Iván Sandrea
Sierra Oil & Gas
View from the Top

Sowing Seeds in Midstream

Wed, 01/18/2017 - 10:48

Q: What are Sierra’s goals in the midstream segment?

A: Sierra wants to become the first independent Mexican company that participates in the complete oil and gas value chain, to become a local energy champion able to attract investment and projects that will benefit the country. In midstream we see several opportunities such as onshore terminals, pipelines and storage. For now, we have decided to focus on projects that will ultimately create marine terminals for development and growth.

The creation of hubs is complex, takes time and requires large capital. We have around nine of these projects in our sights but have only announced one so far, Caoba Terminal in Tuxpan. The Caoba project involves installing marine terminals, docking positions, 260km of pipeline, truck facilities and interconnections to PEMEX infrastructure at a cost of US$800 million. Very few companies can take on this kind of investment but we believe it is in the best interest of Sierra and Mexico to do so.

Our goal in midstream is to do at least three of these projects over the next seven years to help the market develop and to become leaders in the creation of strategic infrastructure.

In midstream, Caoba remains our single most important, largest and strategic project. We are putting it together in partnership with TransCanada and TMM has a special place in the overall reshaping of the midstream sector in Mexico. We feel very good about how everything has developed so far.

Sierra remains stronger than ever. We continue to grow in terms of technical and management capability and also have added more capital to the company from important sources such as CKDs. Last year, around 15 percent of Sierra's capital came from a single CKD. By adding a second CKD, that percentage has grown by another 20 percent. We have also added strategic investors, which shows that people are willing to invest in the company.

Q: What challenges does Mexico’s midstream sector face?

A: Two and a half years ago we were worried about the whole process of liberalization for the midstream segment because it is a very complex thing to do but we have certainly seen progress. The government has established a proper set of objectives and a strategy to achieve them. Although there have been delays, we look at that as part of the learning process.

Looking ahead, we have a number of wells to drill as part of our commitment and a defined midstream project to develop. Oil prices and other external factors are not a real fundamental worry for us because we are building a company with a low-cost structure and fortunately without inherited high costs. We compete with other players in the market with cutting-edge technology and our fields have the right volumes to make them economically viable. Nothing seems impossible.

Q: How do you see Sierra developing in the coming years?

A: Sierra is receiving up to 10 job applications per day to join the company. After winning Round 1.1, we received 800 job applications in two weeks. We are looking for the best people and make sure we get them by going through a very thorough and personal process involving senior management. Sierra is happy to have an immense pool of talented people in Mexico. We continue to chart Sierra’s journey in an emerging and growing environment. We want to be leaders.

In upstream we expect to target around 500 million barrels of net reserves. We want to have a leading portfolio, continue growing and looking for opportunities. In midstream we want to have a strategic participation as developer and operator of three projects that help develop the market.

In human capital we also want to become a highly recognized company, a unique place to work where people develop their skills and abilities as leaders in the sector and maybe even create their own companies.