The Future of Human Capital in the Mexican Oil IndustryWed, 01/22/2014 - 17:04
The Association of Mexican Petroleum Engineers (AIPM), founded on April 1958 in Mexico City, was originally created to provide E&P specialists with a platform to discuss and share knowledge. Today, the association has around 3,500 members concentrated in its ten delegations: Reynosa, Monterrey, Tampico, Poza Rica, Veracruz, Coatzacoalcos, Comalcalco, Villahermosa, Ciudad del Carmen, and Mexico City. The composition of AIPM has grown to also include downstream engineers, which now constitute around 10% of its membership.
AIPM aims to provide solutions for the industry’s more urgent technological challenges with a particular focus on E&P through information sharing, research, and collaboration. José Ángel Gómez Cabrera, National President of AIPM, sees these challenges as very well defined. “In the medium and long-term scenario, the main technological challenges revolve around deepwater, shale gas, and shale oil,” he says. “Mexico also has a peculiarity: most of the crude that has been recently discovered is of the heavy and extra-heavy variety, with less than 10°API.” Classifying the country’s hydrocarbon challenges by order of priority, Gómez Cabrera states that heavy crude extraction most urgently needs tackling, while deepwater and shale oil and gas production can be addressed later. “We are still identifying the potential in deepwater and shale reservoirs. These will not be tackled during President Enrique Peña Nieto’s term. The risks in both of these segments are much higher than those in onshore and shallow water regions,” says Gómez Cabrera. “If we invest heavily and take the time to study these areas and bring the necessary equipment to develop them, we might start seeing production from shale and deepwater reservoirs by the beginning of the next presidential term.”
Gómez Cabrera affirms that the mass development of shale oil and gas is still far away, expecting the appraisal process in shale reservoirs to be completed in five to ten years, but he believes it is AIPM’s responsibility to begin looking for ways to streamline this process. “If shale gas projects do not contain a liquid hydrocarbon component, they are almost immediately rendered unfeasible,” he states. “So, in order to really talk about mass shale developments, we have to find a considerable amount of liquid hydrocarbons in the reservoirs. While the technology to exploit shale gas is well known, issue arise from the unique characteristics of the Mexican subsurface and the commercial characteristics that those projects need to be rendered exploitable,” he adds.
“Mexico still lacks the technology and expertise to produce oil in deepwater, and it will take more than five years for PEMEX to extract its first barrel of deepwater oil,” says Gómez Cabrera. All deepwater exploration activity has been done through service contracts. The next steps will take longer, and the Mexican petroleum engineers of AIPM feel that this is where they can contribute. “We need to implement early production processes in deepwater in order to minimize the time to first oil,” Gómez Cabrera states. “Once we find a new deepwater reservoir, we can anticipate the appraisal process by carrying out extended well tests. Through these tests, we incorporate the reservoir’s production immediately, while continuing to perform analyses on the well’s characteristics to dynamically streamline the exploitation process.”
Gómez Cabrera does not view deepwater or shale gas as Mexico’s main priorities, he reserves that judgment for the shorter-term challenge of offshore heavy oil extraction. “We have extra-heavy oil buried in pockets at a 2,000 or 3,000m depth, in 100m water depth near our coast,” he remarks. “To address the challenges related to heavy crude oil production, we urgently need collaboration agreements amongst the government, universities, research centers, and associations related to the petroleum industry. Once those collaboration agreements are formed, we have to integrate them within the private sector.” Gómez Cabrera sees it as imperative for the country to build an integrated relationship amongst all players to develop the technological prowess necessary to meet the country’s future challenges.
A role model for Mexico could be the Brazilian technological development that underpinned the country’s success in pre-salt deepwater areas. “I really like the Brazilian model,” expresses Gómez Cabrera. “In Brazil, all the main universities are involved in the oil and gas industry. The CENPES research center is on the campus of the Federal University of Rio de Janeiro and thousands of researchers, professors, and academics dedicated to the oil industry are working there to develop solutions for the national oil industry. At the same time, the government works hand-inhand with Petrobras and the other oil companies operating in the country. There is a clear, strong link that binds the business community, the government, and the academic sector together, unlike what we see in Mexico.” Gómez Cabrera continues. “The Brazilian regulator, ANP, has all it needs to function properly. It even has control over the reservoirs and the exploitation projects, a mandate that the government is now extending to CNH.”
