Palma Méndez
Director of Mexico
Wood Mackenzie
View from the Top

Local PResence to Support Investment Decisions

Wed, 01/20/2016 - 08:42

Q: How has Wood Mackenzie influenced the Mexican petroleum industry from its Houston headquarters, and how will the opening of an office in Mexico help increase its impact?

A: Wood Mackenzie has provided its insights and experience as a global and regional industry leader to key decision makers in Mexico since 2001. Over the past ten years, we have increased our presence in the region and today have more than 25 offices around the world. Our research and consultancy teams are now closer to the markets in which they work. This integrated model of research and consulting, together with our proprietary databases and global industry knowledge, helps bring our perspective and international best practices to the Mexican oil and gas industry. This is important for a market opening up to the world and where reliable data and strategic thinking are critical for the key investment decisions that both the government and players will be making in the coming years. Our offices in Mexico City will open in July 2016. The main idea is to be closer to the clients that Wood Mackenzie has developed over the last 15 years of doing business in the Mexican oil and gas sector. Our company works with every type of client across the energy sector, from IOCs to small independents, NOCs as well as governments, conglomerates, and financial institutions. These clients depend on our research and consulting services to make investment decisions. Our objective is to improve the support we provide to our existing and new customers, and to expand our research content as the market grows in complexity. We believe our integrated approach is a key differentiator and makes us the provider of choice for businesses seeking world-class research and consulting services.

Q: In what ways is your economic model different than those provided by other companies?

A: Firstly, we offer an economic model with a proven track record of more than 20 years in the global oil and gas industry. This model not only contains our proprietary data for production projections, development costs, operational costs, and fiscal terms, but also allows clients to modify variables. That means that clients can modify the pre-loaded data to include their specific assumptions for variables such as tax regimes or price decks. Most new companies do not have the knowledge or the resources to create this type of model, and Wood Mackenzie is a smart and common-sense choice to save time and get ahead of the curve. Secondly, our services include unlimited access to our analysts so clients can have the assurance that Wood Mackenzie is available to act as an extension of their teams. Experts are at their fingertips, ready to support them and
answer any questions about our data and models. 

Q: According to Wood Mackenzie’s model, what challenges will PEMEX and newcomers encounter in the Mexican oil and gas industry in the future?

A: Everyone in the industry recognizes that PEMEX's tax regime requires modifications. The NOC’s operations for most fields are profitable even at low prices, but the story changes once taxes are taken into account. The current fiscal regime makes most operations and investments non- profitable for PEMEX at today’s moderate to low prices, leaving the NOC at a financial disadvantage in the new Mexican oil and gas industry.

The situation is complex and involves conflicting interests, but the NOC has other mechanisms to try to improve the situation. These include reducing costs and upgrading its portfolio. We understand PEMEX is working on cost reductions. However, the magnitude of possible cost reductions is limited by the present procurement processes that it must follow and the political implications of additional reductions on activity in certain regions.

Q: What advice does Wood Mackenzie give to companies looking for joint ventures or partnerships with PEMEX?

A: PEMEX could offer future partners the opportunity to participate in attractive assets and exploration activities. However, there will be challenges and potential differences in the ways of conducting business. We advise that companies entering joint ventures or partnerships with PEMEX have a clear long-term strategy, leveraging the NOC's strengths. In addition, they should build networks with key PEMEX teams and with Mexico's regulatory bodies, all of which are learning how to operate in a new post-reform world.