allow the integral optimization of our operations based on processes, while avoiding redundancy in administrative chores.

Finally, in March 2015, the Board of Directors made several executive appointments in line with the company’s new structure. This has been PEMEX’s most important corporate reorganization in decades, which would not have been possible without the new tools granted by the approval of the Energy Reform. The new structure will promote an agile and flexible organization with the ability to adapt quickly to future changes.

Q: What has been the impact of global economic and political developments on PEMEX over the past year?

A: The Energy Reform is one of our most important weapons to face the drop in oil prices. We will face this challenge as a productive enterprise of the state, with more technological and financial resources to extract oil from onshore, shallow and deepwater fields, lowering the costs and risks of extraction, and making the business more profitable. The transformation that we are undergoing has strengthened us and given us the tools to be successful in the international environment. Without any doubt, we would be more vulnerable in this new scenario if we have not had these changes in our structure.

Q: IOCs are responding to the lower oil price environment by reducing their workforce. Can PEMEX become truly value-driven if it does not have the same opportunity?

A: Although there has to be a restructuring in our workforce, there will not be massive layoffs in our company. Moreover, we will still compete with other oil companies to attract and retain the best talent. Our employees are PEMEX’s best asset and this will remain the case. PEMEX has to go through adjustments to comply with the MX$62 billion reduction in its budget while simultaneously increasing productivity and flexibility in the management of human resources. We will optimize our existing personnel and we will anticipate the retirements of those workers that have earned the right to retire.

Q: To what extent has the centralization of PEMEX’s procurement processes already enabled it to better understand and control spending?

A: With the transformation of PEMEX, we have ensured that administrative tasks are streamlined and aligned to effectively serve our core business in the exploration and production of hydrocarbons. We made a thorough reorganization of our corporate structure to move towards a scheme of management by processes, rather than by functions. Just after the approval of the Energy Act, one of our first fundamental changes to modernize PEMEX’s purchasing structure was the creation of the Supply and Procurement Corporate Directorate, which has helped to make the purchasing process more agile and transparent. With this, we have homogenized procedures which will allow us to save around 5-10% in the US$40 billion in purchases we made in 2014. With a more agile structure focused on generating value, we have a new way of supplying PEMEX that is more efficient, brings us important savings, and makes better use of our resources. Our goal is to build common strategies where we can consolidate our purchasing power worth billions of dollars as we see great economic benefits to be accrued through this.