Growth Opportunities in Infrastructure DevelopmentWed, 01/25/2012 - 12:49
“The biggest challenge for our company is being an independent Mexican engineering firm of our size,” says Sergio Dan Saldivar Valdés, Director General of NorthAm Engineering, a Mexican engineering company with experience in the design of topsides for offshore platforms. “We have been very fortunate, growing at 50% year-on-year. This now makes us the largest independent engineering firm in Mexico. There are other firms that are the same size and some are larger, but those are affiliates of international engineering companies. The challenge is that we have to keep feeding the beast. When you have affiliates in other parts of the world, you are able to balance workloads by working on projects for other affiliates. That has been our biggest challenge and our biggest worry moving forward. We need the projects from Pemex and CFE to continue growing. If those dry out, we are going to have a hard time allocating our execution capacity elsewhere in the world.”
However, NorthAm need not worry too much about the amount of work for engineering firms coming from the oil and gas sector. In the last few months of 2011, Pemex contracted around 1.2 million man-hours of engineering work, and in the first few months of 2012 intends to contract around 2 million hours more, according to Saldivar Valdés.
Most of the work Pemex is contracting is related to a revitalization of its offshore infrastructure, and the company is both buying new platforms and refurbishing its existing infrastructure. When asked how he believes Pemex should manage the balance between these two activities, Saldivar Valdés says: “The best development model will be a combination of both, and around 50 new platforms will be installed at Pemex’s mature shallow water fields in the next few years, which is quite an aggressive rate for a two- year period. But Pemex also needs to maintain its current infrastructure in order to maintain production rates.”
Regarding how Pemex’s development plans fit into the growth of NorthAm, Saldivar Valdés explains that: “While we know Pemex intends to develop a lot of platforms in shallow water in the coming few years, in the long-term we will see more FPSO and deepwater projects being announced, and as a result we are working very closely with partners in the US, primarily with Foster Wheeler Upstream, to interest them in the Mexican market, and be able to jointly push projects where NorthAm currently lacks the expertise. Five years from now, we hope to be able to develop engineering for those projects.”
Saldivar Valdés says that, in general, companies from outside the country have high regard for Mexican engineering capacity as a result of flagship Mexican companies like Bufete Industrial and Grupo Protexa, which were very influential in the development of Mexico’s oil and gas sector. However, in the recent past, engineering was primarily executed outside of Mexico. Large refining projects went to countries such as Korea and Spain and a lot of Mexico’s engineering projects were executed outside of the country. However, this is now beginning to change, and companies are starting to see the value of partnering with Mexican engineering companies.
“In the upstream environment, there are still very good Mexican firms, some of which have been suffering a lot and as a result have limited capabilities today,” says Saldivar Valdés. “Maybe now they are not in the best position, but they still have the people and the experience. In the upstream, what we bring to the table that is different is our relationship with international companies, and execution capacity in terms of volume. Whilst these other companies need to hire the engineers to execute a project, we already have them and can offer a very rapid response to a project as a result.”
Talking about NorthAm’s long-term growth potential in the upstream oil and gas industry, Saldivar Valdés says: “On the upstream side, which today accounts for around one-third of our business, we are definitely intending to capture a good portion of the engineering work coming up for tender. There are a lot of onshore engineering tasks to overcome as well as offshore. Even in Chicontepec, which has always been controversial, there has been a major shift in the way Pemex E&P is looking at the engineering portion of contracts allocated in this area. Our goal is to be able to execute one million man-hours per year by 2014. Right now we are at 500,000 man-hours per year. That means doubling in size. With the projects that are out there, even if we get a rather conservative slice of the pie, we will be able to achieve this objective.”