Engineering Merger Strengthens Downstream ActivitiesWed, 01/22/2014 - 14:40
Q: What were the main objectives of the NorthAm Engineering and Foster Wheeler merger?
A: We have known Foster Wheeler for a while now as both companies had jointly pursued and executed various projects prior to the acquisition. The due diligence process for the merger started in May 2012 and the deal was concluded on May 31, 2013. Foster Wheeler had been chartered by its board to pursue additional business ventures in Latin America. Increasing its presence in Mexico through the acquisition of NorthAm Engineering was one of the starting points of their strategy. Foster Wheeler has traditionally been active in the refining market, while NorthAm’s strategy was to diversify into other markets. At the time of the acquisition, 50% of our activities were focused on upstream, providing Foster Wheeler with a complementary point of entry into the Latin American market. Foster Wheeler brings to NorthAm Engineering improved market positioning, expertise, technology, resources, and a larger overall presence. All of these have a considerable impact on our targets and ambitions. We are focused on the oil and gas industry, mining and metals, and industrial pharmaceuticals. Throughout its history, our company has been present in the refining sector as well as midstream, upstream, power generation, and transmission. While we were previously reluctant to pursue EPC projects, since the merger, we have been actively pursuing such opportunities in refining and upstream. We continue to operate under the name of NorthAm Engineering, although we are working together with Foster Wheeler.
Q: How did the merger with Foster Wheeler affect NorthAm Engineering in terms of human resources?
A: NorthAm Engineering has a very comprehensive training program. All our employees are on permanent contracts, we do not hire people to fill a job position, we hire them to add value to the company. The merger with Foster Wheeler means we will have more resources at our disposal, with more training and expertise at hand. Naturally, we will need to adapt to our parent company’s standards and core values. NorthAm’s engineering staff is already participating in integration sessions with the goal of eventually replicating what Foster Wheeler does worldwide. We are working together on multiple fronts to ensure a fully successful integration process.
Q: What are the advantages of NorthAm Engineering’s approach when executing onshore upstream projects?
A: The capabilities that our company offers are not easily found in the market. NorthAm Engineering also has the advantage of being based locally. This can be seen in Poza Rica, where we have the largest presence of any company. At the moment, NorthAm Engineering is working on the execution of a Master Services Agreement, a type of contract for service orders. Within this context, the most significant field is the Aguacate field in Poza Rica. It is necessary to be close to the fields in order to carry out studies, develop the conceptual design, and ensure that proposals meet the field’s requirements. Once this is done, we implement a holistic multidisciplinary approach with compression stations, all sorts of production facilities, connecting pipelines, and electrical works. We also completed several studies and we are now moving on to the detailed engineering phase along with PEMEX at the Ebano field. We will work on automation, electrification, as well as making a few adjustments to boost production.
Q: How can your company’s engineering capabilities contribute to the development of Mexico’s pipeline system?
A: There is an evident lack of pipelines in Mexico. As a consequence of the merger, we are now part of a much larger organization with extensive pipeline capabilities. These derive from Foster Wheeler’s acquisition of a Canadian company, Three Streams Engineering. At the moment, we are looking to integrate said capabilities into NorthAm Engineering’s product offering. In the past our pipelines were limited in size, but the company is now able to work with 36-inch pipelines over hundreds of kilometres. NorthAm Engineering is making itself available to PEMEX and CFE, as well as to operators and EPC companies pursing similar projects. TransCanada and Mitsui, which are bidding for or have already been awarded projects, are two of the players that have approached NorthAm Engineering.
Q: How does NorthAm Engineering evaluate its opportunities in the Mexican downstream market in light of recent contracting changes in the sector?
A: The refining projects have moved beyond the basic engineering stage to the EPC stage, as can be seen in the Cadereyta refinery’s diesel program. This will now be the main market in the downstream segment. NorthAm Engineering is positioning itself to bid for these projects. For instance, the Salamanca refinery will soon enter the EPC phase. The other project we are currently looking at is in Salina Cruz, where a portion of the basic engineering was completed ten years ago. The works will be reviewed and likely redone due to newly available technologies. In my perspective, the next phase in refining for PEMEX will either involve joint ventures or direct private participation. I do not see why PEMEX has to invest in new capacity if it can acquire said capacity from the private sector.
Q: What are NorthAm Engineering’s main growth targets for 2014?
A: Our main targets for 2014 remain the same as the reforms will take some time to percolate and come to fruition. We do expect more projects after 2014, when fields will be assigned to private companies. Once the Energy Reform becomes effective, our business in Mexico will change from working with one customer, PEMEX, to five or six companies. As I mentioned, NorthAm Engineering is already a supplier for several companies that have been attributed blocks.