Schlumberger Grows its Energy Services LeadershipBy Conal Quinn | Mon, 08/08/2022 - 11:25
Q: How would you describe Mexico’s energy industry of the past few years?
A: Throughout 2020, the environment was marked by total uncertainty about the future. In 2021, the market showed resilience, which is a characteristic the industry had to learn, as well as how to work together as a team to keep operations going. The industry proved that in spite of the challenges, it is able to move forward. This year represents a positive inflection point that came earlier than anticipated but which is providing our industry with a brilliant future and the opportunity to do things right and apply what we learned in the past two years.
The turnaround came earlier because of geopolitics. Everybody was expecting the slump to last longer but the unfortunate situation between Russia and Ukraine turned this trend around. Another reason was the return to normal from the COVID-19 pandemic. This boosted energy demand, providing further opportunity for the industry.
Q: What has been the impact for Schlumberger itself in Mexico relative to its global operations?
A: During the significant decline of the industry during the past three years, Mexico was one of the few countries that did not stop activity, independently of how oil prices performed. This puts Mexico in a different context. When the new cycle came, Mexico continued as normal. It is also indicating that it could increase its efforts because of the government’s priority to increase production and achieve energy sovereignty. This creates a complex situation as the world struggles to meet energy demand. Being disciplined in where to allocate capital is important for the company in this environment.
Considering what is happening with Mexico’s exploration and development and how this impacts Schlumberger’s activity in the short term, the market fundamentals are constructive for our industry. We need a reliable energy supply to develop further, as well as the opportunity to contribute to the growth cycle. Companies need to fulfill the short-term supply but must also meet the projected demand while also look further ahead in their strategies.
Q: What has been the role of service providers in turning the production curve around?
A: Schlumberger does not see itself as merely a service provider but as a solutions enabler for its customers. Making these solutions available has been the main opportunity for the company. To better support its clients, the company has created partnerships that contribute to achieving their objectives at different levels. Schlumberger continues working with its local customer, as we have done for many years. We support the NOC with our technology, ensuring we are as efficient and reliable as we can be, optimizing the state company’s processes and reducing uncertainty. Operating at Mexico’s oil fields is becoming increasingly challenging, so it is no longer viable to only provide a service. Solution providers must understand the entire ecosystem to be able to provide an answer.
Schlumberger also supports the international oil companies that are relatively new to the Mexican market and which focus on exploration and development. For them, we apply the same principles of efficiency, optimization and risk reduction, adding abundant value through our know-how of the Mexican market.
Q: How aligned is the global technology roadmap with the needs of Mexican clients?
A: Schlumberger has a technology roadmap, developed for different markets across the world and reviewed yearly. In some niches, the applicable technologies are tailored to a specific geography. Considering the investment we are making and the capital discipline that we carry out, we may not have the same flexibility that we used to in the past to fill all these gaps.
Nonetheless, Schlumberger has its Fit for Basin strategy, which features partnerships and technological developments specific to a certain marketplace, like Mexico. In some cases, this means partnering with other companies, so we can provide an integral solution and fill potential gaps in our portfolio. An example of such a gap in Mexico is locally manufactured solutions regarding wellheads.
Q: How do you see exploration, development and production efforts evolving in the near future and how is this shaping Schlumberger’s priorities for the short term?
A: The market fundamentals are constructive for the industry and the company is positioned well in all regions to drive production short- and long-term, toward the future. Regarding exploration and development, the emerging growth cycle is aligned with our strengths and our engines of growth. Schlumberger has evolved and grown its scope with differentiated technology and the integration of solutions.
In the current cycle, the focus is on development, to later reach production. This represents a great opportunity for our core business, as development for both onshore and offshore is part of the company’s core strengths. When it comes to the production as the result of success in the exploration and development stages, one can see the commitment to replenish reserves from our local customers and the IOCs. Today, the IOCs and other private operators produce 100,000b/d on average, a relevant contribution. Schlumberger’s priority remains to work together with its customers to unlock this production and access to energy, to the benefit of everyone.
Q: How is the company managing the pressure of inflation on the work you deliver and how does this affect how you work with your clients?
A: This is one of the biggest challenges we face today in the industry, along with the lack of resources like raw materials and transportation. Schlumberger is tackling the issue by working closely with its clients and suppliers. For customers, rationalization is essential, so we can optimize our resources in terms of technology and services to support operations. For us, this contributes to our planning and therefore functions to obtain better business models. It is always a priority for Schlumberger to comply with its contracts and protect its clients as well as its own operations.
Regarding suppliers, we take the same approach. The company tries to sign longer-term commitments, which was not an option during the past three years due to the prevalent uncertainty. Today, the volume of work makes these commitments easier to establish, however, we continue to be challenged with demand versus offering constraints.
Q: How is Schlumberger developing its local content strategy and stimulating R&D in Mexico to gain better control over the quality of its suppliers?
