Working With Giants

Q: What capabilities have made Shell a successful player in the licensing rounds?

A: Before participating in the licensing rounds, we defined the areas we would like to develop and the partners with whom we would like to work. Both Qatar Petroleum and PEMEX are strategic and long-term partners for Shell. PEMEX has been our partner since 1993 in the Deer Park Refinery, and we are now working together both in deepwater and on shallow-water projects. The latest bids simply reinforced our previous partnership. The same thing happened with Qatar Petroleum. At the same time, we identified blocks where we were comfortable enough to bid on our own. 

This shows our commitment to the country and how strongly we feel about our capabilities regarding these projects. Thanks to this strategy, we have now built a significant deepwater portfolio in the Perdido and Campeche areas, thus diversifying the geological risk we might face. 

Q: How would you rate the regulations rolled out by ASEA, CRE and CNH and their impact on operations?

A: 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 room for simplification regarding contract administration. There is a great deal of 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. 

Q: What fiscal or geopolitical factors are the main source of Mexico’s attractiveness for companies like Shell?

A: The most important factor is geology. If the conditions are not right, there is nothing to work with. Of course, we look into everything the country has to offer and we always maintain a long-term vision for our investments. We do not get distracted by short-term events, such as changes in government, and that applies to every country where we operate. So far, we believe Mexico has the right geology and its bidding terms remain competitive. Companies keep participating and the Mexican government receives higher royalties compared to other countries, including Brazil and the US. Furthermore, there has always been a tradition in Mexico to uphold contracts. The fundamentals are there and that gives us certainty for the long term.