Key Oil and Gas Leaders Gather at MOGS 2023

Mexico Oil and Gas Summit celebrated its 2023 edition on Oct. 4 and 5, with leaders and key decision-makers from the industry's main sectors gathering at Expo Santa Fe in Mexico City to share ideas and insights regarding the state of the industry. Opportunities were highlighted in new developments like Zama and Trion, but challenges remain as the industry grapples with regulatory uncertainty and a lingering favoritism toward PEMEX. 

The summit was inaugurated with a presentation on the political scenarios 2024 and their impact on energy policy, a very pertinent topic as Mexico's energy landscape has undergone significant changes over the past decade. The arrival of the new government in 2018 marked a shift in the direction of the Energy Reform and the suspension of bidding rounds created uncertainty for private operators. In this context, Carlos Ramírez, Political and Economic Risk Consultant, Integralia, said that whoever wins the elections will inherit both positive and negative elements in energy matters. On the positive side, a nearshoring momentum, relatively robust macroeconomic indicators, improvements in some social indicators and a society that trusts more on the government favor the new administration. On the negative side, Ramírez highlights tight public finances, significant liabilities like PEMEX’s debt burden, bottlenecks in the energy sector and low governance capabilities to make public policies. 

Meanwhile, Óscar Roldán, Director of the Oil and Gas Division, R9 Holdings, guided an interesting revision of Mexico’s Energy Reform after 10 years and reported on the results yielded and lacking from the reform. On the private sector’s side, company participation yielded important results. Roldán explained that private companies have invested US$14 billion and plan to invest about US$50 billion more, while these operations have also yielded US$3 billion for public finances in the form of taxes. Likewise, Mexico’s oil and gas data increased significantly.

Elizabeth Castro, Head, National Hydrocarbon Information Center (CNIH), talked about the fiscal regimen of licensing and shared production contracts, under which operators normally work. Private production and exploration have yielded significant results for the development of the industry. At the same time, companies can represent an important part of the public income. As Castro explained, profit from exploration and extraction activities is distributed between the State and the operators. The State receives income from compensatory payments and taxes, while the operator receives the remainder after making these payments to the state and covering the project’s costs. 

To talk about the experiences of these private operators in the Mexican contest, Ivan Sandrea, Co-Founder and CEO, Westlawn Americas Offshore (WAO), led an interesting discussion featuring Alma América Porres Luna, Former Commissioner, CNH, where experts concurred that it would be a mistake to assume that no progress has been made in Mexico’s oil and gas ventures. The role of private operators in Mexico’s upstream oil and gas industry was highlighted by the participation of Porres; Andrés Brügmann, Vice President, Hokchi Energy; Giorgio Guidi, Managing Director, Eni Mexico, and Martin Jungbluth, Managing Director, Managing Director of Mexico, Wintershall Dea. The experts celebrated the progress that Mexico has had in its unique oil and gas industry and gave perspectives on the future of the industry, addressing the main challenges they face. Porres mentioned that operators have held up to regulators’ strict standards, even in difficult times such as the pandemic. With an emotional applause, the panelists and assistants thanked Porres’ for her work as commissioner during her tenure.

Experts also addressed PEMEX’s role in the development of the industry and the challenging situation of its debt burden. Alejandra León, Latin America Upstream Director, S&P Global, led a panel featuring Roxana Muñóz, Vice President Senior Analyst - Corporate Finance Group, Moody’s Investors Service; Félix Boni, Chief Credit Officer / Economic Analysis, HR Ratings México; José Pablo Rinkenbach, Executive Director Asset Management and ESG, AINDA, and John Padilla, Managing Director, IPD Latam. The panelists discussed PEMEX’s financial, debt and cash flow outlook, a critical cornerstone of Mexico’s economy due to the NOC’s public contribution and role in the energy industry. Credit rating companies have closely monitored the NOC, warning of the potential risk that the company may become unable to meet its financial obligations. Experts mentioned that the following years will be crucial for the NOC as it deals with mounting debt and difficulties in securing further financing.

