Eckhard Hinrichsen
Country Manager Mexico
View from the Top

Positive and Negative in New Regulations

Wed, 01/18/2017 - 13:30

Q: Where does Mexico fit into DNV-GL’s portfolio, both globally and in Latin America?

A: In Latin America an important market for us is Brazil, but it has faced its own problems recently. Attention is being drawn back to Brazil and a lot of companies like Chevron and Statoil are coming back to that market. Apart from Brazil, Mexico is certainly one of our most important markets with great growth potential.

Q: How does DNV-GL interact with CNH, ASEA and CENAGAS?

A: Right now we are working directly with ASEA, helping to shape regulations. We also have close and regular contact with CNH and CENAGAS. ASEA has an extremely difficult task and the new regulations are being pushed forward very quickly, which is positive in one sense but negative in the sense that oversights can happen. Now ASEA is a lot more organized and has recruited the appropriate personnel to carry out these tasks. There are still some overlaps in terms of the responsibilities of each regulatory body but this will be sorted out over time. CNH and ASEA have capable leaders and by working alongside the Ministry of Energy, this is really coming together.

Q: Why do you think ASEA chose to interact specifically with DNV-GL, given that other companies struggled with this?

A: It was ultimately a tender process and I believe we had the best proposal technically and could demonstrate worldwide expertise in working with regulators. Additionally, we won as a consortium so the expertise of the other strong companies within this group played a significant role in our being awarded the contract. We were also in the same position initially, where it was difficult to get meetings with the regulators but now that we are coming to the end of the contract we are seeing a lot of progress. We see this as a positive experience and potentially a stepping stone for involvement in future projects of a similar nature.

Q: How has the low oil price impacted your business and the regulatory bodies in general?

A: While oil prices have had an impact on the Mexican oil and gas industry in general, the most impact has been felt by the reorganization of PEMEX. Since José Antonio González Anaya’s appointment as CEO in February 2016, most projects were put on hold and this has had the greatest impact on us. Oil prices are affecting the bidding rounds and the speed at which the fields are developed. If oil prices were more attractive the operators would apply more pressure for faster development.

Q: How does DNV-GL convince PEMEX to invest in its services, especially given its historic lack of focus on safety?

A: We carry out root-cause analyses for PEMEX and we offer services to evaluate the safety and integrity of facilities. In some cases we work directly with PEMEX but often we work with contractors. PEMEX requires certification for a great deal of activities and as one of the leading certification companies we can provide these. We also perform risk analysis. We have two major process-risk analysis contracts in the southern region and offshore in the Ku-Maloob-Zaap field. These were among the last big PEMEX tenders to be released, one lasting three years and the other five years, so this provides us with some added stability. Generally, one can say that our services make good business sense for PEMEX because we are lowering the risk of its operations and increasing reliability and availability.

Q: Can you elaborate on the risk assessment you are carrying out with PEMEX for deepwater drilling at depths of over 500m?

A: PEMEX was tendering its reinsurance contract to the international market and wanted to know the possible financial impact of a worst-case scenario. This was also shortly after the Macondo incident so this may also have influenced PEMEX’s desire to perform this assessment. We developed a probability model to estimate such costs, integrating CNH requirements, and applied that to all of PEMEX’s deepwater exploration wells. In each case we take all specific data into account, such as type of drilling rig, water depths, well design and oil spill modeling, and calculate the cost impact by applying advanced probabilistic methods. ASEA will publish new insurance regulations in which minimum coverage amounts will be established and operators must be in compliance. Those amounts can be lowered if justified through risk analysis techniques. Our method is ideally suited for that.

Q: To what extent are you sourcing national talent or outsourcing this to your international talent pools?

A: We try to build up local talent with Mexican engineers but we also have Mexican engineers that studied in Norway. Apart from that we send our engineers for training and technology exchanges at our Houston or other overseas offices. And yes, we have supported international projects with our personnel for many years, for example Asset Integrity Management Projects in Saudi Arabia.

Q: What kind of research and development are you carrying out in Mexico?

A: In Mexico we are starting joint industry projects (JIPs), including one on dynamic barrier management. Features that are considered at the design and project stage, such as wall thickness, corrosion control and operational procedures are the barriers that prevent accidents. But those barriers can be breached without the proper maintenance and can cease to function. The dynamic barrier management continuously monitors the state of the barriers to prevent a breakdown of the system.

We have used this system in pilot programs with an international oil company in the UK. We also host “pipeline days” because the company is very strong on subsea and onshore pipelines. We are the leading technical adviser in this field so we invite our clients, PEMEX and regulators and bring our colleagues over from Norway, the US and Brazil to provide a full day of technical talks free of charge. New technologies and research in the field are presented there.

Q: What would be your ideal positioning for next year?

A: We want to continue to work with ASEA and other regulators but these will always be niche projects. The big projects where we can really contribute our expertise will be the large deepwater development projects with Statoil and other similar companies. The Texas-Tuxpan subsea pipeline project worth US$2.1 billion is also of great interest to us. It will be developed by Transcanada and IEnova.