News Article

Price Downturn a Challenge and Opportunity, Says Supply Chain

By Peter Appleby | Thu, 10/29/2020 - 14:09

You can watch the video of this panel discussion here.

Major names from Mexico’s supply chain offered their views on the resilience of the country’s supply chain against the price downturn caused by COVID-19.

In a panel moderated by Antonio Juárez, Director of the Mexican Association of Oil Service Companies (AMESPAC), panelists at Mexico Oil and Gas Summit 2020 covered the sector’s main issues, kicking off with a question regarding how delayed payments from PEMEX to companies have been overcome.

Carlos Ortiz, President and CEO of energy investment firm CAXXOR Group, suggested that the current price environment offered some benefits to companies, including low-rate, long-term loans that could be used to meet Mexico’s infrastructure and storage needs. Ortiz believed that that government should back payments owed to service providers by PEMEX. An alternative route of meeting financial responsibilities could be development banks, which many investors are interested in working with. “Development banks could promote a new fund with fully private investments that could have the function of founding production chain programs so that a broader spectrum of suppliers can receive payments on time. The only unacceptable route would be to not resolve this situation,” he said.

Joel Vladimir Ulloa, Director Global Business Operations of CEMZA, said that the industry must take the current situation as an opportunity and work with the government to enhance the fortitude of the oil and gas supply chain.

“Energy demand in Mexico remains high and the government is adding various mechanisms to help operators and companies reach the energy goal. Therefore, we must find the common ground between key industry stakeholders to deliver the ultimate charge: the supply of energy to the country and the world,” said Ulloa.

The COVID-19 pandemic has clearly impacted the abilities of service providers but companies are adapting, as Sonia Castellanos, Managing Director Mexico & Central America, Schlumberger, explained. “COVID-19 was unforeseeable but here we are. The challenge has forced Schlumberger to expediate the implementation of new operating models, based on enhanced efficiencies and supported by the digital side. Today, 60 percent of worldwide operations Schulmberger is involved in are being done remotely. This ensures there is no compromise on service delivery because full support is there. This also helps to reduce the risk personnel are subject to,” she said.

Depressed oil prices are being reflected in manufacturing and production prices. For Karla Torres, Contracting and Procurement Lead for Shell Mexico, this offers Mexican companies along the supply chain the opportunity to compete with the world’s major manufacturing hubs, like China. “Shell has always looked at Mexico as a potential strategic sourcing opportunity because it has always been critical in the supply chain. We foresee more opportunities for companies now because Mexico is becoming, once again, very competitive when compared to China. In the latter, it currently costs US$1,000 to manufacture a metric ton of certain items, while companies in Mexico are charging US$800,” she noted.

Peter Appleby Peter Appleby Journalist and Industry Analyst