PEMEX is facing the risk of losing a large number of personnel due to retirement at an approximate rate of 1,000 employees per year. The situation becomes truly problematic as there are not enough skilled workers to fill the resulting gaps. César García Brena, Partner at Bremass Energy Advisors, claims part of the problem comes from a current lack of interest in the oil industry. “The new generations think that the oil industry is dirty or outdated. This is a misconception, as the oil and gas industry will still have a prominent role in the future and offers great career paths for young people, but it is not promoted enough.” The problem also stems from the fact that higher education institutions do not have the capacity to educate young professionals at the required rate. “More engineers are graduating in Mexico than in Germany, but not many are specializing in petroleum. For a long time UNAM was the only university to offer graduate programs related to the oil industry,” says Gómez Cabrera. Over the past decade, IMP has taken on the task of educating professionals through its post-graduate programs. However, he notes that these are not entirely focused on oil exploration and exploitation. “We need thousands of oil engineers and hundreds of professionals with master’s degrees or doctorates. The industry needs skilled workers who can identify the hydrocarbon potential in the subsoil and help with the extraction processes: petroleum engineers, geologists, and geophysicists.” Gómez Cabrera sees the efforts made so far as being insufficient. In the downstream segment, UNAM also opened a master’s program in refining five years ago, the only one of its kind in the whole country. However, only a small number of students have finished this program, thus the industry has not reaped significant benefits from it yet.
Around 30 Mexican universities now offer programs in petroleum engineering, which reflects educational institutions’ increasing interest in the industry. Nonetheless, Teódulo Gutiérrez, Consulting Partner at GPT and Director General of Oil Projects, has found that quality issues continue to affect these programs. For instance, he claims they were created without certification or curriculum guidelines from the government, the wider academic sector, or any major player in the oil industry. Graduates from those programs will therefore not necessarily possess the skills that match the needs of the Mexican oil sector. Out of those 30 universities offering a program in petroleum engineering, Gómez Cabrera believes that UNAM, IPN, Universidad Olmeca in Tabasco, Universidad de Nuevo Leon, and Universidad Veracruzana comply with what the industry needs. Fluvio Ruiz Alarcón, Professional Board Member at PEMEX, says he has met with many universities to promote programs related to the oil industry. After visiting the main public universities in Tabasco, he realized that not many higher education institutions are familiar with the Hydrocarbons Fund. He compares the task of informing universities about the Hydrocarbons Fund to spreading the technological gospel. IMP is already embarking on this endeavor by promoting scholarships in geophysics, geological sciences, petroleum engineering, physics, and mathematics. Ruiz Alarcón claims the problem, specifically in Tabasco, is that earth science programs are barely beginning to emerge. He urges the creation of state policies to strengthen capacities in Mexico’s main oil regions. “Although efforts are being made in the University of Carmen and the Universidad Tecnológica de Campeche to address this knowledge gap, these are isolated attempts carried out without coordination with the federal government or PEMEX.”
Gutiérrez points out that only 1% of PEMEX’s staff has doctorate degrees. This is a vital issue that has to be addressed, and Gómez Cabrera praises PEMEX’s initiative to send engineers abroad to study. “PEMEX has publicly said that it currently has around 100 professionals studying post-graduate programs abroad, but this number is not enough to cover the industry’s needs,” he notes. However Ruiz Alarcón questions the effectiveness of this initiative. “There is no point in PEMEX spending money on sending people abroad to get post-graduate degrees if they are going to come back to the same position they initially had or leave for a position in a private company.” To prove his concern is justified, he notes that there are no IMP postgraduates working at PEMEX. Instead, they can be found working at Schlumberger, Weatherford, or Halliburton.
While Gómez Cabrera praises the project that PEMEX has launched to create a corporate university with ITESM, he believes there is a more urgent need for technical schools that help solve the root problems of the Mexican oil and gas industry. “The PEMEX Corporate University is a very ambitious project with the aspiration to create 30 campuses nationwide, but I do not think that this is the solution to the industry’s main problems,” he comments. “This project is creating a business school, but we need schools that teach the hard skills: technical schools that form petroleum engineers, geologists, and geophysicists.”
Given that the progress brought by the Energy Reform is set to unfold slowly, Gómez Cabrera believes Mexico’s best bet in the short-term is to continue working on what it does best. “PEMEX still has to develop more secondary recovery and enhanced recovery projects in order to improve recovery rates in shallow water and onshore fields,” he says. If the country continues its development on schedule, Gómez Cabrera is confident that deepwater and shale resources will come next, particularly if an improved professional base and strong links between the government, the private sector, and academia can be forged.