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A Focus on Boosting Local Content

Antonio Juárez - AMESPAC
Director General

STORY INLINE POST

Wed, 03/14/2018 - 12:19

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Q: What are the prevalent concerns among AMESPAC members?

A: The companies integrated into AMESPAC are primarily service providers to the oil and gas industry. Concerns have been raised over the lower price of oil and PEMEX’s steep production decline, causing field activities to significantly diminish. Companies accustomed to a solid market foothold in locations such as Ciudad del Carmen or Villahermosa with strong oil and gas production activity are now suffering from both a lack of work and PEMEX’s contract revision process to get better prices, which directly impact expected revenues.

Q: What steps is the industry taking to adjust to this situation?

A: Some companies have closed as a direct consequence of this. We have a good relationship with PEMEX and we are trying to help it look for new ways to increase its reserves and production. PEMEX’s budget is still designated and managed by the government and investment levels are dependent on total sales revenue, which suffered a drastic fall in 2015-2016, reducing investment. Previously, PEMEX invested close to US$20 billion per year while at present it is investing less than half that. We are in talks with the government to make a case to prevent service companies from dying. PEMEX’s increased resources to pay its commitments and start drilling again are a critical part of the equation. In 2010, 170 drilling rigs were operational, whereas now only 22 are operating in development fields and 14 in the exploration fields.

Q: What can companies do to survive under these conditions?

A: A number of private companies are starting operations in Mexico, launching new deepwater, shallow-water and onshore projects awarded in the country’s licensing rounds. Mexican companies working in the awarded blocks, especially in the country’s southeastern region, are looking to get involved with these new operators. Small companies working in onshore projects are also part of the target as the inherent nature of onshore projects and the size and flexibility of the companies allow for a more streamlined launch of operations.

Q: What are AMESPAC’s most significant initiatives for the next few years?

A: From the outset, our association has been focused on increasing local content with the development of the oil and gas industry. Our priority is to rely on our associates, both international and local, to push for local content requirements and to foster employment as the new local content formula in Mexico’s regulatory framework quantifies products and services, mainly through local labor. AMESPAC works closely with Mexican universities to develop new programs to prepare young people for work in the industry.

Q: How quickly do you think the industry will pick up as key variables improve?

A: New investments from foreign companies that were awarded E&P contracts during the licensing rounds are turning into drilling activity for exploration operations. Over the next three or four years, this activity will steadily increase.

Q: What is your approach to the foreign service companies arriving to Mexico?

A: Several new companies are setting a foothold in this industry. There is a particularly significant contingent of Norwegian and US companies looking to expand their market presence in Mexico. We have expressed our interest in them joining AMESPAC so we can help them successfully achieve their goals, introduce them to Mexico’s operators and build a stronger group within our association. AMESPAC organizes several conferences throughout the year to connect operators with service companies, including key speakers from the relevant government agencies and regulators: PEMEX, CRE, CNH and ASEA. We also invite foreign organizations to participate, such as the Society of Petroleum Engineers (SPE) and the American Petroleum Institute (API)

 

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