Alejandro Zairick
Economic and Harbor Development for the State of Veracruz
View from the Top

Veracruz Could Become the Oil and Gas Crown Jewel

Sun, 07/01/2018 - 14:58

Q: PEMEX’s successful discovery of gas in the Ixachi field was announced in December 2017. What will be the impact on the state’s economy?

A: This discovery is good news for Veracruz. Ixachi represents more employment for our constituents and will make up for the unfavorable situation after PEMEX’s restructuring left behind a significant contingent of professionals. The field is integrated into Mexico’s fiveyear bidding plan and is a primary component of the state’s almost 43 percent portion of the country’s oil and gas reserves. In our capacity as Veracruz’s Ministry of Economic and Harbor Development (SEDECOP), we are working full steam ahead to make the most of the emerging opportunities in this industry and to be prepared for the new players arriving to the state’s offshore and onshore blocks. We are in close contact with all interested parties, we remain one of the most active states in the licensing rounds and are engaged in fruitful interactions with the sector’s regulators: CNH, CRE and ASEA.

Q: What steps is SEDECOP taking to position Veracruz internationally?

A: Our local government attended the Offshore Technology Conference (OTC) in Houston in 2017 for the first time since the event’s inception. We wanted to meet first-hand the industry’s main players and gauge which of those companies might be interested in investing in Veracruz. That same year, we launched the Alvarado port project to meet the oil and gas sector’s inherent needs in logistics and supply. Veracruz’s coastline is 750km long and our state’s geostrategic position in the Gulf of Mexico and its valuable oil and gas resources necessitated such a strategic project. Local suppliers in Veracruz also want to understand the requirements of the newcomers and under what time frame. SEDECOP is working with them to provide training programs. We are also working with the federal government to develop our supply chain in the oil and gas industry to help these and other companies in the state.

Q: How will the Alvarado port assist in filling Mexico’s infrastructure gap in the oil and gas industry?

A: We are looking for the right partner to develop the project and many companies have expressed interest. We are undergoing environmental impact studies and feasibility tests and the results are encouraging. Experience in this kind of project as well as healthy and structured capital are among the key factors we expect from this strategic partner. The size and scope of the project is unprecedented. With the possible exception of PEMEX, hardly any company has experience in developing a port dedicated to oil and gas and we want to do it right. We expect the project to be finalized before the end of 2018.
Q: How are federal programs such as the Special Economic Zones (ZEEs) making an impact in Veracruz? A: The ZEEs are working quite well. In the particular case of Veracruz, it involves Coatzacoalcos, Nanchital and Ixhuatlan del Sureste. These create attractive opportunities for private players in terms of federal, state and municipal taxes. Previous federal programs created a one-stop shop that assisted private players in fast-tracking permitting and administrative procedures at all government levels. This complete package created a pipeline of 15 letters of intent a few steps away from closing. Expectations are high and the interested companies include refineries, liquid storage businesses and offshore services providers. 
Q: What is Veracruz’s plan to provide highly trained professionals to meet the industry’s requirements? A: We are working closely with academia to draft the specialized programs and training that future industry specialists will require to provide for the specific needs of newcomers. We are also working with CONACYT and INADEM, among other federal agencies, which are drafting the required training programs on par with the reform’s demand for qualified technicians and professionals, particularly for the Special Economic Zones.
Q: With oil prices going up, are you witnessing a reactivation of the oil and gas sector in Veracruz?

A: With the Ixachi discovery and Mexico’s licensing rounds, we are now looking at a new and better horizon. Veracruz is strategically positioned to spearhead the Energy Reform. Our contingent of experienced professionals who left PEMEX is eagerly awaiting the opportunities that will soon materialize.

Q: What is Veracruz doing to ease anxieties relating to community relations and security?

A: Veracruz is dealing diligently with these two particular issues. We are working closely with the Ministry of Interior to address these situations accordingly. The South of Texas-Tuxpan pipeline, a development by TransCanada, is a positive reference in that regard. In most cases, the problems are rooted in misinformation so we are focusing our efforts on creating exchange platforms between corporations and communities to dissipate any doubts and to be part of the solution.
Q: How is Veracruz improving its business platform? A: To the best of its ability, the government of Veracruz extends a helping hand for companies to set a solid foothold in the market and undergo a seamless process from arrival to the launch of operations. We are working on regulatory improvements to expedite permitting processes and administrative procedures and to make them as dynamic as possible. Our goal is to reduce our 755 procedures and services and to shift toward shorter response times and shortened procedures. 

Q: What other stimuli are you offering to arriving investors? A: We are drafting an instrument similar to the ZEEs but at the state level. We are trying to structure what the municipalities can provide in terms of attractive tax rates and other incentives among strategic positions within Veracruz. We are still polishing the inner workings of the instrument. Industrial park developers are also part of this conversation to provide the most effective stimulus instruments possible. We are motivated by the sizable potential they have seen in the state

Q: What do you consider Veracruz’s strategic advantages compared to other oil and gas states?

A: The size of our reserves and the length of our coastline are major comparative advantages. Veracruz’s proximity to Mexico City and Puebla, as well as being Mexico’s entry and exit point for European goods also stand out Our local administration has also placed a heightened importance on fostering a thriving business environment, accompanying corporations every step of the way.

Q: How does Veracruz deal with the cyclical nature of the oil and gas industry?

A: Veracruz created its own State Energy Agency in 2017. It will help provide certainty not only to our constituents but also to the companies arriving to Veracruz. It will also become a strategic link between our state and the federal governments and all of its new agencies since the Energy Reform. In addition, we are drafting a petroleum development program to make the most of our advantageous resources and clearly establish the vocation of each strategic state zone, with the goal of attaining long-term orderly development.

Q: What will be this administration’s legacy for Veracruz’s energy sector?

A: We want to set the stepping stones for Veracruz’s effective and efficient development, anchored in its petroleum development program, coupled with an energy development plan to integrate the whole strategic scope of opportunities Veracruz offers. A fully functional State Energy Agency will spearhead these efforts and we want to leave a solid foundation for our strategic Alvarado port for the next administration. It will be a critical link in Veracruz’s prosperity chain, considering the oil and gas industry in Mexico exceeds the parameters of any other industry in terms of investments, job creation, wealth creation, social impact and economic growth. It is set to become a major stimulus for Veracruz’s economy and will positively impact other sectors