IOC Evaluation of the Energy ReformMon, 09/01/2014 - 14:33
Q: What are the differences between the Energy Reform that has been passed and the version you were expecting?
A: The current Energy Reform, in its constitutional state, could be compared to international standards in its significant opening up of the oil and gas industry. It has necessary elements that will introduce competition, efficiency, productivity and investment, foster these and take them to match international standards.
Q: How will the strategies of IOCs such as Shell adapt to the new opportunities following the Energy Reform?
A: The government acted wisely in having an Energy Reform that tackles the entire value chain, ranging from upstream to downstream. This will see companies exploring opportunities in areas once thought to be inaccessible. The Energy Reform is showing the potential for possible investments to be made across the entire industry’s value chain, while letting companies analyze and choose where they fit best and where they can add the most value. PEMEX knew and understood that they could not be everywhere in the value chain nor could they do it all themselves.
Q: How is the Energy Reform changing the position of Mexico in Shell’s global portfolio?
A: Companies always face choices. Shell must choose which opportunities to seize worldwide. Mexico has now become one of those options, which was not the case in the past. Mexico’s biggest advantages are the opportunities arising from opening up the market after being closed for many years. Many new possibilities will come about. In addition, the experience, technology, and knowledge acquired throughout Mexico’s closed period can serve as concepts to be applied today that could have been more difficult to conceive in another market. A perfect example is the deepwater segment. Deepwater technologies have evolved during the past 30 years, and even though no significant development has taken place in Mexico except for PEMEX’s successful exploratory wells, the possibilities are endless. Current technology can enable these possibilities to become a reality much quicker. Mexico is a country that we believe might be interesting to explore, and its availability of resources can certainly help the country’s development.
Q: What uncertainties in the legal framework are likely to impact the risk profile of the upstream oil and gas activities of private companies in Mexico?
A: The most urgent factor is to clarify the roles and responsibilities of each of the actors in the industry, as well as those of SENER and the regulators. It is also necessary to establish what it means for PEMEX to become a productive company of the state, what it needs to achieve in order to comply with its new responsibilities. In addition, it is necessary for there to be agencies or government bodies that regulate economic aspects of the industry, such as the administration of the Mexican Oil Fund. It is equally important to understand how all the actors will be interacting and how strong each of the institutions will become. This is basically figuring out how the Mexican oil and gas industry will enforce a “checks and balances” framework to allow it to be efficient and competitive.
Q: How can Shell help Mexico to seize the current opportunities given the limited amount of money available?
A: This quote could apply to any IOC since we always have more opportunities than budget. As projects become more and more expensive and complex, a company cannot do them all. All we can hope for is that as more companies come into Mexico, more opportunities will be taken advantage of in a better way. This situation applies to PEMEX as well as any other IOC, including Shell. We will have to decide where we would like to focus in Mexico and this will hopefully benefit the country, as well as the actions taken by the many actors at the table.
Q: What do you expect to contribute to the development of the Mexican oil and gas industry in the following years?
A: As a company, we are expecting to share our best practices, knowledge and to contribute to the development of the energy sector in Mexico. In addition, we plan to prepare talent that will meet the industry’s requirements. Being able to create long-term relationships with the community in terms of fostering talent and expertise to cascade that down and generate individuals that understand the energy sector in Mexico will be a great achievement. Overall, Shell aims to be a force for good.