Perspectives on ISCs Benefits for Service ProvidersTue, 01/22/2013 - 15:10
Upstream-Downstream Specialized Services, an American company providing exploration, production, development, and refining services, began operations in Mexico in 2001 with a crude transportation project at the Cantarell complex. Although they have not worked with Pemex since 2001, UDSS Country Manager Jorge Martínez claims the company has been able to successfully operate in Mexico due to the magnitude and market potential and the various services they have been able to provide to companies such as Halliburton, Schlumberger, Baker Hughes, and Weatherford.
UDSS has been able to expand its operations and services in the oil and gas sector due to its aggressive business model focused on expanding beyond Mexico and the USA, acquiring contracts and providing services to Argentinian, Venezuelan, Colombian, Ecuadorian, Brazilian, and even Spanish and Italian markets. Now that UDSS is a well- established company in the international oil and gas market, it has the clear and ambitious vision of “becoming the leading provider of specialized services in any relevant aspect of the life of an oil field, including exploration, development, production, and refining,” claims Martínez.
Even though UDSS is present in multiple Latin American countries, the company is focused on Mexico “because it is currently the number one oil and gas market for international companies given its potential in deepwater, shallow water, and onshore projects – even though the market is currently controlled uniquely by Pemex,” explains Martínez.
The advancement of the integrated service contracts (ISCs) makes Mexico more and more attractive for companies like UDSS. However, Martínez claims that there is still a long way to go before the real potential can be exploited and the attractiveness fully acknowledged. Although incredible improvements have been made in the interaction between Pemex, the Mexican government, and domestic and international companies, there are still various limitations. One of these limitations, according to Martínez, is finding the right balance between quality and price. “The Mexican constitution limits the interaction between Pemex and private companies, but since the 2008 Energy Reform –where Pemex was given the freedom to award ISCs – we have seen an ongoing tendency to award contracts based on price,” states Martínez. This is a detrimental limitation on the attractiveness of the Mexican oil and gas market for international oil companies because, “even though we pay taxes and are registered as a Mexican company, we still have to follow certain global UDSS policies, standards, and processes that severely limit our chances of acquiring contracts due to our inability to decrease our prices,” he explains.
Pemex’s tendency to award contracts based on price rather than quality has been slowly changing and Pemex has demonstrated a strong desire to listen to its clients as a means to improve in every aspect, specifically with regards to their operations and contracting system. “We trust and believe Pemex is engaging in the correct discussions and taking the right decisions and we are extremely positive about the restructuring of Pemex, especially with the new young, vibrant, and brilliant Pemex CEO, Emilio Lozoya,” Martínez believes.
Despite these limitations, UDSS still has an ambitious growth agenda in the areas of exploration and production, providing services for onshore and offshore platforms, specifically in deepwater, since these are the areas that are currently offering the best financial rewards. Nonetheless, UDSS is still trying to find new opportunities and alliances with Mexican companies that acquired contracts in the first two ISC rounds. Despite their efforts to work with Mexican companies, Martínez argues that his company has been most successful in creating strategic alliances with international companies with a strong presence in Mexico.
These various projects in Mexico have allowed UDSS to grow an astounding 600% since 2006, and Martínez claims that Mexico was a vital factor in this exponential growth; therefore, “we want to have a continued presence in Mexico, preserving the business relationships and projects we are currently engaged in, but at the same time contributing to the growth of the Mexican oil and gas sector with new propositions and solutions to the problems encountered in such a complex business.”