Strategic Alliences Will Bridge Infrastructure Gaps

Q: What role are alliances and JVs expected to play in PEMEX’s future business plan?

A: Transparent and competitive alliances will have a vital role in helping to strengthen our downstream and midstream units. We have the expertise to establish the financial and legal mechanism to make a concrete alliance or joint venture. We are already working on a number of initiatives from our different business lines, which should be ready to enter the market during the summer of 2017. We recently made an alliance for the hydrogen plant in the Tula refinery.

This is a landmark transaction because PEMEX will hold no share in the project. Once we gain traction, we expect to announce further deals for various projects throughout 2017. We want to support and encourage the private sector to develop greenfield assets that will be needed by off- takers, including PEMEX, in the next two to three years. This works well for the entire industry because we can focus our resources on our core activities.

Q: How will you decide the winning bid?

A: It is based on the tariff the company will charge for its service. During the bidding round, we detailed the compression services we need over a specific timeframe. We are awaiting the details of the proposals. Whichever company offers the lowest tariff and complies with all the technical aspects will in all likelihood be awarded the project. We have designed the process to be as pragmatic and simple as possible. It is essentially the same protocol we followed for the nitrogen plant sale. In the unlikely event that we receive two identical proposals, then we will look at the timeframe and choose whichever enterprise can complete the job in the shortest time period.

Q: To what extent is the new businesses division at PEMEX involved in the farm-outs?

A: Typically, we like to play a backstage role in these activities, advising our partners and providing corporate support where needed. We do not offer technical assistance but rather act as a sounding board to aid the construction of business plans and legal and financial packages and structuring. We are involved in the farm-out projects but only to a limited degree because the requirements and regulations for farm-outs are clearly set out in applicable law. We are much more heavily involved in the downstream and midstream segments, for example, which are not as regulated by law. Our role is to devise a financial and legal package that reflects best market practice.

Q: How seriously are foreign companies looking at the opportunities in Mexico’s oil and gas industry?

A: The interest is accelerating quickly. It starts with developing infrastructure because this helps to make field bids more viable and this will always attract international players; it is a domino effect. If the private sector is aware that infrastructure already exists, it makes the licensing rounds and farm-outs more attractive in that particular region. The more interest there is in the fields, the more interest there is to build infrastructure. We have seen a tremendous amount of interest in offshore and onshore projects, whether it is to build new facilities or take over old ones from PEMEX.

Q: How do you see PEMEX’s role evolving over the next five to 10 years?

A: Five years is a relatively short time for a company the size of PEMEX but we will be focusing on strengthening our core activities. We need to make use of our financial and human resources in non-core activities more efficient by offloading responsibilities to experts. One example is gas compression. All over the world, private companies provide gas compression services for the neighborhood. Also, a big chunk of the world’s refineries do not have their own hydrogen plants, instead buying services from third parties. Hydrogen, gas compression and water treatment are all areas where industry players usually rely on experts rather than doing it themselves, and PEMEX is jumping on those initiatives.