Merlin Cochran
Director General
AMEXHI
/
View from the Top

The Light And Shadow Of A Year Like No Other

By Pedro Alcalá | Tue, 04/20/2021 - 11:51

Q: What were the most positive aspects of 2020 for your members?

A: It is important to evaluate the state of our industry at the end of 2020. Regardless the pandemic, overall, the industry achieved important results: 40 billion dollars of approved investment and 16 billion dollars of executed investment. Almost one million dollars were invested on National Content. In 2020, the private industry presented 6 discoveries of resources and reserves have raised 40%. In fact, we hosted an event at that time where we talked to government officials, including senators, and explained to them the latest progress that our members have made with their projects and fields. Many people asked us about production levels but we emphasized that approximately 70 percent of our members’ contracts are still in their exploration phase. We chose to highlight metrics that are not only more relevant given the kind of development taking place at these fields but also due to the conditions imposed by the pandemic that affected 2020. Some figures included numbers on employment created by our members’ activities. Surprisingly, job numbers increased in 2020 when compared to 2019. Most of this increase comes from oil and gas states such as Tabasco, Veracruz and Campeche, states this government considers strategic to its vision of economic development. This industry generated 14, 150 direct employment.

We also have numbers regarding social impact and the benefits that originate from our members’ activities. Oil & Gas contracts do not have strict stipulations or requirements when it comes to social engagement and community management, outside of local content requirements. I say this to illustrate the actions in support of social welfare that our member companies have undertaken are not the result of a need for contractual or regulatory compliance but because they understand that their long-term commitment to Mexico, especially in a year as difficult as 2020, needs to be expressed in meaningful ways. The presence of the industry is in at least 120 communities. We have focused on the promotion of these kinds of stories, which have generated positive environmental impacts as well. Another successful metric is that more exploration wells were drilled in Mexico than in any other country in the Americas. Sixty percent of those wells were commercially successful, a number that is unprecedented at an international level. This speaks very positively of the enormous geological potential that Mexico continues to have.  

Q: What concerns your members?

A: One major concern was how to operate safely in this new normality brought on by COVID-19. Offshore platforms and vessels present unique environmental and spatial risks when managing personnel operations and activities, especially in regard to anti-contagion industrial safety precautions and protocols. Many of these workplaces can be quite confined, with recirculated air that creates additional risks for accelerating the infection rates in certain cases. To implement safety protocols as effectively as possible in offshore environments, we have partnered with state governments and port APIs. Entities such as SENER, CNH and SE have also played a significant role in doing the work necessary to make this possible. Thanks to their efforts we have had the flexibility to implement these protocols.

Long-term uncertainty is another prevalent concern. This is not only based on observations of our upstream subsector or exploration and production activities but also, we are seeing rules change in this industry in a manner that is worrying. Many of our members’ contracts carry 30-year terms, some even 50 years. For the most part, operators have some degree of visibility into the future in terms of strategy and decision-making, provided the rules of the game stay the same. The ROI time frames that our members are working with target the long-term, so they are understandably concerned about the changing policies and rules happening in Mexico’s energy industry. In this regard, I acknowledge the work of SENER, which has been receptive to addressing these concerns, as well as to our requests for transparency and further information regarding the government's intentions and plans. SENER tells us that investments are still needed and even the President has mentioned that the contracts will continue to be respected.         

Q: What positive social impacts derive from your members’ activities?

A: Any company that plans to be in Mexico for more than 40 years needs to be part of the community and its social fabric. They cannot be isolated from social concerns that may arise. They need to earn the respect and license to operate in the communities they operate. The law calls for specific kinds of royalties to be paid to communities directly, particularly for onshore fields. Their operators need to make sure they are up to date on their social compensation payments to communities and landowners neighboring such fields.  2020 has made us question what role we play in the function of health and medical institutions, which have been strained tremendously by COVID-19. Therefore, we are studying ways in which our members can contribute and invest in these institutions. Our members also finance the construction of schools through cooperation with municipal governments. A collection of examples of positive social impacts has been recently published through a book titled ‘La Energía de un Pueblo’, available on our website.

 

The Mexican Association of Hydrocarbon Companies (AMEXHI) is a nonprofit association. Its goal is to develop Mexico’s hydrocarbons industry to the highest international standards. The association includes 34 companies and PEMEX.

Pedro Alcalá Pedro Alcalá Journalist and Industry Analyst