Rogeiro Mendonça
President and CEO
GE Oil & Gas Latin America
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View from the Top

Merger of Industry Giants to Drive Efficiencies

Wed, 01/18/2017 - 09:13

Q: What impact do you expect in Mexico from GE's acquisition of Baker Hughes?

A: GE Oil & Gas and Baker Hughes will create a new fullstream digital industrial services company. The complementary transaction combines GE’s oil and gas technology, manufacturing and digital platform with Baker Hughes’ oilfield services offering and technologies. The combined company will have a global portfolio of assets that will drive efficient delivery of services to customers and create an opportunity for sustainable investing through the industry cycle. The transaction is subject to approval and we are committed to working constructively with the relevant government regulators to gain the necessary approvals. Until then, it is business as usual for our two companies.

Q: Which technologies are creating the most demand in the upstream market?

A: The Energy Reform is shining a new light on the Mexican upstream market, boosting its attractiveness even in an environment where prices are still volatile. With 2016’s deepwater licensing round, demand for high-pressure and high-temperature technologies for drilling and subsea equipment will rise. The presence of H2S in some projects will also require new technological solutions.

Other technologies in demand are steam turbines for power generation, offshore turbo compressors and generators, control and safety valves for process flow and digital Asset Performance Management (APM) solutions.

APM is a suite of software applications built on the Predix® platform and designed to increase equipment reliability and availability, while reducing unnecessary or unplanned maintenance downtime. A couple of success cases: one of our oil and gas offshore customers saved $5.3 million by utilizing GE’s APM tools to prevent platform equipment failure and another was a power generation customer who saved $1 million within one month of deploying APM.

Q: How do these products and services relate to the winners of the bidding rounds, especially in offshore and deepwater?

A: The deepwater licensing round will put Mexico in a different stage of the E&P cycle. So far Mexico has developed capabilities for shallow water and land projects. Deepwater projects will require not only new technologies but also different skills and the presence of international operators will help to accelerate the learning curve and ramp up discoveries and production.

Q: What added value does GE offer in upstream that differentiates it from other players?

A: The exploration and production landscape has changed significantly in recent years. Over the past cycle, we could witness substantial growth in new resources such as unconventionals, while the downcycle following 2014 refocused the industry on productivity optimization and lower costs per barrel.

We know the demand for oil and gas will continue to grow, and in the short term the expansion of existing production in low-cost basins is enough to supply the current demand. However, new supply sources are needed to meet future demand, so now the industry needs to focus on developing more challenging reservoirs while managing costs and complexity. That means the progression of the upstream segment is paramount for the industry’s growth moving forward and our company is not only able to provide a large number of advanced drilling solutions but also a myriad of offshore and subsea technologies that can be deployed in Mexico’s deepwater blocks, including subsea trees, controls, manifolds, umbilicals, connectors, pipes, wellhead equipment and flexible risers.

On the other hand, we have a variety of solutions designed specifically to improve well performance such as water injection and gas-specific solutions such as gas reinjection and gas lift – all connected by our digital solutions for enhanced outcomes.

Lastly, the GE Store is a huge differentiator because it enables access to knowledge and technology from different businesses and industries, a benefit to the upstream segment. Thanks to the GE Store, we were able to take alternators from GE Aviation aircraft engines and use them to improve motors that pump oil from the ground all over the world.

Q: Why should the new players entering the Mexican market choose GE technologies and services?

A: Our customers are looking for better ways to enhance productivity and we provide efficient and valuable solutions thanks to our consistent investments in Latin America over the past years. We are one of the biggest oil and gas equipment and services providers, integrated over the entire value chain and capable of providing short and long-term solutions together with appropriate financing for our customers.

We also drive enterprise advantages that benefit the entire industry through the “GE Store,” where every GE business can share and access the same technology, markets, structure and intellect, from advanced technology, materials, software and analytics to commercialization, processes and business model best practices.

It makes the totality of GE more competitive than its parts because no other company has the ability to transfer intellect and technology as we can through the GE Store. The result is a massive, global exchange where our most brilliant minds mix and match technologies, tools and ideas across functions and industries to create better solutions for all our customers.

As an example, we used computational fluid dynamic techniques developed for helicopters by GE Aviation to create a new class of gas compressors with a smaller footprint and higher efficiency. This is definitely our biggest competitive advantage and where we can provide the most added value for our customers.

Q: How will the strategic cooperation with manufacturer Shenkai improve Mexican drilling measurements?

A: The strategic cooperation with Shenkai, one of the largest public limited companies specialized in R&D and the manufacturing of petroleum and chemical equipment, is aimed at ensuring product line continuity in a highly competitive manner when it comes to Measurement-While-Drilling (MWD) and Logging-While-Drilling (LWD) systems. This will benefit our entire customer base in Mexico and also around the world because it provides increased competitiveness, commercial flexibility and enhanced customer proximity. This change also allows us to respond to explicit customer needs in a highly efficient and effective fashion.