Fernando Cruz
Mexico Business Director
Dolphin Drilling
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View from the Top

A Norwegian Veteran Returns to Mexican Waters

By Pedro Alcalá | Wed, 08/25/2021 - 15:28

Q: How did your previous experience play a role in your designation at Dolphin Drilling?

A: I previously worked at KPMG, Deloitte, Fugro and Kannbal. The first stages of my career in the major consulting firms gave me a great deal of experience in the financial background of both the industry and the country, and the procedures and controls that these entail. About 17 years ago, I formally joined the energy sector through a company that needed an internal reorganization. I was initially planning to stay in energy only for a couple of years before returning to a more general consulting business but circumstances and the time frame of projects led me to stay longer, eventually working with Dutch group Fugro on exploration projects for both PEMEX and private operators that needed geophysical, geotechnical and seismic consulting services. This experience led me to work with private operators once the Energy Reform was enacted.

My professional background was relevant for adding value to business in Mexico for a company like Dolphin Drilling. Helping to build a business portfolio for them was well within my capabilities. Dolphin returned to work with PEMEX after being absent from the country since 2004, managing a platform for the NOC’s exploration and appraisal work. After Dolphin won a drilling contract with PEMEX at the end of 2020, the company needed someone like me to help on managing contract administration, along with financial and business control with the NOC and the more specific nuances of that relationship. Part of my responsibilities are to adapt to the country’s new regulatory and contractual requirements.  

Dolphin has had great success in using the Blackford Dolphin platform, which was transported from Norway to Mexico in record-breaking time — the bid was put together and the deal was finalized within the last quarter of 2020; the platform was ready and on-site by December of that year. Our drilling performance and results have been remarkable since then.    

Q: What were the key success factors when negotiating the value and terms of the contract, along with its rig selection process?  

A: PEMEX bases its decisions on increasing production levels and reserves. This means that drilling and exploration in shallow water has taken center stage. Blackford Dolphin is in great condition and is capable of executing extremely efficient operations, plus it was available in a very short period of time. These were all circumstantial but still important success factors. In addition, PEMEX had a detailed drilling program ready for us from the very start. We had a meeting with PEMEX that was part of their routine internal appraisals on contract execution and we scored 99 percent, both in terms of requirements and expected drilling performance. Available talent was also a factor. Once the deal was signed, we had to go around the world to hire and recover back top professionals known for operating this particular rig at peak performance. Fortunately, we were able to get them all. We are also balancing international talent sourcing with an ongoing talent development initiative to hire local personnel and general content into our operation as much as possible, with this we are also focused on developing local crews and contributing with improvements of the communities in which we operate. All of these factors contributed to the contract’s ultimate valuation of US$83 million.

Q: How are you managing the complicated political context of your contract with PEMEX? 

A: We are hired to drill the SAAP-1EXP in the Uchikil assignment, which borders Talos Energy’s block and competed with it for the operation of the Zama reservoir underneath both of the areas, which SENER ultimately granted to PEMEX. Some media outlets have reported that SAAP-1EXP replaced a previously planned delimiting well that was favored by CNH but this is incorrect; SAAP-1EXP did not replace that well. CNH merely recommended that the previously planned well also be drilled. We are following PEMEX’s drilling plans to the letter. We are scheduled to finish our work at SAAP-1EXP soon and then move on to another location but until then, and even after that, we have nothing to comment on the Zama situation. I would say that we are managing the situation by being the best contractors that we can be for PEMEX and focusing on the stipulation of the contract, the specifications of PEMEX’s drilling program and its prospect for success.    

We are also working very closely with Pemex to support their plans and keep the operation going well. We recognize that there are also financial challenges present, but we see open channels and collaboration to improve within reasonable and acceptable terms.

Q: How would you evaluate your position in the volatile economic environment of offshore drilling?

A: Dolphin Drilling went through a full reorganization and became a private entity in 2019, having previously been listed on the Oslo stock exchange. Dolphin is very focused on its core assets and on ensuring meaningful employment for the rigs and personnel. We maintain an eye on growth opportunities, such as  the recently published bid alongside Transocean for the assets of Seadrill. In that sense, we have made a relatively agile shift from a bearish to a bullish position in the cycles of our financial planning over the last two years. That is also partly due to the fickle economics of the offshore drilling market, which was turned upside down by the pandemic and the oil price crash of 2020. Our path for the future is very clear. We are investing in optimizing contract execution while adopting new operational innovations as part of our digital transformation process. For instance, we were the first drilling company to gain ISO50001 certification for our energy management system. This makes our rigs, including Blackford Dolphin, some of the most energy efficient in the world. We expect to make Mexico a big part of our path toward that future.

 

Dolphin Drilling is known as one of the most established offshore drillers in the North Sea region, with operations beginning in the 1960s under the name Aker Drilling Company. The company is Norwegian and is headquartered in Aberdeen.

Pedro Alcalá Pedro Alcalá Journalist and Industry Analyst