Pietro Fiorentini Eyes Expansion in Mexican Market

Q: How has the war in Ukraine affected global supply and demand for natural gas in general and how has it impacted your services in particular?

A: In Mexico, PEMEX has a mandate from the government to ramp up production to support the push for energy sovereignty. Ever since the López Obrador administration took over four years ago, the demand for oil and gas services kept increasing year over year. Even throughout the global pandemic, the industry’s activity did not decline in Mexico. Fiorentini has grown consistently since 2019. Therefore, even before the war in Ukraine, Mexico was already a global sweet spot for investment in the oil and gas sector. By disrupting the global supply-demand balance, the war ignited prices for raw materials and energy, eventually causing inflation to skyrocket.

Even though the pricing for our services is mostly fixed by contract, the costs to provide those products and services increased by double digits compared to 2021, eroding the profit margins and, in some cases, shutting down projects that were budgeted just one year ago.

The main issue is that we are still far away from the real disruption that will occur this winter, when the northern hemisphere will need to source natural gas for heating. With the prices per Kwh already at an all-time high, it will be interesting to see how this will develop and how the industry will cope to survive. Meanwhile, we have been adding equipment and have hired people for our operations in Mexico to be able to deliver services to our customers with the highest level of quality. Whatever will come in the next few months, we are prepared.

Q: How has your service offering evolved since founding the Villahermosa multiphase flow meters service business in 2013?

A: We entered the Mexican market in 2013, technically by backing up a company in Villahermosa that won a three-year multiphase contract with PEMEX. The local company took care of the project management and logistics of the operation, while Fiorentini provided the assets to cover the technical part. At the end of the contract in 2015, oil prices plummeted. Due to global geopolitical crises,  many local companies struggled to survive. With limited activity, nearly no contracts and an excess of equipment in the market, oil and gas service prices collapsed and it was a matter of time until mergers, insolvencies and bankruptcies started to occur. 

Fiorentini managed to survive the downturn, thanks to the combination of having a solid balance sheet, market-leading products and a leap of faith from our management on the potential for the long-term Mexican market. Eventually, we were able to weather the storm between 2015 and 2018. As occurs during any crisis, we reshaped our business model to better fit into the market. Since then, we have increased revenue a hundred times over by shifting from rental to a service model, taking direct ownership of the quality of the data provided to our clients by leveraging full control of our equipment’s supply chain. This chain includes R&D, quality certifications, manufacturing and distribution. Pietro Fiorentini is in total control of the production chain of its equipment. This sets us apart from our competitors, allowing us to deliver outstanding services.

Q: How does Pietro Fiorentini’s business strategy align with the Mexican government’s re-centering of PEMEX as the pillar for national development?

A: Despite the Energy Reform initiated by the previous government to open the oil and gas sector to foreign companies, PEMEX still accounts for about 94 percent of the Mexican oil and gas market, so when the NOC is busy, everybody is. We work with private players, therefore indirectly under PEMEX, and are interested in growing in that sector by venturing into direct contract with PEMEX. 

The well optimization solutions offered by our multiphase flow meter (MPFM) are particularly sought-after, as they provide a boost to both client’s production and profits. 

When conventional reserves become scarcer and producers like PEMEX become more reliant on more mature fields, reservoir management becomes paramount as operators are forced to recover hydrocarbons from less economically viable reservoirs. Additionally, MPFMs provide continuous real-time measurements of the amount of oil, water and gas in the well stream, eliminating reliance on more traditional, larger systems based on phase separation and reducing everyday equipment expenses. This improves the economic viability of wells that are approaching or that have already passed peak oil by rapidly reducing the OPEX impact. The quick feedback offered by real-time measurements also cuts down on potential additional expenses down the line. Our state-of-the-art extraction technology is tailor-made to suit our customers' needs. Compared to traditional separation systems, Pietro Fiorentini’s MPFMs also significantly reduce a well’s carbon footprint because they consume less energy and require less maintenance, making them the perfect solutions for unmanned sites.

Q: Do you see potential for growth in Mexico for the renewables industry given the related investment you have made already in other regions? 

A: As a company with international recognition and commercial success, we are in a healthy position to invest in renewable technologies and look for new opportunities in emerging markets. Even if some of these alternative energy sources still cost too much to produce and are, therefore, not economically viable just yet, we want to carve out a niche in these markets because that is where the future lies. Moreover, an ESG commitment is now a market imperative if you want to continue attracting investment to your company. It simply makes sense to diversify the portfolio and be prepared for an eventual energy transition, even if oil and gas is here to stay for a long time.

Pietro Fiorentini is a leading industrial company based in Italy, with more than 80 years of experience across the entire natural gas supply chain, from components and services for distribution and transmission networks to a series of engineered solutions that include valves, multiphase flow meters, processing plants, reduction and metering units and stations.