Technology Tops List for Efficiency Drive

Q: Which objectives have guided Baker Hughes in an operating environment characterized by low oil prices?

A: Due to the challenging market conditions in Mexico and elsewhere, we had to make some adjustments to our business. However, we continue to invest in technology because we believe it is key to improving efficiency gaps in the industry and we also believe it is the main road to lower oil and gas production costs. Discipline is essential for every company to compete and the downturn is evidence that we must collaborate across all levels of the supply chain to improve performance. Most importantly, we must retain the talent of our people. For the past year, we have developed a great deal of local talent. Our employees truly understand our customers’ needs, which is essential for us because our most important goal is to meet their objectives.

Q: How has your strategy in Mexico changed given the reforms and the opening of the energy sector?

A: Baker Hughes’ main strategy is to provide technology and solutions that help our customers build more efficient wells, optimize production and ultimately improve recovery. Our goal is to build on our strategy in more profitable markets. In Mexico’s case, we have been impacted by low oil prices and the reduction in Mexico’s NOC drilling activity. We reorganized our business to better support more active areas in the region such as the offshore market, which demands the most advanced technology. Starting in 2014, we evaluated our footprint and redistributed activity to better support the offshore market. We have provided significant value to our customers through advanced applications of technology and the expertise of our people and we have helped our customers remain sustainable during the downturn. We have three main objectives in Mexico, focused on technology, people and processes. We will always combine these with ethical business, which creates long-term relationships.

Q: How does the contract renegotiation affect your relationship with PEMEX?

A: The concept of contract renegotiation was something that all service companies had to adjust to. There is a trend to move toward integrated services contracts rather than discrete services, something in which we were very strong. Baker Hughes had the opportunity to participate in the first integrated services tenders and we were awarded one of the contracts. We also continue to provide discrete services as needed and our relationship with our customers has improved greatly because of our performance.

Similar negotiation processes have been implemented in many other countries in Latin America. We leveraged lessons learned to adjust our structure across the region. The negotiation process has proved beneficial for us and our customers and we believe our relationships will only continue to improve.

Q: How can Baker Hughes contribute to PEMEX as it becomes a productive enterprise of the state?

A: We believe that Mexico’s NOC now needs to diversify and focus on new areas, including the creation of new partnerships. Baker Hughes is very open to this. We changed our strategy in 2016 and one of our new goals is to create partnerships and JVs with new companies, including Mexico’s NOC. It is the only company potentially in the world that is a customer, a possible competitor and a possible ally at the same time.

Q: Which of Baker Hughes’ past projects with Chevron in deepwater highlight your capabilities?

A: Baker Hughes has worked with most of the major companies working in deepwater fields worldwide and we have the relevant experience that will be required to exploit Mexico’s deepwater fields. Baker Hughes has already proven itself as a services expert, now we simply need to replicate that success in Mexico. A major challenge will be how fast the oil can be extracted to begin commercialization. A balance will need to be found between capitalizing on private sector expertise and maintaining control within these partnerships.

Q: How prepared is Baker Hughes to confront these challenges?

A: We are excited because we believe we have the right technology and service portfolio, operating footprint and expertise to support these challenges. We are undergoing a mindset change. We need to do things differently to obtain different results. We are changing our supply chains and our products and services so that they are the most technologically advanced and varied. We are simplifying and integrating.

The manufacturing industry changed a great deal but this has not been experienced by the oil and gas industry, which has just scratched the surface of the possibilities for manufacturing and development. We have a great deal of opportunity and strong chance of success. As the industry turned its focus to the offshore market we adapted our business to fit this need. Historically we have had a presence in the onshore Mexican market but as part of our reorganizational strategies we decided to focus on offshore opportunities, where our presence has become stronger in the last years. We know there is a waiting market in Mexico with the Energy Reform and the entry of new companies. We need to work with partners that have a presence in Mexico to train and certify them as representatives of Baker Hughes.

Q: How do you expect Baker Hughes’ technology to evolve in Mexico?

A: We are very strong in drilling and completing wells with some of the best tools and technology being delivered in the Mexican market, providing services and value combinations to our customers and maximizing their results. Our well drilling services include technology in drill bits and directional drilling tools, drilling fluids and wireline services. For well completion we are a leading provider in completion and wellbore intervention products, as well as in cementing services. Baker Hughes will soon introduce self-adjusted cutting structure bits to the market, as well as a new-generation of more robust hybrid–Kymera drill bits and hole-opener devices that can be activated on demand in real time. We are also developing new technology in Electrical Submersible Pumps (ESP) for production.