Mexico’s Offshore Energy: Challenges, Growth Outlook

Q: What role do independent offshore operators like Fontis play in Mexico’s long-term hydrocarbons strategy?

A: All of our rigs are currently operating in Mexico, and they are all working with PEMEX, with one having recently completed its contract this past May. Right now, we have around 450 people supporting our operations here, and I am proud to share that more than 400 of them are talented Mexican professionals. Fewer than 50 of us are expatriates, including myself, and we mainly focus on management roles, mostly offshore and just a handful onshore.

Our goal as expats is to help grow the business and, ultimately, hand over the reins to national talent. This transition is already happening, since taking over the business in 2023, we have been empowering our Mexican team members and promoting them into more senior roles.

The way we work with PEMEX is very straightforward and transparent. We see this partnership as strong and sustainable because it allows us better visibility, closer collaboration, and the opportunity to uphold high ethical standards together.

Q: What do you see as the key differences between operating in deepwater environments versus shallow water or onshore? How prepared is Mexico to take on the unique challenges of deepwater development?”

A: Deepwater operations are an entirely different challenge. Right now, Mexico is not fully ready for deepwater development, at least not if it is approached the same way as onshore or shallow water projects. Everything is amplified in deepwater: timelines, risks, and the potential costs of mistakes. That is why it is so important to get things right the first time, a single error or long delay can make an entire project unviable.

Many companies, ourselves included, have the technical capabilities for deepwater work, but I believe the local processes and regulations need to mature a bit more to truly support this kind of development.

Where we add real value is not just through our rigs, but through our people. You can have a Ferrari, but without the right driver, you would not win the race, it is the same with our assets. Operating them well, staying humble about what we know, and focusing on strong collaboration with our client are what make the difference.

We believe in listening to our partners so we can keep improving together, which ultimately supports stronger, more efficient production. I have seen this work well elsewhere, national oil companies want to produce for their country, and contractors like us can help by sharing our experience here and abroad. If we are given a bit more space to contribute ideas, I am confident we can help reach production goals without necessarily adding more costs.

Q: Where do you see the greatest opportunities to improve efficiency in the current environment?

A:Before we look too far ahead into automation, we first need to strengthen the basics. We know how to drill efficiently, but many delays come from simple issues like a missing part, a fluid, or a permit that was not ready in time. Solving these gaps would unlock the full potential of our rigs and those of our peers.

For example, when the supply chain tries to save money by taking extra days to get a better deal, they might not realize how costly those three days of downtime can be for the entire drilling process.

We also see a need for more ownership and accountability in middle management. Right now, it is sometimes necessary to go straight to the top to resolve issues that should be handled more efficiently within teams.

In the end, even with all the latest technology, if operations are not supported properly and on time, drilling would not reach its full potential, and production will ultimately fall short.

Q: Given PEMEX’s current financial constraints, how do you see the outlook for drilling contracts in Mexico? What are Fontis Energy’s plans to sustain or grow its operations amid these challenges?

A: The need for drilling in Mexico is greater than ever, but whether contracts move forward depends largely on PEMEX’s financial resources. Right now, declining production means less revenue for PEMEX, which can limit what they are able to invest in new drilling projects.

Drilling is not something you can stop and start overnight, shutting down a reservoir is a bit like rebooting a system; it takes time and care to bring it back online. PEMEX is working on improving its financial structure and is rightly focusing on spending within its means. However, the funds available today may not be enough to maintain production at the desired levels.

Like many others in the industry, our contracts are approaching their end. If financial support is in place, our clear intention is to continue working here. We do not want to move our rigs elsewhere because relocating would mean losing many of our dedicated, long-term employees, which we want to avoid. But if there is no funding available, we will adapt as needed.

Our goal remains to grow both in Mexico and internationally. Whatever happens, we are committed to keeping our rigs operating and safeguarding jobs for our people as best we can.

Q: What do you think are the main obstacles holding back development compared to other countries?

A: In many countries, the main challenge is a lack of oil and gas resources, but that is not Mexico’s situation. The resources are here; they just need to be developed more efficiently. There is so much untapped potential, which can feel frustrating when it is not fully realized.

Mexico has skilled people, a capable workforce, and abundant resources, all the ingredients for success are here. What is needed is a push to simplify and streamline processes so we can extract these resources more effectively and use financial resources wisely.

At Fontis Energy, our mindset is “simplify to comply.” When our guidelines and procedures are clear and practical, people can and will follow them. If they are too complex, people might do what they think is easier, which can create inconsistency and risks. That is why we keep things clear and simple, so we can uphold our values of integrity, reliability, and performance, and deliver on our promises.

Looking ahead, we are confident that investors are interested in Mexico, but uncertainty about how long it takes to see returns often holds them back.

We remain optimistic and genuinely want to contribute. If given the opportunity, not just for us but for our fellow contractors too, we believe our combined experience can help deliver greater efficiencies, even in the face of today’s financial constraints.