Michael Gunther
Director of Energy and Infrastructure Mexico
Sebastian Aguayo
Sebastian Aguayo
Vice President
Marsh Energy
View from the Top

Risk Management a Needed Cultural Shift in Mexico

Sat, 08/12/2017 - 10:44

Q: What is the added value Marsh offers to the Mexican oil and gas industry?

MG: We can help both Mexican and international companies obtain a better view of their risks, and also manage them better. For international companies, we have insights into the country and the associated risks due to our many years here. For Mexican companies, we have a global view of the oil and gas industry and a wide database of risk management best practices from all over the world. For both, we can also benchmark the global information we have gathered thanks to our extensive operations and use it to better manage their risks. We have already worked with many of the big companies coming to Mexico in other parts of the world. The mid-sized companies in the country, both national and international, would be the ones that can benefit the most when coming to work in Mexico. They need the most information about risks and how to manage them, but they do not have the required expertise nor an existing communication channel with companies like Marsh.

Q: How does Marsh perceive the risks associated with the Mexican oil and gas industry?

SA: Most of the projects that are being auctioned in the upstream and midstream sectors have the advantage of needing only last-mile investments, as most of the infrastructure has been already developed. For that reason, we are not expecting major investments to be made just yet. One trend that the global industry is facing is coupling existing and aged infrastructure with newer infrastructure. This may be perceived as complex but in reality, should not be a problem, and operators working with proper procedures that include a long-term vision for the project can manage the risk very well. For this to happen, a proper communication transfer strategy between the old owner of the infrastructure, in this case PEMEX, and the new owner, will be crucial.

MG: Midstream and downstream are two areas that, although they have not gathered as much attention as upstream with the oil and gas rounds, are growing. Major companies are entering the country to sell gasoline and natural gas, and they want to provide in the country their own molecules, meaning that a major refurbishment of the transmission and distribution systems in Mexico will be required.

Q: How important is human capital to mitigate risks in oil and gas operations?

MG: Human capital will be crucial to keep risks low in this area as trained employees are essential to ensure safe operations. Proper maintenance is also a decisive factor when measuring risks, and goes hand in hand with human capital, as the less prepared workers are, the poorer the maintenance. In times like these, it is hard for companies to allocate a budget and invest properly in maintenance and human capital, but we have found through a study performed by our company that there is a clear correlation between the international fall in oil prices, the fall in maintenance expenses and the increase in claims in the industry.

SA: In Mexico, the human factor is especially important as we are facing a talent gap. The commercial incentive to bring younger people into the market is just starting, and most of the senior talent is retained by PEMEX. Unfortunately, the cost of transferring this talent to other private enterprises is still too high.

Q: How is Marsh working toward a cultural shift, from insurance to risk management, in Mexico?

MG: The risk management culture in Mexico, although evolving, still has a long way to go. We are trying to convey the message to our clients that, even though an insurance broker is useful and we can offer insurance policies, it is always better to have a risk management strategy in place. It is interesting to see how clients often are very aware of the risks they face, yet fail to assign a control or mitigation procedure.

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