Ernesto Siniesta
Commercial Director
Subsea Systems at FMC Technologies
View from the Top

Strategic Focus to Position Range of Subsea Technologies

Wed, 01/21/2015 - 23:18

Q: How has your outlook on the Mexican oil and gas sector been impacted by the Energy Reform and the structural changes within PEMEX?

A: Due to the Energy Reform, new rules, the migration of contracts, the upcoming entry of new operators, and PEMEX’s new corporate structure, the market has suffered a big contraction. The impact of this contraction was about 30-40% in general terms. Every company that works in the Mexican oil and gas industry essentially works for PEMEX, so many were impacted by this contraction. Only those companies that are already well-established through ongoing contracts with PEMEX have enjoyed business as usual. Paired to this, we expect 2015 to be complicated because of CNH’s bidding rounds and SENER’s need to move very fast. Once SENER and CNH publish the contracting models and the final contract specifications of each block to be tendered, companies will take their time in analyzing every opportunity available. The first contracts will be awarded in the second half of 2015, which means that the winning companies will likely begin their activities by the first half of 2016.

In addition, we expect PEMEX to move forward quickly. Considering the areas and fields awarded to the NOC in Round Zero, it will forge ahead with sustained production at the Cantarell and Ku-Maloob-Zaap fields. It will also take on new projects in heavy oil, shallow waters, and onshore areas. Yet, PEMEX has to move even faster than it is doing at the moment. It is already very close to defining its new upstream and downstream framework, and is working on how to attract the right partners for its farm-outs, and how it will find the right investors. This process will take at least six months. If this scenario occurs, PEMEX will probably begin the pre- evaluation of its projects by the last quarter of 2015 and extend into 2016. Although 2015 will be another complicated year for the industry, FMC Technologies (FMC) has established contracts with PEMEX for the assets that maintain the country’s production levels. Therefore, we will be able to keep working with PEMEX steadily throughout 2015. While we are not expecting much growth or increase in revenue, we are simply expecting to maintain a steady income plateau.

Q: Where will FMC focus its strategic efforts throughout 2015 and beyond?

A: Our main focus will be on our business relationship with PEMEX throughout 2015, where we will help the company face new challenges and enter into JVs. We want to continue supporting PEMEX’s operations while learning about its subsea needs, be it for its own projects or for its joint ventures. If we look at heavy oil developments, we need to pay careful attention to who will be working with PEMEX so that we can assist both parties; we are interested in these opportunities since we are very experienced in these types of projects. We already advised PEMEX on how to develop the heavy oil field Ayatsil-Tekel. In the end, PEMEX chose what we expected, a fixed platform system, and so we began providing the surface wellhead systems for the topsides. All in all, whether it is PEMEX working alone or in partnership with another operator, we will be there. However, future projects will not be carried out at depth of 120m, but rather in deeper and more complex conditions, where platforms are not the most suitable development solution.

Q: What lessons should be learned from the development strategy and contracting process for Lakach?

A: PEMEX wants to learn about technologies for these kinds of fields. While this is a good thing, Lakach became a very complicated project, not only for PEMEX but for other companies involved as well. There is no limit in liability by pollution, according to the new Environmental Liability Law. Many companies did not approve of the terms for working on this project, service, construction, or other types of providers. Hopefully, all companies involved will cover every aspect of the field’s development to ensure safety, and that no accident occurs, because if a blowout or some other uncontrolled problem comes up and pollutes the environment, it will be a disaster.