César Vera Méndez
Region Manager
GE Oil & Gas & Surface PC Latin America
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View from the Top

Synergies are Crucial in the Post-Reform Oil and Gas Industry

Wed, 01/21/2015 - 13:50

Q: How has GE Oil & Gas (GE) improved its product portfolio in Mexico since the acquisition of Vetco Gray and Wood Group?

A: The main positive aspect of these acquisitions has been expanding our portfolio to a large array of high-quality wellheads and associated equipment. We are now in the process of optimizing our portfolio to the products that best fit the Mexican wells in order to help PEMEX and other operators maximize the processes, maintenance, and efficiency of their operations.

Q: What role does Mexico play in GE’s oil and gas operations in Latin America?

A: Because of all the changes that have taken place in Mexico of late, most oil and gas companies have been affected by PEMEX’s process of readjustment and budget optimization. Therefore, our revenue in the country diminished at the end of 2013 and during 2014. Today, Venezuela is the country that provides the largest revenue for our company in the region, around 30% more than Mexico. One of my objectives is to narrow that gap. We expect our Mexican business to ramp up in the following years, when the activities enabled by the Energy Reform fully take shape. After all, a constant we have noticed in most of the forums and conversations GE has participated in is the need to be prepared for a significant increase in business. However, despite having two manufacturing plants and our GE IQ center with an extensive team of engineers in Mexico, our workflow mostly comes from projects outside of the country, such as those in the Middle East. To remedy this, we are actively pursuing the creation of alliances as this is a very good time for collaboration between companies. Companies are in this business for the profits but the way to achieve such profits needs to be shifted. I want to highlight the need to collaborate with each other in order to provide the solutions needed in each oilfield. GE is therefore looking for partnerships where each player contributes with its own specific strengths. This also extends to how GE is consolidating its presence within the oil and gas sector, for which GE has different business lines. One initial step is to create synergies among GE’s different business divisions so that the company can participate as a single entity. We will leverage those synergies in order to maximize our market share and become a preferred partner and solutions provider for PEMEX and other players as well. In order to actively embrace the post-Reform landscape, GE is also striking a balance between organic growth and capturing highly experienced talent within the oil and gas business. There is no way around this because companies have been losing their experienced personnel to brain drain. PEMEX, which also faces this situation, has even announced the need to bring certain retired personnel back.

Q: Which features of GE’s value proposition give it a competitive edge when contracting with PEMEX?

A: PEMEX is very stringent about the prequalification phase, setting limits to the number of companies that can provide equipment and services. Today, 80% of the wellhead and surface equipment installed in the southeastern region of Mexico were provided by GE. Once a supplier is providing the equipment, the most natural activity to follow is to provide the service as well, which was one of our main goals given the magnitude of that contract. The possibility of providing maintenance or remanufacturing equipment that has been operating for some time represents a fantastic option for PEMEX, particularly considering the recent drop in oil prices and the need to maximize efficiency and lower costs. We are looking forward to assisting PEMEX in all these processes.

One noticeable thing, though, is that the contract we signed in 2014 to provide wellhead equipment and Christmas trees at Ayatsil focused on that field’s specific needs. The tender was neither generic nor open, which proved that PEMEX’s procurement arm is seeking suppliers that can be flexible and provide the right tools and services in a timely manner.

Q: What is the basis of the technology collaboration agreement that you recently signed with IMP?

A: IMP has always been a respected research institution. One of the consequences of the Energy Reform is that it will now have a broader scope. IMP will no longer carry out research programs for PEMEX only but will do so for the entire energy sector in Mexico. The alliance with GE will allow IMP to put more minds to work, while it leads the projects and GE supporting and collaborating with it.