Rudolf Hess
President and CEO
R.H. Shipping

Oil and Gas Priority for R.H. Shipping

Wed, 01/21/2015 - 11:43

Oil and gas companies eyeing up Mexico following the Energy Reform will need to know that many of their needs will be met. While legal certainty, labor availability, and tax regulations may well top the list, transport and logistics also feature prominently. Enter R.H. Shipping, which, with almost 20 years in the market, is in a strong position to meet the potential requirements of incoming companies. Founded during the peak of the Korean steel market as an international agent specializing in this industry, the company soon diversified its services into logistics, customs clearance, full charter ships for overweight cargos, and various forms of land and air transportation. Today, the company also provides services which range from nonvessel operating common carrier and international freight forwarding services to cargo insurance consultancy and warehousing. “Having effectively implemented our initial diversification strategy, R.H. Shipping has continued to expand into new areas of opportunity. One remarkable success has been in the niche market of perishable goods,” explains Rudolf Hess, President and CEO of R.H. Shipping, whose primary focus is currently on the Mexican oil and gas sector. This was the reason a subsidiary office was established in Houston in 2010.

Today, R.H. Shipping’s reputation is backed by major achievements within the oil and gas sector, such as having transported the largest single shipment of dismantled LPG spheres for the Mexican company Zeta Gas or having completed port-to-door transportation of land-based oil rigs from the US to Mexico. “We were recently awarded a contract for the transportation of 100km of pipes from India to the Ojinaga–El Encino pipeline in Chihuahua,” mentions Hess. As for the Asian market, R.H. Shipping has been able to take advantage of increased exports from China to destinations all over the world, becoming the leader in freight forwarding from Asia to Mexico. This reputation is based on its ability as an agent to identify carriers that best suit the needs of each project, either to carry large and heavy rigs, semi-submersibles, pulling tugs, or any other bulky equipment. “We define as special projects those that involve the transportation of extra-heavy steel pieces, petrochemical industrial equipment, steel pipes, and chemicals, among other exceptional equipment. We have experience in shipments of products that cannot be transported in containers due to their volume, size, weight, or configuration. As a shipbroker, we find the vessels that can do the job, and negotiate all business transactions and associated shipping contracts, providing versatile solutions with a wide variety of vessels including bulk carriers, rollon/roll-off ships, tankers, and container vessels, as well as barges for rivers and sea,” states Hess.

However, one shadow might come to dampen its plans. PEMEX is planning to build 21 new vessels in Veracruz, although the exact nature of these ships and their intended goals are not clear as yet. Nevertheless, Hess dismisses this as not posing a threat to his company’s market share. To his mind, the shipping market in the Mexican oil and gas sector will grow so rapidly that there will be enough work for all parties. “Despite these new ships, PEMEX will remain far more competitive by chartering ships from operators than by operating them itself. This fact might even bring more business to companies like R.H. Shipping,” explains Hess. “Ultimately, if PEMEX seeks to team up with a proven vessel management and shipping company that knows how to handle every aspect of the business, then we can be its partner.” Despite this enthusiasm, the oil and gas sector still represents a small part of R.H. Shipping’s income, largely because the industry in Mexico has been exclusive to a limited number of suppliers until now. However, this situation will completely change as the Energy Reform begins to show its first results. New entrants will enter the sector and PEMEX is expected to be more efficient, autonomous, and open to new service providers. For Hess, the reforms are a game changer as they considerably increase the growth potential for his company within this particular industry. This has turned into a strategic priority for R.H. Shipping. “We have recently registered with PEMEX Procurement International in Houston, and we have started bidding on several PEMEX projects. I see good chances of winning bids simply because of the quality of our value proposition,” comments Hess.

According to Hess, the fact that PEMEX is changing its procurement decision-making processes will bring fresh air to the logistics and transportation industry. In the past, many decisions were made for cost reasons, which ultimately did not translate into savings for the parastatal. “Any major oil company that wishes to truly compete on a global scale must rely on world-class supply vessel operators. This means paying the going market rate,” he indicates. He refers to a joke, currently popular in the corridors of oil companies in Houston, which states that “Mexico is the junkyard of the Texan and Louisiana backyard.” Much like in the automotive industry with used cars, American vessels that can no longer meet the right standards were in the past dispatched to the Mexican market. They were welcomed here because, despite their inefficiency, they could provide meager profits. This of course has changed in the past two years, as PEMEX is bidding on used vessels with a maximum age of ten years. Hess believes that President Enrique Peña Nieto’s package of reforms will help to break this cycle by forcing local Mexican firms to deal with international competition while becoming aligned with global norms and standards.