Reappraising a Mexican Engineering PortfolioBy Pedro Alcalá | Thu, 04/21/2022 - 14:45
Q: To what degree did the industries you work in recover in 2021?
A: I would not say that 2021 was a year of recovery. Rather, it was a year of “maintenance,” defined by sustaining the rhythm of activity we were able to recover in 2020. Our results were quite similar in 2020 and 2021. In Mexico’s oil, gas and energy sectors, we do not consider COVID-19 to be the main factor impeding growth for us in general. Political uncertainty has slowed us down much more, especially in the energy sector. During 2021, CFE launched a strong campaign that included the development of six combined cycle power plants. It scheduled the release of the tenders, which were then delayed as a result of the discussions surrounding the electricity reform proposal. Renewable energy projects were also halted. In the meantime, Mexico’s oil and gas sector has been defined by the needs of the country, particularly the necessity to keep production going and to sustain it above the average exploration success rate. The Dos Bocas refinery project has also developed without any substantial interruptions. We also work in the petrochemical sector and we do not see many of our clients looking for new opportunities in that field, since there is considerable risk involved in launching new projects in this category. Still, the maintenance, modernization and reconfiguration of existing facilities remains an active market.
Q: How has your work with the public and private sectors changed across your portfolio?
A: Before the beginning of President López Obrador’s administration in 2018, we were hoping to greatly increase the role of the private sector in our portfolios. That dynamic has now been somewhat reversed. If we want to continue working in Mexico’s oil and gas sector, our relationship with government institutions like PEMEX and CFE and their projects must deepen and play a leading role. In the past, we were looking at a 60 percent private sector against 40 percent public sector split in our portfolio; we are now looking at a 70 percent public sector against 30 percent private sector split.
Q: How have your alliances with EPC companies in Mexico evolved over the last year?
A: They have become more important than they used to be. Many Mexican construction companies with procurement supplier networks are looking to contract their engineering to a company like ours. We continue our relationships with Avanzia, also known as Grupo Cobra, Arendal, Hosto and various other construction companies that we complement through our engineering services. The engineering that we provide generates value through new efficiencies as well as the shortening of construction timelines and budgets, achieved in part through a more precise approach to the selection of technologies and materials. Without these partnerships with EPC companies, gaining that key degree of proximity to any major project would be a more complicated endeavor.
Q: How has the evolution of PEMEX’s drilling schedule over the last year impacted your participation in Mexico’s upstream segment?
A: In 2020, we expected the midstream sector to be the least impacted by Mexico’s political uncertainty but that obviously changed a great deal. The government’s ongoing conflicts with private developers of storage and distribution infrastructure have escalated and impacted the sector greatly. These issues have extended into 2022. Many companies are waiting to see if their projects are viable under these circumstances. This has resulted in an increase of upstream exploration and production activities in our portfolio. We have continued to renew our contract with PEMEX E&P. For 2022, it has been expanded and we will continue working with the NOC to increase its production levels, particularly from the southern and southeastern onshore regions. We provide PEMEX with consultation services for the most part. We basically analyze its problems and offer a solution.
Summum is a midsized engineering service provider with more than 40 years of experience. It delivers regional expertise and offers comprehensive services in the oil and gas, energy and mining sectors. It has offices in several Latin American countries.