A: The corporation works very closely with its suppliers and organizes sessions to identify what can be done locally and requires an alternative business model. Schlumberger has been successful in a couple of cases where it found local suppliers. Due to the higher oil prices of the current cycle, we are becoming somewhat more flexible. The company is increasingly looking to work with alternatives that are developed locally. Schlumberger has two manufacturing centers in Mexico, one in Monterrey and another in Veracruz, which drives our efficiency on the local level.
Moreover, we are working with suppliers to examine a shared resources model, where clients can use the same resources with different areas and companies. It is not an easy model to operate because setting priorities can be challenging but the benefit is in how companies can manage the full supply chain.
The company has applied this model to its operations with some customers, with the results being more successful in some areas than in others, but we have proven it can work. When it is done with similar clients but for different assets, the governance model proved to be the bigger challenge. If you have established clear rules and governance, then you can make it work.
Q: What have been the main changes the company has seen in PEMEX’s eagerness to implement new technologies?
A: The biggest challenge in the industry today is the adoption of technology and innovation. We are working to push this adoption forward but, in the end, we encounter a variety of roadblocks and need to find ways to overcome them. PEMEX has always been a technology-driven company, motivated to overcome its challenges. Its reservoirs are becoming increasingly difficult to produce but not every area of the company is as willing to try new solutions. Some are more risk averse and want to wait until a solution is tried and tested while others are willing to take chances, depending on the asset they manage. Both the pricing and proving the value of new technologies can be difficult at times.
Even though there is an appetite for new technology and assuming that the adoption and the contractual mechanisms are both satisfactory, then one has to consider the availability of those technologies. In the past, the need for technology was concentrated in certain hubs, so it was easier to distribute the available resources. But when demand is high, technology becomes scarce and companies start to wonder where to allocate it, which can create bottlenecks. Schlumberger sets out to both innovate and solve these challenges.
Q: How worried should Mexico be about the oil and gas boom in Guyana when it comes to the availability of resources and technology in the region?
A: Guyana has been extremely successful. It is growing rapidly but the number of wells they are spudding compared to Mexico’s development is not that high. However, one needs to also take a look at places like the US Gulf of Mexico, where activity is skyrocketing and operations are quite similar in terms of reservoirs. Brazil and West Africa’s sectors are also surging, which is a more relevant issue for the Mexican market in terms of competition.
Q: How is digitalization transforming the way Schlumberger runs its business?
A: Digitalization is one of Schlumberger’s three pillars of growth. Following the pandemic, the transition toward digitalization was accelerated. Nonetheless, the industry is still facing the challenge of adoption, with added problems of data hosting and protection. Data quality and adequate hosting are key factors to make digitalization successful.
Digitalization has enabled growth, despite a low amount of resources being available and a lack of experienced people in the industry. Remote operations are an example: in some countries, including Mexico, Schlumberger has carried out drilling monitored remotely by a technical expert. This has compensated for the challenge we face regarding resources. Working together with clients has been made easier, too, since the company has found ways to build a collaborative environment and share information. In Mexico, the company has also been able to optimize operations through artificial intelligence and online tools.
The company’s focus right now is to further the adoption of digital tools. Digitalization is a highly dynamic process; therefore, a fast and continuous adoption of technology is key if companies want to stay ahead. Digitalization is about internal and external processes and we certainly have progressed positively in both aspects around the globe.
Q: What will be Schlumberger Mexico’s main concern for the next 12 months?
A: The main focus will be the safety of our people as our operations in Mexico increase. We function at 110 percent all the time, trying to be more efficient, more reliable and attempting to bring production forward quicker than anticipated. Sometimes, the environment puts pressure on its people, so they may be tempted to take shortcuts. We must continue protecting our people independently of the growth cycles.
In the short term, another concern is the availability of resources and how to keep up with demand while continuing to develop the local talent and retaining people in the industry. This is an industry-wide challenge; we have lost many people in the past and bringing them back has been difficult. The sector also needs to improve its public perception to be able to attract more and younger talent.
Another issue is that of sustainability and the energy transition. The energy industry is here to stay; we must merely make it cleaner and more attractive, developing local talent in the process and ensure we build a truly inclusive industry.
Q: What would success look like for Schlumberger in Mexico at the end of this year?
A: For Schlumberger to be able to say 2022 has been successful, it would need to have incident and fatality-free operations in Mexico. It should also be able to grow its business sustainably and have all its operations digitalized on the drilling side, as well as greatly advance in the entire value chain of exploration and production. Finally, Schlumberger wishes to gain returns on its investments and aims to contribute to the local market. We want to have a positive impact on the local communities where we operate. The years ahead are looking promising in that regard.
Schlumberger is the worldwide leading energy service company for reservoir characterization, drilling, production and processing. Schlumberger works in more than 85 countries and employs around 100,000 people.