What Hurdles Have You Faced and What Have You Learned in Mexico?
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What Hurdles Have You Faced and What Have You Learned in Mexico?

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Sun, 07/01/2018 - 10:22

The opening of the Mexican hydrocarbons market left the door open for both national and international companies to explore and produce oil and gas in the country. Through different consortiums, or as lone players, IOCs, NOCs and independent oil and gas operators are bringing best international practices and long track records from around the world to untap as many opportunities as possible. Despite that experience, many companies must still undergo a learning curve to consolidate their foothold in the country. We asked industry leaders what they have learned, what challenges they have found and what are their expectations now?

Javier Zambrano

Javier Zambrano

Executive Director
Jaguar E&P

The top two challenges operators face in onshore fields are dealing with security and with communities. To handle the community aspect, we become closely involved in the social issues of the communities in which we work. As each community has a different set of needs and concerns resulting from our operations, and as there is no specific pattern to follow when dealing with them, each area represents a different challenge. Being respectful with all the people we interact with, as well as with the landowners is crucial. On the security side, when dealing with any kind of criminal activity that may be present in our areas of operation, we follow procedures and recommendations that are put in place by our security consultants.

Matt Mccarroll

Matt Mccarroll

President and CEO
Fieldwood Energy

There has been a lot of bidding activity but not much well drilling and construction activity. The only companies that have ever actually drilled wells are winners from Round 1.1 and 1.2: Talos Energy, Pan American Energy, ENI and ourselves. There is a lot of activity to come. I think a legitimate question is whether or not the regulatory process and the administrative process within government agencies such as the Ministry of Energy, CNH and ASEA can handle the volume of work that is coming. There are many practical elements that have not been figured out yet. For example, as of March 2018 there are only two CNH-approved delivery points for oil offshore. It is hard for us to make the commitment to spend hundreds of millions of dollars developing a field until we are certain how we are going to sell that oil and where.

Glyn Jones

Glyn Jones

General Manager
Petrofac

The first is human capital. With the improving oil price trend and the growth in activity levels as the Energy Reform gathers momentum, we anticipate a skills shortage in Mexico. There is definitely a gap in the country that needs to be addressed. Fortunately, we have also seen that the Ministry of Energy and other institutions such as AMEXHI and the British Chamber of Commerce are very interested in helping. It will take time, but it will happen. Another challenge is the capabilities of local suppliers where we see a need for help. Lastly, land access and security at the fields is an issue. Negotiations with trade unions are complex for international companies and even more so when talking about communities, where in some cases we experience vandalism and blockages.

Timothy Duncan

Timothy Duncan

President and CEO
Talos Energy

Generally, things have gone better than we could have expected. In our view, one of the most important efforts the Mexican government can make in the near future is to continue to help PEMEX reach its ultimate potential by removing many of its institutional obstacles and help it streamline its decision-making process. With a stronger, more entrepreneurial PEMEX, the entire industry would grow and flourish much more quickly. Other than PEMEX, Mexico needs to continue to strengthen its supply chain and service company capabilities to enable world-class operating performance in the country

Steve Hanson

Steve Hanson

Director
Tonalli Energía

We have learned a lot about the regulatory process in Mexico, which is very different than in Canada and which has been a lot of work. The regulatory agencies here are very thorough and the process is all new to them. They are learning at the same time we are, so this process should become easier making it less expensive for us in the future. I think the regulators are going to figure out how to make their life easier by doing less work than they have been doing until now. Currently, they are doing a lot more work than regulators in Canada would do, and frankly in Canada the regulators work very well with the operators to create one of the safest oil and gas environments in the world.

Iván Sandrea

Iván Sandrea

CEO
Sierra Oil & Gas

I personally believe that for the reform to be successful many things need to happen, not just the development of a good regulatory environment, good regulators and good contracts. We need to have competition. We need to have a strong PEMEX and, in the case of the Mexican players, we need a very strong ecosystem of local companies. Up to Round 2.4 more than 60 percent of the contracts were signed by newly-formed Mexican players. Companies such as Sierra Oil & Gas, Citla Energy, Jaguar and PetroBAL that have ventured into large projects and higher risk areas employ many people here and our activities are essential to local development. We are committed to the country for the long term. We have capital and staff that comes from Mexico. We try to connect companies with capital providers when we see opportunities

Alberto de la Fuente

Alberto de la Fuente

Director General
Shell Mexico

All three regulators have the right attitude and the competencies to build a strong regulatory framework. Having said that, we are all still riding the learning curve and there is still room for simplification regarding contract administration. There is much paperwork and many processes that could be simplified to help companies be more focused on safety and actual operations. Moving forward, the challenge will not be with ASEA, CRE or CNH but with the next tier of regulators. As soon as we start working locally in exploration activities, we will need to communicate with many more governmental entities that will also have to undergo this learning curve. The entire ecosystem is challenging and it will take more time to develop completely.

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