Luis Vázquez
Chairman of the Board
Grupo Diavaz
View from the Top

Experience, Knowledge and Adherence to Standards

Wed, 01/18/2017 - 23:04

Q: What new skills must Diavaz develop to succeed in the new-look market?

A: Diavaz needs to transmit the message to new foreign companies that we have the experience and knowledge garnered over many years in the Mexican oil and gas industry. The first step toward this is a contract we are signing with a Canadian company to begin working with them as if we were PEMEX. We have to comply with safety standards, an aspect that has not always applied in Mexico. A pertinent example is the pollution that used to be caused by oil and gas operations in Mexico. Tampico, Ebano and Villahermosa were heavily polluted in the past because PEMEX was only loosely bound to comply with weak and rarely enforced policies and laws. Now that things have changed, Mexican companies must comply with standards set out by the industry’s regulatory bodies. Meeting those requirements allowed PEMEX to partner with Australian company BHP Billiton because it sees that the NOC adheres to international standards. Similarly, the Canadian operators Diavaz is partnering with supervise us to ensure we are complying with all ASEA’s requirements.

Q: How can Diavaz contribute to Mexico’s new rules for local content?

A: Being a Mexican company Diavaz will always help meet local content quotas. We have doubts about how the government will actually measure the involvement of local workers on a given project. Given that the majority of Diavaz’s services are completed in alliance with international firms, it will be difficult to quantify how much of a job has been done by Mexicans. Mexican companies should demand that local content be measured well, but not before they are fully trained and accredited.

Q: If you could share three priorities with the ministry of Energy, what would they be?

A: The first priority would be to complete the contract migrations so that Mexico’s private oil and gas sector can start competing properly. The second would be to improve planning. Most importantly, the Ministry of Energy should prioritize strengthening PEMEX financially and organizationally. The best way to strengthen PEMEX is to leave it alone and grant it independence rather than having so much involvement from the Ministry of Finance. When the reform was implemented the authorities decided to pass PEMEX’s labor liabilities to the Ministry of Finance but this has not happened.

Q: What political incentives should be considered in the oil and gas industry?

A: The government is not giving any indication that it will take more action in the oil and gas industry before the 2018 election, raising the possibility that PEMEX’s situation will worsen in the next year. In recent years PEMEX had its belt tightened considerably and many projects were cancelled. Unfortunately not much has changed since it got new leadership. PEMEX officials urgently need to sit down and work out how the company will continue its production levels of 2 million b/d without maintenance budgets. It is not the current government’s fault, instead the problem lies with Mexico’s political system itself.

In the face of PEMEX’s worsening financial and production outlook, the key for large service providers like Diavaz is to search for new clients entering the market. In five years Diavaz’s goal is to have 70 to 80 percent of its portfolio dedicated to PEMEX, with the rest focused on the private sector. Diavaz will continue working in the same way and investing in the sector, although PEMEX owes us an incredible amount of money.

Q: What are Diavaz’s three objectives for the year to come?

A: Our first priority is to finalize the separation between Diavaz and DEP and have one president for each company. Secondly, we are focusing on partnering with a foreign firm to bid on the licensing rounds. Lastly, we would like to finish migrating the four CIEPs and COPFs we hold with PEMEX. There is a lot of uncertainty about how the Mexican oil and gas industry is going to develop, but we believe Diavaz is well positioned to take advantage of the opportunities.