Making Technology Work for PEMEX

Q: How would you describe Pemex’s current attitude towards the utilization of advanced technologies in exploration and production?

A: Fifteen years ago, Cantarell was Pemex’s main source of oil, and extraction was extremely easy, cheap, and required limited technological capabilities. Cantarell was responsible for two-thirds of Mexico’s annual oil production at this point, and acquiring this production required little technological innovation. Although Pemex was regarded as an expert in shallow water production, the challenges that the company now has to face make this achievement small in comparison.

Pemex became complacent with regard to technology as a result of having its production assured by Cantarell. When faced with a decline in production, Pemex realized that it would have to start investing in exploration again, but that the process would be a long one.

The field that many believed would be the replacement for Cantarell was Chicontepec, but Pemex quickly realized that the challenges this area posed were beyond its technological capabilities. It took Pemex several years to develop appropriate technology for Chicontepec, and even today we are not able to say with confidence that we have managed to achieve all we need to technology-wise at this field. Production and recovery rates are gradually improving, but we are still a long way from achieving what we would like to in this area.

Now we also have the promise of shale gas in Mexico. According to recent estimates, Mexico has more shale gas than the United States, but it seems to be located in an area of the country that has limited access to water, which is vital for shale gas production. If this is the case, then we need to find a technology strategy to deal with this issue, and develop a strategy that looks not only at production here, but also at new fields and in deepwater.

Mexico is not used to investing in the long-term in the oil and gas industry, and for many years Pemex has been accustomed to thinking in the short term. We need to change the thinking of the company in order to adjust to making investments now that will crystallize in five to 10 years.

Pemex produced its first ever technology plan in 2011. It took a long time for the company to decide where it wanted to place its technology investments, and how it would organize researchers, technology sites and universities, but finally it is moving in the right direction and directly addressing its technology needs.

Q: Where is the inertia in the adoption of new technology? Is it at the Pemex level or does it come from elsewhere?

A: I think it comes from everywhere. What Pemex needs most to help it move more quickly to adopt new technologies is the correct legal framework to encourage the company to invest more in this area. Currently, the law states that Pemex can only invest in proven technologies. This means that Pemex is hesitant to invest in unproven techniques and equipment. If this were to change, it would mean that Pemex would be more willing to take risks, such as declaring some fields as research fields, and accepting that some money might be lost in the short term in order to justify longterm gain. This type of attitude is starting to develop at Pemex, but it will take time.

Using the new technology plan effectively is an excellent way to ensure that Pemex continues to invest wisely in technology. For example, at Chicontepec, Pemex was not producing at the expected level, so the board stepped in to examine the project, and concluded that the NOC needed to invest more money in technology at the field before drilling more wells. This attitude is understood at the top levels of Pemex, and Carlos Morales Gil in particular has done a lot to incorporate new technology into the company, but still, the fact remains that at Chicontepec, the board had to step in, which shows that attitudes are not completely in the right place yet.

One major change that needs to be made is with Mexico’s oil and gas research centres. We need to work out the best way to motivate universities to dedicate effort, funds and faculty to working on developing oil and gas technologies in the long term. Many of these universities do not have specialists in the industry, which means they will need money to train people, send them abroad, and start dedicated research centres.

Another challenge lies with the IMP, Pemex’s research arm. A change of mindset needs to happen here, so that researchers concentrate on the needs of Pemex, rather than their own individual interests. In order to do this, and help the IMP to help us in areas such as shale and deepwater, we have to be willing to fund the organization at a higher level.

Q: How is Pemex currently prioritizing its technology focus?

A: When the technology plan was being created for the first time, Pemex looked at every process across the business and asked itself where there were problems that had a basis in technology. When these areas had been identified, they were split into three categories: those problems where Pemex would have to buy technology, those where technology could be transferred, and technologies that have to be developed by Pemex itself. Buying technology is relatively simple; transferring technology requires relationships to be developed and contracting methods to be fine-tuned, and developing your own technology means creating innovative ways to fund research.

A few years ago, Pemex started putting aside around US$0.50 of every barrel of production and placing it in a fund dedicated to research. The problem with this fund is that there is currently not enough research taking place in Mexico to be funded with the revenues collected. Pemex now needs to spur research in the areas where it most needs it, which it can do with this fund. The challenge for them is analysing which projects are worthwhile and which are not. This activity will start to develop Mexico’s oil and gas research capabilities, but it will take at least five years before this plan is fully implemented.

Q: In the segments of automation and control, there seem to be two conflicting philosophies among providers – either the model that aims to provide integrated solutions, or those companies who want to be niche equipment providers only. Which does Pemex consider to be the best implementation model for their current project needs?

A: In its current state of operations, integrated solutions are probably best for Pemex. The person running the project has to take responsibility for its outcome, which lowers the risk appetite of these managers and means that they are more likely to opt for integrated systems rather than taking a risk on implementing thirdparty technologies on their own. We understand that the second option is more likely to lead to technology transfer, but we need to build our overall technology base more before this can become more useful to us. One key aspect of this is putting a team with a technology and research focus in every part of Pemex, not just at the corporate level.

Q: How important is real-time monitoring for Pemex at the moment, and why?

A: Pemex is definitely trying to move more towards centralized control of its processes. Measurement has become increasingly important for the company, which is reflected in the fact that this is now a key responsibility for Pemex employees. As a result of increasing fuel thefts, there is more pressure to measure correctly, and learn as quickly as possible when one of its fuel lines has been tapped. There is also the need to ensure that Pemex workers are not aiding the thieves, and regular measurement is one key to solving this problem. Of course, measurement also has safety and production implications – anything that is better monitored will mean that reaction times to problems will improve, whether these events have safety or productivity implications.