Mexico Remains Firmly on Radar for iPSBy Conal Quinn | Mon, 09/12/2022 - 11:08
Q: Last year, iPS Powerful People opened its Houston office. How has this initiative further developed your offering in the North American offshore market?
A: We moved to Houston for various reasons but most important was the strategic partnership we signed with a company called Teal Energi. This company is based in Houston and its founders have over 30 years of experience working in oil and gas, particularly LNG. In fact, when the LNG market really started booming about 10 years ago, Teal Energi was one of the pioneers helping to build a new workforce for this industry. For us, LNG is an extremely interesting market, especially after what has happened with Russia and the conflict in Ukraine. In the immediate aftermath of the war breaking out, over 15 new projects were launched, totaling several billion dollars in investments. Even though only five of these projects will probably go ahead, it is still apparent that LNG has a bright future ahead in both the USA and Mexico.
On the Mexican side, the likes of New Fortress Energy, Mexico Pacific LNG and Sempra Energy are launching new projects. With iPS as a global player in maritime services and over 15 years of experience in Mexico, as well as Teal Energi, with its team and experience on the US side, we believe we can work together with a joint strategy and a shared back office to make the most of the blooming opportunities.
We also are fortunate enough to work directly with clients who were awarded contracts in the bidding rounds following the 2014 Energy Reform, as well as the EPC companies they subcontract. iPS noted that around 80 percent of our energy clients in Mexico are actually headquartered in Houston. Moreover, we forged strategic alliances in both Guyana and Suriname in 2021 and we saw that most of the decisions affecting those markets are made in Houston as well. In this sense, moving to Houston was a strategic step forward.
Houston helps us bind everything together. It is the so-called energy capital of the world, with a huge talent pool and more companies opening their engineering offices and HQs here. Houston is also a major hub for the energy transition with all the opportunities that entails. So far, the move has paid off.
Q: How did the growth in renewable energy factor into the move?
A: IPS has expanded into the offshore wind industry over the past 20 years. We have been involved in providing personnel to nearly all the offshore wind projects developed in Europe and Asia, which basically accounts for over 80 offshore wind farms. Now that this is a growing market in the US, we want to bring our experience here. Around US$4.5 billion went into the last bidding of New York Bight only, the total expected investment in Offshore Wind in the US is estimated at more than US$80 billion and creating 83,000 new jobs in the next 10 years. Within a few years, these blocks will enter the construction stage and require more personnel, so the opportunity to help build a new industry on this side of the pond with clients we already have relationships with from Europe and Asia is the final reason why we came to Houston.
Q: Where does Mexico fit into your expanding Americas portfolio?
A: While it is difficult to put a number on it, we have a huge presence in Mexico with offices in Mexico City, Ciudad del Carmen and Dos Bocas. The market will be crucial going forward. We also have an extensive background in Mexico, having been here since 2007, and offer a complete package of services, including headhunting, outsourcing, specialized services and recruitment process outsourcing (RPO) services. Mexico has many short-term projects drawing our attention, such as the private development of three service ports in Manzanillo, Alvarado and Frontera. IPS also has a portfolio of operator and EPC clients with extensive plans for 2023 and onwards.
While everyone may be talking about the energy transition, the global need for energy is set to double by 2050 or at least increase to such an extent that renewables alone will not be enough to satisfy the demand. As Elon Musk said recently, we will be dependent on oil and gas for a while yet. However, it is true that we are quickly running out of places around the world where it is relatively simple to get oil and gas out of the ground.
However, even for all the potential in places like Guyana and Suriname, where it seems like every time a well is drilled oil is struck, the infrastructure and local expertise is still developing. Therefore, the human capital and ready-made infrastructure are very much in Mexico’s favor. The population here is also much larger, so we do not need to be as reliant on foreign labor. Mexico’s labor force is so skilled and hard-working that we have been sending top candidates to other parts of the world, though skill sets can always be improved and diversified.
Q: How has iPS evolved since 2014?
