Anthony Childers
Managing Director
Subsea 7 Mexico
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Insight

Ready to Dive into Mexico’s Deepwaters

Wed, 01/18/2017 - 11:55

Subsea 7 is preparing to draw on its Houston ties to bring much-needed deepwater technology and knowledge to the country as its oil and gas market opens to foreign players, although the company still sees this opportunity as some way off. “Our activity in Mexico is focused on Subsea Umbilicals, Risers and Flowlines (SURF) and offshore maintenance contracting, rather than the high-tech solutions we deal with in Houston,” Anthony Childers, Managing Director of Subsea7 Mexico explains.

But as the market welcomes companies like Total, Chevron, Exxon and Statoil to explore the eight deepwater blocks auctioned off in Round 1.4 and PEMEX joins forces with BHP Billiton to work on the promising Trion block, the need for expertise in efficient high-tech solutions is imminent. CNH President Commissioner Juan Carlos Zepeda has said the country expects additional production of 900,000b/d of oil within the next nine to 10 years as a result of the eight contracts assigned in Round 1.4. Mexico, which produced a maximum average of 3.4 million b/d on 2004, is struggling to hold crude production above 2.1 million b/d.

The expected increase in deepwater activity comes as good news for companies like Subsea7 whose core business are seabed-to-surface engineering, construction and services to the offshore energy industry. The opportunity to bring its full capabilities to Mexico is definitely on the horizon and is a reason why the company took a long-term view and established itself in Mexico in 2011, Childers says. With work from PEMEX becoming scarce, the firm is hard at work defining its strategy to take advantage of Mexico’s opening petroleum sector.

“Deepwater is the future, and it has been for some years now,” Childers adds. The key for Subsea 7’s Mexico team is to now adjust its mindset to match the engineering challenges of greater underwater depths, a feat Childers says will depend on interfacing and leveraging the company’s Houston-based expertise and experience to the Mexican context.

As PEMEX transforms into a productive state-owned enterprise with more focus on efficiency between its different departments, an integrated approach to service is increasingly in demand. Since the NOC is its main client in Mexico, Subsea 7 has already detected changes in the way it works. “In particular, we have perceived budgetary pressures that were not as prevalent before,” Childers says. PEMEX’s budget was slashed in 2017, down 18 percent from the previous year to MX$392 billion (US$19 billion). Although difficult, Childers says the industry’s downturn forced all players to raise their standards in cost-effectiveness, efficiency and productivity.

“Our maintenance work for PEMEX continues to be based on preplanned projects but there is a heightened focus from PEMEX on delivering the plan on time and at lower costs,” he adds. The budget cuts at the company further limit the funds available to improve its existing assets. The need for new infrastructure is also on Childers’ mind. He defines one of Subsea 7’s main concerns as “the uncertainty surrounding to what extent activities in shallow water will require new infrastructure altogether.”

Circling back to the industry downturn in recent years, Childers mentions that it continues to hit hard in the southern city of Ciudad del Carmen, where the company’s Mexican branch is located, and that a focus on hiring and training local personnel helped the company through the lean times. “Our office has a 98 percent Mexican workforce,” says the British executive. despite the novel challenge of deepwater, Childers is certain Mexico holds adequate talent to succeed, which will come as good news to the winners of Round 1.4 that will enter into contracts that require local content of up to 10 percent during the blocks’ development phase.

One way companies may ramp up their local content levels, he adds, is through strategic alliances with local firms employing Mexican personnel, something that could pose an opportunity for Subsea 7 given its almost exclusively native workforce in Mexico. The firm is no stranger to forming mutually beneficial alliances and Childers says Subsea 7 already benefits from partnerships with One Subsea and Graheme, which primarily allow it to put forward collaborative integrated solutions in combination with an early engagement approach to offer cost-effective solutions.