Edge, Technology, Efficiency: Norway Enabling the Industry

Q: How has Norwegian Energy Partners (NORWEP) adapted its overarching strategy for promoting Norwegian companies in Mexico's oil and gas sector over the years?

A: NORWEP is an organization founded with the core mission of helping Norwegian companies internationalize their business. The organization employs Senior Market Advisors, who typically reside in and possess a deep understanding of the markets they represent. In my case, being Mexican and having worked extensively in the Mexican market, I am positioned to guide these companies, helping them establish a foothold, understand the inherent risks, and identify opportunities.

Our adaptation strategy fundamentally relies on our full-time presence in the market. We are deeply embedded in the industry's dynamics, allowing us to understand current trends and changes, which we then relay back to the organization. This ensures that Norwegian companies interested in or already operating in Mexico have a knowledgeable contact to better navigate the local landscape.

Q: How does NORWEP balance showcasing Norwegian technology, companies, and capabilities with the industry's need for cost efficiency?

A: Norway is a large country with a "small population" that developed their O&G industry in a challenging environment that was the new frontier in deep waters at the time. This probably helped the industry to focus on innovative and cost-effective ways of doing things from the start. After half a century, this approach sets the Norwegian Industry apart from many others. There is continuous innovation and a focus on lowering costs and improving safety. The digital oilfield, net zero targets and floating offshore wind are just a few of the areas where Norway has excelled.

Translating these technologies to the Mexican market, where conditions may be different, but the drive to do more with less is equally important, is actually not that complicated. Operators in Mexico routinely meet with Norwegian companies to find innovative ways to improve their efficiencies and operations.

As NORWEP we help all companies affiliated to offer their services in Mexico. We don't represent one single technology. We have many areas where there are several companies offering similar services, so we stay neutral and let the companies themselves drive the sales process. Essentially, NORWEP opens doors and facilitates the showcasing of technologies, but our companies must compete in an open market, just as they would anywhere else.

Q: How does NORWEP encourage its members to engage in new collaboration models, like mixed development projects? 

A: If these new contracts materialize, they will likely be structured between large service companies or operators and the Mexican government, with PEMEX as a partner. Equinor, a Norwegian company, entered Mexico in 2014 during the market opening. They partnered with BP on two blocks, but unfortunately, these blocks were eventually returned to CNH at the time. Consequently, Norway no longer has any operators developing fields in Mexico. Therefore, we do not anticipate any Norwegian companies signing field development contracts directly with PEMEX or the National Energy Commission.

My personal opinion is that these new contracts will be extremely difficult to implement and operationalize as expected. The biggest problem is that the risk is transferred to the operator, but the benefit of having the reserves on the books remains with PEMEX. Entering such contracts makes it very difficult to structure a financial package that allows for the necessary investment because you do not own the reserves. This is essentially the same situation as the service contracts from two previous attempts in 2008 and late 2012, which never truly materialized.

However, if they do happen, then we will see new operators emerge, such as Carso Energy. This would introduce a new player into the market that we would need to understand and engage with, so that Norwegian service companies can offer their services to them.

Whatever happens will require immense effort, commitment, and faith that the authorities will respect agreements and secure the necessary funds to support investments. When you have a 50/50 partnership, if one partner cannot contribute their share, the development simply stalls.

Q: Are there other opportunities you also see for Norwegian suppliers in the midstream and downstream sectors?

A: Absolutely. When your business is technology-driven, there will always be a need. The Norwegian industry is incredibly broad, highly experienced, and deeply rooted in technology. Many of the solutions it offers are designed to enhance efficiency, either by providing cost-efficient ways to perform existing tasks better or by introducing new technologies that replace older ones to increase operational revenues and profits.

Mexico possesses a very robust midstream sector, particularly its gas distribution network. This presents numerous potential opportunities for Norwegian service suppliers. The downstream side, however, is more complex as it remains 100% linked to PEMEX.

Q: Norway is known for its transition towards a greener economy. What lessons do you think Mexico's oil and gas and energy industries can learn from Norway's transition?

A: One aspect I deeply admire about the Norwegian industry is its long-term vision. When translating the Norwegian experience to Mexico, the primary message would be to start thinking long-term.

Unfortunately, we face very complex short-term challenges that require immediate resolution before we can fully embrace a long-term view. However, I already observe with the current government an attention to, for example, lowering emissions, which is an environmentally crucial aspect. There is also an increased focus on safety, aiming for fewer spills and accidents offshore and onshore that pollute the environment.

Ultimately, discussions will lead to carbon capture. Norway already has a plant, Northern Lights, that has been operating for over 10 years and is set to become Europe's carbon capture facility for decades to come. 

Q: How is NORWEP moving forward, and what are its main objectives for this and the following year?

A: While my perspective on the Mexican market might sound pessimistic, I am being realistic about the current situation. However, this is certainly not the worst crisis the oil industry has faced globally. The oil industry has repeatedly proven its resilience, even in the face of severe crises. Therefore, I trust that in Mexico, we will find a solution to the problem.

Mexico still holds significant potential. While we do not have the world's largest oil and gas reserves, we are a resource-rich country, possessing abundant solar energy, minerals, and wind. We are currently undergoing a process of self-understanding. We used to believe we were solely an oil-exporting and producing nation, but we are fundamentally a manufacturing country that requires a lot of energy. Once we shift that mindset and understand that oil and gas are necessary for us to have the energy to produce what adds value to our country, we can make better decisions on how to manage the oil and gas industry in Mexico.

For NORWEP, Mexico is a very important market. Many companies show interest in what's happening here. There are a few very interesting projects globally, attracting international interest not only from Norwegian companies but also from others, because things are still unfolding here. Our imperative is to remain closely connected to decision-makers and understand the evolving landscape so we can help companies make the right decisions when they enter Mexico, while presenting the appropriate technologies that will contribute to the success of projects in Mexico.

Norwegian Energy Partners (NORWEP) is a dynamic and independent non-profit foundation dedicated to enhancing value creation and employment in the Norwegian energy industry by expanding its international business activities. With over 320 companies as partners, NORWEP has established itself as a driving force in the industry.