Transformation: Focus on Strategic Thinking

Q: What is your perspective on the potential restructuring of Pemex?

A: Instead of talking about what Pemex needs in order to boost the Mexican oil and gas sector, Mexico should focus on what needs to be done to improve the whole oil sector, and Pemex with it. The main problem is that everyone believes that Pemex is the oil industry, but it is not. In order to change this perspective, there needs to be a transformation of mentality. This means the roles and responsibilities of each one of the institutions related to the oil industry, starting with the Energy Ministry, must be revisited and analyzed in order to decide what specifi c role each institution plays and should play. I do not think Mexico needs an energy reform, but Mexico badly needs a transformation of mentality.

Q: How do you achieve this transformation of mentality?

A: In the petroleum world almost everything has already been done by someone else, so what you really need to do is look for best practices that fi t your culture and needs, and adapt and implement them. Mexico has to look for people with strategic minds. In the end, this means that Mexico needs politicians who can direct the industry through strategic rather than political thinking. They can do this by bringing people in from outside to advise and help implement this much needed mentality transformation. A strategic planning group should be created to make an objective analysis of the entire oil and gas sector and decide what is best for Mexico, instead of what is best for Pemex, the Energy Ministry, the Finance Ministry, or the government.

Q: Who can set this transformation in motion; the Energy Ministry, Pemex, the CNH, or President Peña Nieto?

A: The Energy Ministry has to lead the transformation of the Mexican oil and gas sector, and go beyond the restructuring of Pemex. For the Energy Minister it would be easier to reform Pemex than the whole industry, because reforming the whole sector would require reforming the Energy Ministry itself, and people are generally reluctant to change. However, transformation is essential because Mexico is facing serious challenges and nobody seems to be reacting to them. For example, the USA and Canada have agreed to build the keystone pipeline to connect Alberta with Texas. Once completed, this pipeline will be able to transport around 2.5 million b/d of crude to Texas, our largest consumer. Who is thinking about the threat this poses to Mexico? In essence, what I am trying to say is that Mexico is failing to see many threats and is missing opportunities. For this reason, there needs to be a transformation, to make the sector more competitive and more fl exible to react to these threats and seize more opportunities.

Q: What should be the role of the private sector in this transformation?

A: So far the private companies in the oil sector have been passive with regard to change: they are waiting to see what type of opportunities Pemex will o† er. Until now, I truly have not seen any initiatives or proposals from the private sector to reform Pemex or the oil industry. For example, in the refi nery business no one has approached Pemex and o† ered any kind of deal; they have been passive at a time when there are enough potential investors to boost the Mexican oil and gas industry in multiple areas such as gas, refi ning, and petrochemicals.

Q: Why is everyone in the private sector so afraid to be proactive in demanding change?

 A: Probably because of the political environment they witness in the media. If we want the private sector to be involved and speak out, then we must give them the right communication channels and opportunities to participate. If they spoke out freely nothing would happen to them, except public criticism since we live in a democracy, but they do not want to criticize the Mexican government or Pemex and risk hurting their possibilities of acquiring contracts.

I have been in Mexico for 10 years, and even before I arrived here, there were people from Shell, ExxonMobil, Chevron, Petrobras, and BP in the country, and they are just waiting. I think they are here because they have high hopes the oil sector will open to private investment in the near future, but sooner or later they will have to take a decision. Hopefully they will decide to be more involved and help lead this transformation.

Q: How many divisions should Pemex have, and what would be the ideal structure?

A: The success of Shell illustrates that the number of divisions does not really matter, what matters is how well organized the company is. If a company is decentralized enough to make all kinds of decisions rapidly, but centralized enough for the e† ective implementation of an integrated strategic plan, then of course you can be successful. But an organization like Pemex, which is centralized in every aspect, will never be able to reach its full potential. Can Pemex become something similar to Shell? Of course it can, but they need to change their mentality. Until Mexico defi nes exactly what kind of oil sector it wants to have, it will be putting the entire burden on Pemex.

Q: Would you be in favor of creating an advisory council that advises the board of Pemex made up of former CEOs of companies such as Shell, Exxon, Chevron?

A: You can have this group as a sort of special council that can advise and recommend, but Pemex would be petrifi ed to give these people the right to criticize and interfere in the decisions relating to how Pemex should be run. However, large successful companies are built by people who take risks, and if Pemex wants to improve and grow to become one of the leading oil and gas producers worldwide, it must take such risks.