Oscar Mendoza
Director Gas Mexico

Pipeline Development Clashes with Rights of Way

Wed, 01/21/2015 - 10:45

Having begun as a Schlumberger distributor, GENSA has been in the oil and gas market for more than 35 years. In 2005, GENSA bought out Schlumberger’s shares and underwent a thorough restructuring process, which also modified its commercial strategy. “Thanks to a transformed business model, a new commercial strategy, and a fresh vision that puts customer service and client needs as main priorities, the company was able to grow 800% from 2005 to 2014,” shares Oscar Mendoza, Director Gas Mexico of GENSA. This growth was facilitated when CRE certified GENSA as a system operator, meaning it could work on the national network of gas pipelines. “Today, we are responsible for building 80% of the control systems used to measure and regulate natural gas in Mexico, which has enabled us to build a manufacturing plant in Mexico City,” says Mendoza. “In addition, GENSA has gas stations in stock in its facilities in Coatzacoalcos and Monterrey. The next move is to build a facility on the Pacific coast, with Sinaloa and Sonora being considered.” These storage facilities play a key element in GENSA’s strategy, as having equipment in stock is one of the company’s greatest advantages. “Since the equipment we supply is manufactured in Europe, it usually takes a very long time, between ten and 18 weeks, for parts to arrive in Mexico,” explains Mendoza. He adds that this has led GENSA to invest heavily in having available parts in Mexico in order to give the market the fast delivery times it needs. In addition to designing, building, and commercializing gas control stations, the company has an area dedicated to operations and maintenance. GENSA has made notable investments in the latter in order to quickly address problems without operations needing to be stopped while equipment is being inspected. Examining the systems provides information on whether the damage was caused by reckless operation or by faulty equipment. Mendoza explains that GENSA can respond in less than 24 hours, whereas the competition takes longer to send technicians to the location of the problem.

Mendoza shares that GENSA will be delivering approximately 75 measuring and control stations around Mexico by March 2016. Mendoza believes that projects like the Los Ramones pipeline strengthen the industry, as Mexico’s low gas production is compensated for with imported gas. “In order to deliver that gas to industrialized zones like Monterrey, San Luis Potosí, or Aguascalientes, high capacity gas pipelines, such as Los Ramones I and Los Ramones II, need to be built. That will certainly detonate industrialization processes.” For GENSA, this is a great opportunity to build and sell gas stations. Another important project is the Sásabe-Guaymas pipeline, which will deliver natural gas to the Pacific coast, with Sonora and Sinaloa being of particular interest to Mendoza. “After many years of neglect, this region’s industry will be supplied with the natural gas it needs.”

One of the problems Mendoza encounters in the pipeline industry is rights of way. “Many issues surrounding the passage of natural gas pipelines involve community leaders and bureaucracy,” he expresses. “Some people might argue that they did not receive the payments they were expecting and continue to see themselves as the legal owners of the land, even when in most cases they cannot prove their claims.” GENSA is well-acquainted with this situation and Mendoza stresses that the only way to solve it is through legal means. “Once CRE issues a permit, pipeline construction projects cannot be canceled or rejected. There may be modifications in the project but a gas pipeline becomes a public utility once it gets its permit,” he explains. Nevertheless, to avoid any delays or complications, GENSA is developing mechanisms to prevent complications with communities, municipal authorities, and even concessionaries, such as railroad operators, as these sometimes clash when using the same federal land. Moreover, there are problems related to criminal organizations that have become powerful in specific towns and municipalities. “This is a very difficult problem to solve and we are not the only ones suffering from it. These criminals have hurt our employees and stolen equipment and trucks from us,” shares Mendoza. GENSA is joining an association that deals with issues pertaining to rights of way in hopes of obtaining support from the government on these matters.

GENSA’s medium-term objective is to hold on to its market share in Mexico so that it can then tackle the South American market. The US, explains Mendoza, is difficult to enter due to bureaucratic procedures, which is the reason why the company is opting to go south instead. As part of this expansion, GENSA is focusing on the future opportunities that will result from the natural gas pipeline to be built from Oaxaca to Guatemala. “We have contacted the Guatemalan embassy in Mexico to arrange a meeting with the Guatemalan Ministry of Energy and to start getting involved before construction begins,” says Mendoza. Beyond this, the company has also received some requests from Brazil and Colombia in spite of the distance. Nevertheless, despite numerous potential plans to work across Latin America, Mexico will remain GENSA’s headquarters.