A: Once we learned how things worked in Mexico, we were a great added value for companies that were not so sure about the rules and regulations. Uniquely, we have also done everything by the book, especially regarding social security and local taxes, even if it costs us some business along the way. When we arrived in Mexico, we always worked with PEMEX’s subcontractors and never with PEMEX directly. After the 2014 Energy Reform, however, we had almost 70 new operators enter the market in a short period. Even though the energy reform only got to around 25% of its bidding rounds before it was paused, we were able to build confidence with our operator clients by ensuring the services we delivered always met our high standards. IPS has various quality and safety qualifications and certificates and works through these strict rules and guidelines to guarantee the level of service and compliance. From there, the company was able to consolidate and expand its knowledge.
However, the only certainty about Mexico is that everything changes, such as last year’s labor reform. Outsourcing had always been restricted to some extent but it is now prohibited as a result of a new initiative from the Ministry of Labor. This requires companies like iPS to change the business scheme, for providing specialized services a company needs to be certified with REPSE, which means more administration and paperwork. Overall the labor reform was designed to create more benefits for employees, we are always in favor of having better circumstances for employees. While in this industry it is not always as easy to hire individuals directly, there are ways to do RPO and adjust the business model around these new recruitment processes like hiring in the client’s name or putting our personnel on specialized service projects. Since the 2014 Energy Reform, the standards and ethics have greatly improved in the industry. All the foreign operators have brought a wealth of quality to the domestic market.
Q: How has the labor reform further affected iPS’ operations in Mexico?
A: One of the biggest reasons for companies to use outsourcing was profit sharing (PTU). Companies in Mexico need to return 10 percent of their fiscal profit to employees, when using outsourcing they would not have employees and keep 10% in their pocket. Another solution was insourcing, where companies would have various entities and have people hired under an entity that did not make any profit. Both outsourcing and insourcing became illegal in August 2021. Overall, the benefits are enshrined in law and we need to work under local rules and regulations as we do in all the countries we are active in. While the labor reform has made us adjust part of our business model, there are still ways in which companies can outsource some processes that are not part of their core business. By now, most companies have found their way and those that did not do everything by the book have disappeared. In the wider scheme, the labor circumstances have greatly improved in favor of employees.
Q: How could the energy industry ensure it will attract sufficient human capital in the coming years?
A: Overall, we see that younger generations are not keen to be locked away for weeks at a time working many hours on an offshore platform, then coming home for two weeks only to go back and do it all over again. The industry is severely lacking personnel everywhere in the world. We need to motivate people to work in this industry. That starts by reaching them at a young age, in universities and maybe even earlier. Energy needs from here to 2050 are going to increase exponentially, so we need a lot of young professionals to ensure that we can meet this demand. We need to make sure that more young people are interested in engineering and STEM studies in general. We also see more diversity in the industry as more women enter the industry. These are great initiatives but the industry should motivate young people from all levels of education, which is ultimately the responsibility of IOCs, EPCs, governments and ourselves.
IPS, for example, has partnerships with training facilities like RelyOn Nutec, which has the only OPITO-approved basic offshore safety induction and emergency training programs in Mexico. Furthermore, Guido is also co-founder of Holland House Mexico, which makes it more accessible for Dutch companies to do business in Mexico, but we also facilitate for Mexican companies to do business in The Netherlands. Holland House Mexico holds a big talent fair once a year where we invite major Dutch and Mexican companies to find candidates from both countries, fostering the exchange of young professionals.
Q: What will be the main human resources challenges Mexico will face moving forward?
A: Mexico is moving into deeper waters as most of the easy oil is gone. Some of the companies that won deepwater contracts did not strike oil in their first exploratory drilling campaigns. However, a couple did strike oil and some are already producing oil and gas or are in process of producing in the near future. Ultimately, deepwater is where the future lies for oil and gas production in Mexico and we will see more exploratory drilling there. The problem is that there is little experience in deepwater in Mexico, since PEMEX has mainly been focused on onshore and shallow water exploration and production. Therefore, the industry must bring in many foreigners to train the local workforce for deepwater drilling. We have seen this before: When the first FPSO came to Mexico, foreigners totaled 80 percent of the workforce. Five years down the line, it was the other way around. The challenge ahead is making sure Mexico has the right skill set for the next wave of industry trends and developments.
iPS Powerful People is a global staffing agent, headquartered in The Netherlands with offices all over the world. It supplies personnel to the international energy, maritime dredging and civil construction industries. Over the years, iPS has expanded its expertise into other sectors, including renewable energy.