EPC, Summum, Betting on Mexico for the Long TermBy Peter Appleby | Fri, 09/18/2020 - 13:51
Q: How have Summum’s projects been affected by the arrival of COVID-19?
A: We are working on a storage terminal construction project with an EPC company named Grupo Cobra. We are involved in the engineering works, while the client is in the process of pushing the facility into the early production stage to speed the construction. We have modified the original engineering plans to accommodate this change. This is one of the main projects we have in Mexico and it is an unusual project in that we are working with a private client rather than PEMEX. There are not many of these jobs around at the moment. This has been a successful project and we expect it to continue as such.
In the current market, we are seeing a mix of companies suspending projects until they have a better idea of how the COVID-19 pandemic will play out, as well as the political situation in Mexico. Meanwhile, others remain committed and are working as planned. The companies that have projects that fit within the government’s vision of Mexico’s development are those that are still active, though this is a rarity.
Q: How is the company expanding its relationship with PEMEX?
A: PEMEX and CFE are the main areas of business opportunities for most companies in Mexico right now. For Summum, it is important to have a balance in both the private and public sectors. This year, we were granted an extension of around US$5 million for engineering services to PEMEX E&P. This is a huge contract for us and a responsibility we take seriously. It also represents the quality of work we have carried out for PEMEX and the recognition that they are very pleased with the services we have delivered. This is a contract we started in 2015 and both parties want to continue that relationship.
This project is located in Veracruz, principally in the Villahermosa area. Summum carries out the engineering for the NOC’s drilling campaign in the immediate area and in the south of the country. Initially, PEMEX was aiming to develop shallow water and onshore fields, though our perception is that the company is now giving precedence to the onshore opportunities. The company has a very aggressive drilling campaign and requires a great deal of engineering to interconnect the various pipelines, to move drilling rigs and platforms and to construct the electrical connections once aerographic and topographic studies are completed. The contract we have with PEMEX was originally for shallow waters but, a year and a half ago, we entered their onshore developments. Considering PEMEX’s shift to onshore and the need for cheaper development following COVID-19, we believe our move to become involved with onshore developments was the correct choice.
We are a medium-sized company with a midrange price but the experience and expertise we offer in engineering are on par with larger companies, and this has been a key factor in our success. Despite our size, we work with the government and major EPCs offering supervision. Our experience drives demand for our services from larger companies. Mexico is a price-oriented market and so the quotes we offer, compared to the expertise we provide, gives us a strong advantage.
Q: How has the training of local content changed with the crisis?
A: Though we have offices in other areas of Latin America, Summum will always try to complete jobs with local content in Mexico. That said, we will move personnel around the region if we have more work in one country than in another. For us, it makes sense to have local people present in local projects. Each country has its own regulations and civil codes. For example, Mexico’s and Colombia’s civil codes governing design and installation of electrical assets are completely different. This is why local expertise is necessary.
The experience we have in Mexico’s shallow waters can be applied to Colombia because the country is beginning to explore possibilities in the offshore arena. This means we can extend the opportunities we consider there. We are carrying out training services to start familiarizing them with onshore expertise.
Q: How is Summum adapting to the new normal in the industry?
A: Thankfully, as an engineering firm, our tools consist of a PC and an internet connection. From mid-March, prior to any government action, we sent all of our engineering personnel to work from home. For Summum, the principal concern is the health of our employees. Though this was not simple, after a month and a half we worked out how to best perform duties and have become more productive than when we were in the office. This period of change has actually been very valuable for the company. Though I do not believe we will ever work 100 percent from home, we have learned that we can accommodate a great deal of flexibility in our process when needed. This means we will be more flexible in the future, which will benefit our clients and our business strategy.
Q: How has the pandemic altered the attractiveness of Mexico within the Latin America context?
A: Summum has always considered Mexico as an extremely interesting market and country to do business in. Since the ratification of the Energy Reform and the entrance of private players, Mexico certainly has become more attractive, and right now, we are absolutely assured by the vast amount of work still required to see through the contracts that have been set. With PEMEX and CFE having the government’s backing, and considering projects such as the Dos Bocas refinery, the Istmo de Tehauntepec Interoceanic Corridor and the Mayan Train, there are many projects that we can participate in. Mexico needs extensive support in its energy sector, including the other six refineries of the National Refinery System that require serious maintenance to return to their optimal capacities.
Mexico is so large in the Latin American market that a company has to be here if it is to become a success. So, despite the political changes that have occurred and the impact of COVID-19, Mexico remains a vitally important market in Summum’s growth plans. To achieve this growth, we have set some goals. For this year, which has been difficult for everyone, the aim is simply to maintain the company as it is. The company is unlikely to grow much in 2020 because of the COVID-19 situation. Investment will remain depressed, so our goal is to retain our personnel. Once the pandemic has passed, we will continue down our path of growth.
Summum is a midsized engineering service provider with more than 40 years experience. It deliver regional expertise and offers comprehensive services in the oil and gas, energy and mining sectors. It has offices in several Latin American countries.