Patricio Alvárez
Vice President
Perforadora Central
View from the Top

Rigs Ready for Drilling in Mexico's Shallow Waters

Tue, 01/21/2020 - 17:05

Q: How has Perforadora Central evolved in the Mexican oil and gas market?

A: We have been drilling in shallow waters since the early 1990s. At that time, we did turnkey projects for PEMEX with just two rigs while working out of Ciudad del Carmen. In 1998, we began our first major project, which was the construction of an ultra-premium jackup rig that would work with a capacity of up to 375ft of water. Between 2000 and 2016, we engaged in building one rig every two to three years. In 2015, the oil price crisis began and many Mexican companies suffered as a result. PEMEX began struggling greatly with its resources and its spending. It got to the point where we only had one rig working at a very low day rate. In 2014, the daily rate was US$150,000. That plummeted to just US$70,000. It was a very difficult time; nevertheless, we were able to continue negotiating with PEMEX. Gradually, we began to place our rigs in operation and now have three of our six ultra-premium jackups working. We are close to putting a fourth to work with an IOC.

Q: What has been Perforadora Central’s experience working with PEMEX and what advice does it have for other players?

A: We have been working with PEMEX for many years. You need to create a long-lasting relationship with the NOC and carefully maintain the rigs and equipment. If you can meet its requirements, you will enjoy a long, fruitful relationship with the company. Payments are on time, except in the last couple of years when the sector was in crisis and most of the contractors agreed to 180-day terms. Nevertheless, everything appears to be returning to normal. When working with the government, companies must be flexible. To withstand such long payment terms, companies need to reduce costs, negotiate with their banks and restructure their finances. Perforadora Central was able to do all this and adapt to the changing conditions. Companies need to be Mexican to build a strong relationship with PEMEX. It is very difficult and you need the expertise of local companies to adapt. All international companies that enter the Mexican market understand that they need the support of a local company. It is crucial to understand the language, the regulations and framework to be successful.

Q: What role does Perforadora Central want to play in boosting the country’s production in the next six years?

A: President López Obrador wants to ramp up production and the government will be injecting sufficient funds into PEMEX to help make that happen. To truly boost the industry, everything will have to originate in Mexico because the costs of importing will be too high. It makes sense to mobilize local firms. We will be ready with two rigs: Tuxpan and Panuco. We need two to three months per rig to get them operational and ready to compete in clusters 3 and 4. PEMEX will also continue to rent rigs as it did before through daily rates, with its staff operating the rigs and taking all the risk. Our model is excellent because we do not take on any risk with PEMEX subcontracting our services.

Q: What new technologies are IOCs demanding to drill in shallow waters?

A: With the Energy Reform, many blocks were awarded to large companies like Fieldwood and Talos Energy, which take on all the risk. Our main advantage is that we already have two ultra-premium rigs ready for operation in Ciudad del Carmen. Operators want hydraulics and BOP above 15,000 PSI. We only have two rigs with that capacity: the other four rigs are 10,000 PSI. We have drilled for 25 years in various areas in Mexico with 10,000 PSI and it is enough. We are certain that you do not need more than that. It is an international requirement that was introduced by operators that are starting to work in Mexico. New rigs come with at least 15,000 PSI and it is not cheap to convert the rigs to that capacity. To upgrade the four rigs, we would need to invest US$5-6 million per rig and require three to five months of work.

Perforadora Central is a 100 percent Mexican company founded in 1959. It has performed both exploratory and development oil well-drilling works, mainly for PEMEX, in addition to having obtained international experience in well-drilling.