Deeper Specialization Needed to Increase Mexico’s CompetitivenessBy Cas Biekmann | Thu, 09/24/2020 - 12:42
Q: How was Gas Liquids Engineering founded and in what segments does it specialize in the energy sector?
A: The company mainly focuses on engineering and it was founded in 1986 by two process engineers from Calgary who are still the owners of the company. For the past 34 years, the company has grown a great deal and we now employ approximately 200 people. We have expanded from small projects with two people to multimillion-dollar projects around the world.
The company is primarily made up of engineers who specialize in the oil and gas business and now we are slowly moving into power generation and refinery work as well, and similar segments. Even though there are always exceptions, we do not generally have unique technologies. What we do have is a lot of experienced people who have undertaken a wide variety of projects in various parts of the world. We can bring global experience to projects as an added value.
Q: How important is Mexico to the company?
A: Mexico is liked by many because of its pleasant weather, especially if we compare it to Calgary and its long winters. From a business perspective, Mexico is close to Calgary and the two share many personal and business connections. Mexico is part of a Latin American initiative that the company has been undertaking for the past five years. For the past 20 years, the company has developed projects in Eastern Europe and in the Middle East. More recently, we decided to focus our efforts in Latin America. In this regard, we have staff located in Mexico City and Rio de Janeiro. We have invested in both regions with a long-term plan. Many of our staff members in Calgary speak Spanish.
There are opportunities in this country. The publication Mexico Business News often refers to these opportunities. Business is changing and Mexico is looking to produce more gas and energy, for instance. We strongly believe in the Mexican industry in general. Our approach to Mexico, similar to other locations, is based on our preference to form an alliance with local companies. We work together with local players. The goal is to bring our expertise and make it a win-win for everyone involved. We have signed multiple nondisclosure agreements in Mexico with a variety of potential clients, including Jaguar and PEMEX. We have established contact with many local engineering firms, although we do not have long-term alliances with any of them as we work on a project by project basis.
Q: Where do you see the main business opportunities in Mexico?
A: Pipelines, gas power plants and power generation are all opportunities that exist in Mexico. The main business opportunity at the moment is related to private oil producers that are entering the market, as PEMEX is reducing its projects in certain areas. These smaller producers are now receiving assets or reservoirs from PEMEX and have little data or experience on how to produce from such reserves. Some of these reserves are small and located in areas that are difficult to reach. We have considerable experience in other parts of the world regarding the best way to develop resources that might be in a remote area or not connected to pipelines.
Q: What shifts has the company experienced in its approach to engineering due to the pandemic?
A: It has been a difficult and changing situation all around the world. Some of the difficulties are that we cannot do business face to face and conferences are now virtual. The other challenge is the combination of the effects of the pandemic and low oil prices, which have delayed business decisions for several months. On a positive note, I expect activity to pick up for us globally from September. While there is not much activity yet, we are getting many more requests for proposals. I feel that even though the pandemic is not over, people are beginning to realize that they still have to get the work done.
Q: What are your main prospects for the Mexican oil and gas value chain?
A: We can identify two main opportunities: relatively new producers who are looking to new resources onshore. They are drilling exploration wells and are looking at conceptual studies to help develop these resources. The second major opportunity where our services can be applied is the evaluation of and recommendation for improvements on existing facilities. With low oil prices and a shortage of demand, companies that are producing must obtain maximum production for minimum cost from these facilities. We have some experience in sending people to plants, where they can evaluate the plant and we can recommend ways of increasing production. With the pandemic, this has to be done remotely as we cannot put people on the ground.
Q: What needs to happen in Mexico for gas storage to become a viable niche in the market?
A: Many countries are considering gas storage options. The company has undertaken several of these projects with a dedicated group that specializes in storage. The challenge is two-fold for Mexico. One is that gas storage needs to be in a reservoir. There also has to be a suitable gas marketing arrangement. In North America, we have a lot of gas storage projects where companies can make money by producing gas during the summer, when demand for gas is low, and then store it and sell it during winter when demand goes up. Nevertheless, if this differential cost is not available, the government would have to be involved to adjust, modify, control and monitor prices to allow this to happen.
Q: What could Mexico’s market learn from other countries that have experience in terms of oil production?
A: Even though other countries like Brazil and Argentina have state-owned companies, they also count on the experience of many private companies that produce gas and develop fields. The benefit of having a wide variety of players allows different types of producers to focus and specialize in different areas. It also adds a spark of competition and forces things to be done faster and better. Mexico already has players such as Jaguar who are encouraging private companies to be involved. This will eventually speed up the development of some of the smaller areas that giants such as PEMEX do not have much interest in.
Q: What objectives has the company has set for itself in 2020-21?
A: In general terms, GLE would like to see at least 25 percent of its business expand outside of Canada. Regarding Latin America, we are focusing primarily on Mexico, Brazil and Argentina. Prior to the pandemic, we started looking at options to open an office in Mexico. We know that we can work with local Mexican engineering companies and do some work from Calgary.
From an organizational viewpoint, after the pandemic ceases, I would like to open a permanent office in Mexico with a few engineers and draftsmen. This would enable us to have a much closer relationship with both alliance partners and potential clients in Mexico. However, to set an office, we would need the pandemic to pass and projects to formalize. We expect business to pick up somewhat in the short term and we are hoping to have more Mexican projects over the next six months, which would justify our opening a Mexican office in the second half of 2021.
Gas Liquids Engineering is an engineering firm from Canada. It has an international presence, providing quality solutions for engineering, procurement and construction management for oil and gas.