Diversification, Decarbonization: Keys to Success in Mexico

Q: What has been Baker Hughes' overarching adaptation strategy in navigating the complexities of the energy sector in recent years?

A: Baker Hughes' corporate strategy has centered on diversification and expansion across various sectors. In Mexico, this includes the energy, industrial, and new energies sectors. We continuously adapt our business horizons because we understand the imperative of balancing global challenges like energy security, sustainability, and environmental considerations. We are actively adapting and developing these processes of diversification and change, driven not only by the global context but also by the unique local realities of the Mexican market.

Q: Baker Hughes has a diverse portfolio. What is the current balance between your Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET) segments in Mexico, and do you foresee this shifting?

A: Our portfolio is meticulously aligned with the realities I mentioned. This alignment extends across all segments of the oil and gas industry. We have developed robust and consolidated portfolios in each of these areas. While Baker Hughes has traditionally been renowned for its strength in upstream activities like drilling and production, we have successfully adapted these capabilities to new energies, such as geothermal, and to decarbonization initiatives.

In the Industrial Energy segment, a significant component of our portfolio lies in turbomachinery, particularly for natural gas applications. This includes advanced technologies for power generation, compression, transportation, automation, handling, and measurement. Given natural gas' critical role today, we have actively diversified our portfolio in this area. Unlike some highly specialized companies, Baker Hughes has cultivated a strong presence across all segments. In Mexico, we maintain a firm foothold in drilling, infrastructure, and turbomachinery.

Q: What are the main technology trends you are observing and increasingly investing in within the energy sector?

A: Over 70% of Mexico's hydrocarbon fields are mature and in decline. These fields, however, hold substantial remaining recovery potential, especially considering the capital already invested. Mexico's estimated recovery factor is around 20%, whereas the global standard can be closer to 35%. This presents a clear opportunity for enhanced hydrocarbon recovery. We have developed a strong global strategy to address these long-operating mature fields.

Regarding digitalization, its extensive expansion and rapid growth are transforming how we manage operations across drilling, production, refining, and automation. Digital components allow us to not only leverage existing information more effectively but also to predict future challenges. 

We are making significant advancements on multiple technological fronts. We have spent years working on some of the world's deepest wells, exceeding 8,000m in depth. These projects present formidable technical challenges, and very few countries have successfully implemented High-Pressure, High-Temperature (HPHT) Drilling solutions, especially in the subsoil. Our turbomachinery equipment has been instrumental in rapidly supporting the refining system, particularly in power generation and compression. We are currently providing support to refineries like Tula and Salina Cruz with our Refining, Transportation, and Handling Systems. We have also applied critical digital and production technologies, especially for fault detection, management, and AI-driven automation.

On new energies, our focus in Mexico is primarily on geothermal. The country has immense geothermal potential, offering a stable, continuous, and clean energy source from its subsoil. Additionally, this new energy segment includes opportunities to harness emissions and decarbonization for power generation or alternative uses.

Q: Baker Hughes has played a significant role in addressing Mexico’s new energy demands. Could you elaborate on how you have navigated  this new landscape in recent years?

A: Baker Hughes has consistently demonstrated its long-term commitment to Mexico to enable the country’s energy sector through local investment. By working closely with national and regional stakeholders, the company supports the growth of Mexico’s energy sector while championing environmental responsibility. Its efforts to implement cleaner, more efficient energy solutions reflect a deep dedication to operational excellence and a sustainable, inclusive future for Mexico.

Q: Baker Hughes emphasizes "taking energy forward, making it safer, cleaner, and more efficient." How is this global commitment being translated into concrete energy transition initiatives in Mexico?

A: Decarbonization is fundamental to our strategy, driven by our conviction regarding climate change and our industry's inherent obligation to advance sustainability and profitability across all projects. When we speak of decarbonization, we primarily refer to greenhouse gases (GHGs), specifically focusing on the three major ones prevalent globally and especially in Mexico: methane, carbon dioxide (CO2), and nitrous oxide.

Methane presents a particularly significant impact on the climate, given its potency across various industrial segments, not just hydrocarbons. We are actively collaborating with both local and international partners to develop strategies for monetizing methane emissions, including fugitive emissions, venting, and flaring. There is not a singular solution; we are exploring various technological and commercial models. Given that Mexico currently imports over 65% of its natural gas from the United States, structuring business models around methane generation offers a unique opportunity. Monetizing methane not only creates a new value chain but also addresses its critical climate impact, which is estimated to be 40 to 80 times greater than CO2 over its atmospheric lifetime.

For CO2, we are working across different sectors, including refining, cement, and mining, to accurately measure and optimize emissions. It is crucial to establish a baseline for CO2 emissions across industries, not just in oil and gas. While the implementation of CO2 monetization faces significant challenges, particularly from a legal and fiscal perspective, we anticipate legislative efforts will introduce tax benefits and structures, like those in other countries, to facilitate the financial viability of decarbonization projects.

Regarding nitrous oxide, we are currently evaluating technological solutions for specific elements, particularly in the marine sector, addressing the challenges they present.

Q: What is your short-to-medium-term strategy and outlook for Baker Hughes in Mexico?

A: In countries like Mexico, where we have a consolidated history of over 60 years working with both public and private clients, our corporate strategy is comprehensive. It focuses on differentiation in our operational and financial structure, prioritizing our employees and the community. 

Our strategy for next year is to consolidate key stabilization projects, particularly in terms of achieving positive cash flow structures, operations, and activity. This will benefit both the Mexican State and all shareholders of public and private companies, including Baker Hughes. Our current vision is one of support for the local structure, focusing on stabilization in the immediate term, consolidating our existing operations, and pursuing medium-term expansion in the subsequent years.

Baker Hughes is a global energy technology company that provides a wide range of equipment and services across the entire energy and industrial value chain. The company designs, manufactures, and services technologies to make energy production and use safer, cleaner, and more efficient.