Arindam Bhattacharya
President of Mexico and Central America
Schlumberger
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View from the Top

Oil Price Drop Drives Reduction of Overall Project Costs

Tue, 01/20/2015 - 09:44

Q: What has been the impact of the economic and geopolitical changes on the demand of Schlumberger’s products and services in the Mexican market?

A: Presently we find ourselves in the middle of a downturn, and our customers globally are reacting to this downturn as they normally do when the price of their primary revenue source goes down. They are cutting their budgets; we are seeing this same reaction from PEMEX as it goes through the exercise to prioritize their projects and investments. During these difficult times, we have been working closely with our customers, including PEMEX, to reduce overall project costs through our focus on technology, efficiency, reliability, and integration. Recent technology introductions have allowed us to show substantial improvements in drilling days and in increasing productivity of new as well as intervened wells. Our global transformation process is bringing a step change in the efficiency and reliability of our operations, and we have also seen the benefit from higher levels of integration in project execution. Collectively these focus areas allow us to reduce our customers’ costs, and bring down the unit costs of finding, developing, and producing hydrocarbons, thereby improving the economics of our customers’ projects during these difficult times. While we have experienced a natural decline in demand due to budget cuts, at the same time we see more interest in reducing overall project costs through the impact of cutting-edge technology, efficient and reliable execution, and further integration of services scope.

Q: Are your customers more receptive to your solutions dedicated to cutting the cost per barrel now that the oil price is low?

A: We have been saying for some time now that sustainable commercial success within our industry as a whole will depend on changing the way we work, through adopting new technologies, learning from other industries, leveraging scale, and aligning technical and commercial interests across the value chain. If we go back and look at E&P capital investment over the past 12 years, we will find that it tracked rising oil prices untill about 2012. Even though supply increased to meet demand, during this period a five-fold increase in investment only yielded a 10% increase in oil production. Therefore, even before the dramatic drop in oil prices, there was a strong case to optimize the rising trend in E&P investment, where we believe that we can help by responding in four distinct ways, which are the drivers of our differentiation in the marketplace. The first is related to accelerating the pace of technological innovation and increasing focus on technologies that bring a steep change in performance. The second driver is focused on reliability, with a completely new approach to product development, job planning and design, as well as job execution. The third element is to generate operational efficiency through leveraging scale. Finally, by integrating multiple disciplines, technologies, and services through streamlined workflows, we can bring a real operational and commercial impact to our customers. The low-price situation creates an even stronger case for these solutions, and we are focused on supporting our customers to reduce their cost per barrel through these drivers.

Q: What role does Mexico play in Schlumberger’s international portfolio, and how is the Energy Reform going to change this role?

A: Mexico is one of our largest single-country operations worldwide, and the ambition of our team in Mexico is for it to become our largest single-country operation in the near future. In 2013, we decided to separate Mexico as a standalone area within our corporate structure, as we recognized that the changes to the market following the Energy Reform would require higher visibility and rapid decisions. Our nearly eight decades of experience in Mexico, strong track record, and unmatched infrastructure in the country places us in a very solid position to support our customer base, both PEMEX and the newcomers. We are supporting the Energy Reform process through our involvement in the National Data Repository and Data Room project, which is highly strategic and very important for the success of the bidding rounds. With the leadership of CNH, and the strong support of PEMEX, the first Data Room was opened in a record time of three months, within the time frame established by the Energy Reform. Delivering the NDR project is one of the most important projects that we have within our portfolio and our entire organization is committed to this project. We have a highly dedicated and professional team executing this project, and I am very proud of what they have accomplished so far.