For the Whole Industry One Step at a Time

Mexico is one of the biggest petroleum producers in the world but its refining industry is not covering the production required to meet national needs, says Oscar Scolari, President and CEO of Rengen Energy Solutions. With more than half of the consumed gasoline in Mexico being imported, the need for a revamp is urgent, which in the end creates business opportunities, he adds. “More than 50 percent of the refining capacity in Mexico is shut down.”

Scolari believes that although many may blame the current state of affairs on a lack of investment, this is not the true problem. “At the Salina Cruz refinery, over US$3 billion dollars was invested in its modernization, but it is not producing, together with the refinery of Minatitlan. Others, such as Cadereyta and Madero, are running at marginal levels.”

When investment is present, but the results are not as expected, it is necessary to get to the root of the problem. Scolari points to PEMEX’s position of performing all the activities in the value chain, even those that are not included in its core business. PEMEX refineries shuts down alarmingly often, Scolari says. This represents losses of over US$10 million a day just through lost productivity. “If PEMEX has to shut down three refineries that means losses of US$30-35 million per day. Something has to be done.”

Rengen’s area of expertise can help PEMEX forget about noncore activities, Scolari says. It offers products and services that address the main reason PEMEX’s refineries suffer unplanned shutdowns, namely a lack of electric power, steam or hydrogen. The first solution is Rengen’s mobile generation units that can be transported anywhere and start producing energy in two days if the site is adequate for their installation.

The second is the company’s packaged boilers for steam production, produced by Babcock & Wilcox. Scolari says these two services can be offered on a sale or lease basis, allowing PEMEX, or any other company, to avoid a CAPEX hit on its books. “It is not the core business of our clients to produce power or steam, so why should they buy equipment to do so? Our lease plan allows them to focus on their core activities.” To offer a full range of solutions, Rengen is also looking at hydrogen production. “Rengen focuses on products that are not PEMEX’s core business, be it electric power, steam or hydrogen.”

The company’s ambition to become a leader in Mexico’s oil and gas sector is taking it toward a new path, Scolari says: the upstream sector. To succeed, Rengen is looking for a partner experienced in drilling, exploration and production. But Scolari emphasizes the capabilities Rengen brings to the table. “At Rengen, we have excellent local content to offer, a deep knowledge of the entire oil and gas industry in Mexico developed over 40 years, together with a set of privileged installations, such as yards and equipment located in the most relevant cities for the industry, including Villahermosa and Ciudad del Carmen.” The company is interested in both farmouts and nonsolicited offers. High ambitions can lead to big mistakes, and Scolari says he is aware of how important it is to proceed one step at a time in one of the most capitalintensive industries in the world. “We are not looking to participate in deepwater exploration, we want to enter slowly into the upstream sector to avoid errors.”

With political changes around the corner in Mexico, there is an inevitable uncertainty for companies venturing into new business areas but Scolari is confident that nothing can bring down the opportunities already present in the country. “The Energy Reform was passed by the Congress and was ratified by the Senate. It is secure and the only way to end it would be a dictatorship. We could see, for example, fewer opportunities appearing in the future, but those already present are there for the taking. The time is now,” he says. “Oilmen are the greatest gamblers, and when they look for opportunities all over the world, they place their bets where the risks are acceptable. Mexico is more than a safe bet.”