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Analysis

Developing Mexico's Service Sector

Wed, 01/25/2012 - 12:35

One of Pemex’s greatest challenges, argues Luís Vielma Lobo, Founder of CBM Ingeniería Exploración y Producción, is that it fails to completely grasp the importance of service providers. “Most of the time, Pemex sees service companies as businesses that are only looking to increase their profits, rather than help them solve problems. Pemex has had bad experiences in the past and I am sure this is why the attitude still persists, but they cannot make such a judgement based on one or two companies.” Vielma Lobo also believes that the service sector in Mexico has failed to boom because of its own failings. He cites the fact that many service companies do not believe Pemex has execution capabilities and that the oil sector has been unwilling to turn itself around and become more efficient.

Suggesting that Mexico should look to the examples of Norway and Scotland and develop a national strategy for creating a more developed service sector, Vielma Lobo suggests three strategies that he would follow. The first would be to define a strategy for local content. He points to the example of Petrobras as a company that has clearly and intelligently designed local content rules, measuring local content in different ways depending on the type of company, from pipeline companies to drilling rig construction companies and consultancies, and demanding different levels of national participation from each. This, Vielma Lobo believes, would provide the basis for the development of a national service sector, as it would then encourage international companies to set up Mexican operations in order to comply with the laws.

The second step Vielma Lobo would take to develop the Mexican service industry would be to encourage Mexico’s leading entrepreneurs to enter or invest in the industry, which would be much easier following the first step related to national content.

“Thirdly and most importantly,” says Vielma Lobo, “is to put in place a system that allows the measurement of improvement in the sector. Based on such information, the industry will then know what further changes are required and how different parts of the sector are performing.”

When asked about the role that Pemex should play in bringing international service companies to Mexico, Vielma Lobo answers that it should be up to the service sector to look internationally to bring in new technologies rather than the NOC. “I don’t think that Pemex has to play the babysitting role in encouraging this activity. It should be part of the challenge for national investors. You have to create an environment with clear lines and rules so that private national investors have the chance to go and talk to whomever they want and bring them to Mexico. The transaction is not so clean once a public sector company gets involved.”