The Elephant in the Room
Home > Oil & Gas > Analysis

The Elephant in the Room

Share it!
Wed, 01/18/2017 - 10:01

From international best practices and performance standards to linguistic hurdles, Mexico's oil and gas businesses are experiencing unprecedented change as they grapple with a looming labor shortage and a shift in corporate culture.

To say Mexico’s oil and gas industry is changing is an understatement. Private companies entering the market are introducing international best practices and performance standards, while new regulations are being pumped out at an unprecedented rate. Although the Energy Reform’s objective of adding 500,000 new jobs by 2018 has not materialized, a shortage of qualified labor is still looming on the horizon, worrying potential employers. As new operators advance from exploration to field development and production, the industry is destined to see activity levels and human capital demand rise rapidly in the coming years, provided that oil price levels create a supportive environment.

Everything that is happening is doing so as goalposts shift, requirements evolve and stakeholders across the industry’s value chain struggle to cover as much ground as possible. At the very basic level, Mexico’s recent history as a closed state monopoly with PEMEX ruling supreme means that Spanish was the standard operating language. But international companies, from China to the US to Norway, are demanding that potential employees speak English, the international business language, which might prove a hurdle in the short term. “The main client’s official working language is Spanish,” points out Bruno Picozzi, General Director of Sapura Energy, adding that even the signage used on PEMEX’s platforms would need to be changed to comply with international standards. The shortage in language skills extends beyond the NOC and is a countrywide problem across all industries, adds Carmen Suárez, Director of Stanton Chase.

The lack of English proficiency is even more relevant when compared to regional competitors. Despite being the US’s largest Latin American commercial partner and its closest Spanish-speaking neighbor, Mexico ranks sixth in English skills in the region (behind Argentina, the Dominican Republic, Peru, Ecuador and Brazil) according to data published by the country’s respected competitivity think-tank IMCO in a 2015 study called Inglés es Posible (English is Possible). The lack of official data regarding language proficiency also is a hurdle, the study says.

On top of linguistic challenges, Mexico lacks experience in deepwater since the vast majority of its offshore activity has been limited to shallow waters. Guido van der Zwet, Manager Americas for IPS Powerful People, projects an 80-20 split between foreigners and Mexicans in deepwater operations at the beginning. “This should slowly become 20- 80 over the following years,” he says, highlighting the key role international knowledge transfer will play in the industry.

But for the time being, “Mexico’s oil and gas talent gap is the elephant in the room,” says Benjamín de la Cueva, President of Golfo Energy.

THE CORPORATE MINDSET

While Mexican workers might lack expertise in English and deepwater know-how, local players are reaping the benefits of other areas of competency in which international companies, with no experience in the country, are deficient. “To be an effective law firm in Mexico, deep knowledge of the country is required,” says Jesús Rodríguez, Founding Partner at Rodríguez Dávalos Abogados, adding that context of Mexico’s history and the capacity to deal with local communities for land access, among others, are potential roadblocks for which local companies could be drafted in to help.

Insight into the unwritten rules that govern oil and gas operations in the country is something that money cannot buy and a history in the country is being marketed as a competitive advantage. Perhaps the most complex challenge for new operators will be forming relationships with local communities. Historically, oil and gas operators and service companies in Mexico have negotiated with the communities residing in operational areas by investing in local infrastructure. Luis Vázquez, President of Mexican oil services company Grupo Diavaz, which has over four decades of experience in Mexico, says his firm’s contribution to local communities has created mutual respect. “As an example, the company installed a water pump in a village of 250 houses and has built schools and parks in other areas,” he says. “These communities respect us because we provide their people with jobs.”

Business customs are not the only cultural shift taking place. PEMEX’s evolution into a productive state enterprise reflects changes occurring throughout the value chain. As PEMEX alters the way it awards contracts to focus on the most efficient option financially and time-wise, its suppliers are also being forced to focus more on these aspects. This is already having an effect on personnel expectations, for example, says Richard Kirwan, General Manager for Brunel Latin America, as employees switching from PEMEX to private companies face a significant upheaval of values. “Often, it is virtually impossible to be fired from state-owned companies, so there is a strong sense of job security. Moving to a commercial environment where focus is on performance, safety and the environment means that job security diminishes.”

You May Like

Most popular

Newsletter