News Article

How to Measure the Success of Round One

Wed, 07/19/2017 - 12:27

Moderator: Juan Carlos Gay, Partner in the Global Energy Practice at Bain & Company 
Panelist: Alberto de la Fuente, President of AMEXHI
Panelist: Ernesto Marcos Giacomán, Director General of Marcos & Asociados
Panelist: Rodrígo Hernández, Deputy Director General of Administration of Hydrocarbons at SENER

The transparency of the process, the rules and what the regulators learn should be the key determinants when gauging the success of the licensing rounds, Ernesto Marcos Giacomán, Director General of Marcos & Asociados, said at the Mexico Oil & Gas Summit 2017 in Mexico City on Tuesday.

“The number of blocks assigned is often used as a parameter of success but we should take into consideration the transparency of the process, the certainty brought by the rules and the learning attitude of the regulators as a major success,” Giacomán said during the panel discussing how to measure the success of Round One at the Hotel Sheraton María Isabel.

Juan Carlos Gay, Partner in the Global Energy Practice at Bain & Company, who moderated the panel, added that it was necessary to have a set of long-term measurement metrics for success in a country that is just opening its market.

The panel, which included Alberto de la Fuente, President of AMEXHI and Rodrígo Hernández, Deputy Director General of Administration of Hydrocarbons at SENER, agreed that creating a strong Mexican industry was a top metric. “Having Mexican companies in exploration and production will have the most important and positive effect over the long term because it will make the opening of the market brought by the Energy Reform irreversible,” de la Fuente said. He pointed out the commitment that AMEXHI members have to the country, adding that all AMEXHI members agree that having the value chain as close as possible is what makes the best economic sense.

Giacomán, pointed out that Mexico already has a strong and capable industry in place but he also said more needs to be done. “There is capacity; the Mexican industry is comprised of very capable national and international companies but what we need is an increase in demand as soon as possible,” he said.

But a number of hurdles must be overcome to drive the industry forward, Hernández told the audience. Among the top challenges was creating a proper level of trust, both from the general public and investors. “One of the main challenges of the reform was to create trust from the outside, to make both the Mexican public and investors trust that we would work with a transparent framework that provided certainty,” he said, while recognizing that the public is skeptical of political discourse.

Just like every other participant in the market, regulators are also undergoing a learning curve with every round that must be put to work to create better practices, Rodrigo said. “We as regulators are open to feedback, we want to have the best international practices in place,” the SENER official said.

Despite a low level of global activity, Mexico had been able to implement the licensing rounds in a short time, which must be seen as a major achievement, but simpler organization and regulation are required to ensure the country reaches its production goals, de la Fuente said. “The rounds need to keep coming at a quick and consecutive pace to achieve our reserves-replenishment goals. Trion is just one of the many discoveries that we need.”

When confronted with the question of what a change in administration would mean, with the presidential elections coming in 2018, the panelists agreed that Mexico’s open market and the resulting benefits have already been established. “We want to avoid a discussion of candidates or platforms. The way to go is to focus on long term goals, and from there lay the best action plan,” de la Fuente said.

Concluding the discussion, Rodrigo said that it would be dangerous to declare any round a final success. “We have to keep learning, never drop the towel and recognize that we are in an international battlefield, and that the objective is to bring investment to Mexico.