Despite its difficult situation, PEMEX remains a key player in the industry, even when it is not the sole participant in a field development project. One such iconic alliance is the development of the Zama field. Sylvain Petiteau, Management Office at Zama Integrated Project Team, Wintershall Dea, underscored the strategic alliance between PEMEX and its private partners to develop one of the most promising shallow water fields in the world.

Beyond field operation, the opening of the market also brought a transformation to the oil and gas supply chain. Alberto Galvis, CEO, Citla Energy; William Antonio, Managing Director Mexico & Central America, SLB; César Vera, Managing Director, BME Shipping; Miguel Carreón, Regional Leader Mexico & Central America, Baker Hughes, and Daniel Zuluaga, Country Manager, SUMMUM, discussed their outlook on supply chain business opportunities and industry trends. Enhancing resilience and agility in supply chain operations is paramount to mitigating risks and maintaining operational continuity, experts pointed out. Collaboration and partnerships within the supply chain are crucial drivers for innovation, cost reduction and overall competitiveness in the Mexican oil and gas industry.

Regulation and industry developments have also required operators to foster local content participation. However, as explained by experts, local content goes beyond components. Miriam Grunstein, Senior Partner, Brilliant Energy Consulting; Marcos Ávalos, General Director, TUVANSA; Héctor Canizales, Mexico Country Sourcing Manager, Baker Hughes; Joel Zúñiga, Purchasing Manager, Fieldwood Energy, and Rafael Rodríguez, Board Member Consultant, Grupo Industrial Águila, engaged in a crucial conversation regarding procurement priorities, local content optimization and supplier development strategies within the industry. Panelists highlighted the role of talent in boosting supplier performance and in meeting local content requirements. They also addressed how the lack of specialized workers in the US is urging Mexico to develop this workforce, which also works to attract more investment to the country. 

ESG, a topic transversal to all industries, was also addressed at the event. Lorenzo Meyer, Member of the Board of Directors and President of the Sustainability Committee, PEMEX, shared insights and his perspective on ESG from the sustainability committee in PEMEX. The NOC has faced increasing scrutiny regarding its ESG goals and efforts are necessary if PEMEX wants to keep investors happy, which is something that Meyer highlights as a priority. On the private side, companies are witnessing the importance of ESG standards as a critical factor for operations. Ignacio Quesada, Partner, McKinsey & Company; James Buis, District Manager - Mexico, ChampionX; Eckhard Hinrichsen, Country Manager and Market Area Manager, DNV Energy Systems Mexico; Brad McNeill, CEO, Frontera Offshore, and Sara Landon, Executive Director, Inerco, participated in a discussion regarding ESG objectives. Addressing these complex issues requires a multifaceted ecosystem involving customers, corporations and regulatory bodies. Ensuring success in the implementation of ESG methodologies requires a close examination of available tools and facilities, experts concluded.

Legal experts David Enriquez, Partner, Goodrich, Riquelme y Asociados; Claudio Rodríguez, Partner, Holland & Knight and Enrique González Calvillo, Partner, González Calvillo, also addressed energy policy and energy disputes from a legal perspective. These experts analyzed the amparos regarding energy policy being discussed in the Supreme Court and made an analysis on the constitutional limits on the legislative and executive power. Experts emphasized that rule of law is a very important pillar in any economy.

The event concluded with the interesting participation of Stephan Drouaud, Vice President, Trion Mexico, who shed light on Woodside Energy’s collaboration with PEMEX to develop an interesting deepwater project, an untapped area for Mexico. Drouaud explained the map route planned to convert Mexico-s deepwater potential into reserves and production. Drouaud shares that delivering a deepwater development is a complex undertaking, specially this being Mexico’s first venture in this type of development, and therefore takes more time to achieve first production when compared to onshore or shallow-water developments. This milestone will contribute to an increased understanding of the subsurface, facilitating additional development activities in the Perdido Basin, a region presently characterized by the presence of exploratory assignments or contracts, emphasizing the strategic importance of this forward-looking initiative.