Jorge Machuca
Director Project Business
Cummins Power Generation
/
Insight

Pursuing Opportunities Wherever Motors are Needed

Wed, 01/22/2014 - 12:41

Helping clients to overcome the challenge of generating electricity in remote locations is one of the main markets for Cummins, a leader in power generation. “Our clients should not have to produce energy, as their job is to produce minerals, hydrocarbons, or other resources,” says Jorge Machuca, Director Project Business of Cummins Power Generation. In order to allow clients to devote themselves entirely to their line of work, Cummins offers turnkey projects that include civil and electric engineering activities and operation and maintenance services. Its experience providing services in remote locations for clients in the mining industry encouraged Cummins to enter the oil and gas sector. The company believes it has all the expertise needed to succeed in this industry, having set its sights on projects that involve extraction activities. For example, drilling activities in new fields under development in Veracruz or Tamaulipas’ southern region need power generating equipment for its machinery. In the offshore segment, Cummins is providing fire pumps and emergency generators for platforms. These instruments are specifically built to withstand the harsh and corrosive saline levels found in marine environments. Even crew transportation vessels are equipped with Cummins motors, as well as the trucks that supply materials from PEMEX storage centers to gas stations across the country.

Regarding the downstream segment, Machuca believes that every plant where productive processes are being carried out will need an emergency generator, providing Cummins with a valuable business opportunity. Although Cummins is not the only company to provide power generation services for the oil and gas industry, Machuca sees clients as having a preference for his company’s technology. He points out that firms such as Halliburton and Schlumberger are not manufacturers of power generators, but usually hire a third party to supply these machines when working with PEMEX. Cummins has a close relationship with such players both in Mexico and abroad, with Cummins equipment firmly entrenched in oil and gas operations in Brazil, Saudi Arabia, Nigeria, Russia, Canada, and beyond. “We are aware that competition is tough, but Cummins is backed up by successful results,” states Machuca.

Machuca regrets that Cummins has not been able to do as much business with PEMEX as it would like due to administrative obstacles, even though he points out that these have decreased in the past years. The situation has led the company to provide its services to third parties instead. Currently, 90% of Cummins’s client portfolio in the Mexican oil and gas industry is comprised of PEMEX suppliers while the remainder involves direct operations with the national oil company. Machuca is pleased with the Energy Reform, as the Board of Directors of PEMEX will now be comprised of business-oriented executives. Given the interest of Cummins in working directly with PEMEX, the company is now beginning a campaign to grow closer to PEMEX and progressively strengthen ties.

Cummins is also eager to move into power generation for shale gas operations. Machuca points out that Mexico produces around 2tcf a year, yet consumes more natural gas than it produces. “Consequently, around 30% of the gas consumed in the country has to be imported from the US,” he estimates. “Proximity to this border state ensures a sufficient gas supply, but the Mexican states of Veracruz, Tamaulipas, Coahuila, and Nuevo Leon have large shale gas reservoirs. The modifications to Articles 27 and 28 of the Constitution will allow private companies to participate in shale gas extraction and power generation. In the next years we will see the initial developments of shale gas extraction and commercialization. Most companies with a business line similar to ours are carefully keeping an eye on shale gas developments,” he explains. “These will allow smallsized producers to buy gas at cheaper prices than those offered by CFE. Investments in the development of this segment will ultimately result in savings for Mexican people. However, this will not happen overnight.”

Pedro Zermeño, ABO Components BU Leader and Marketing FBU Mexico & Central America of Cummins believes the diesel engines his company is developing could play a significant role in shale gas extraction operations. The company has a large dealer network in Mexico, which spans across more than 600 sales points, many of them chosen to ensure customers receive support in areas where exploration activities are being undertaken. Machuca notes that once the secondary laws are approved, his company will be able to estimate the expansion rate of the shale gas market in order to develop a further action plan. “At Cummins, there is great optimism and enthusiasm regarding the changes happening in Mexico. Cummins wants to be present wherever a motor is needed,” concludes Machuca.