Worley Sizes Up Mexico's New OpportunitiesBy Peter Appleby | Tue, 05/19/2020 - 09:00
Q: What projects is Worley involved in and what are the firm’s opportunities in the Mexican market?
A: Mexico continues to be an important market across all our sectors, but especially in the downstream and petrochemical areas. Recently, we’ve been involved in different aspects of some of the largest downstream capital projects in the country.
Renewable fuel projects have been the main driver of our downstream business in Mexico. This is a global trend that is being reflected in Mexico, and one we are committed to as part of our energy transition initiatives. Recently, we won a major renewable jet fuel bid in Europe and have been fortunate to work on a number of similar projects with developers in Mexico as well. These projects are mainly renewable jet fuel and renewable diesel fuel initiatives.
Q: How has the merging of the two companies allowed Worley to provide Mexican clients with increased service provisions?
A: In April 2019, Worley Parsons and Jacobs’ Energy, Chemicals and Resources division, two global leaders in engineering, technical, professional and field services, came together under a new name: Worley. The merger increased our capabilities substantially. In Latin America, the relationship between Jacobs Engineering and WorleyParsons was complementary, and the merger has dramatically increased our presence in Mexico. We now have over 400 people in Mexico City alone, completing projects in the midstream and downstream sectors. And we expect to add local offshore capabilities very soon. The merger also means we can deliver offshore projects anywhere in the world from our bases in Houston and New Orleans.
One of the benefits of the merger was experience with topsides in the Gulf of Mexico. This complemented our heritage WorleyParsons experience in Asia Pacific and Europe, and is strengthened by our subsea experience with Intecsea. For offshore in particular, the merger has expanded the integration abilities of our services to the point where we are able to move across the entire life cycle of an offshore project.
We are particularly well known globally for our EPC services. However, up until now, we’ve focused on providing engineering and procurement services in Mexico by leveraging our global procurement capabilities. But as we explore new opportunities in Mexico, there are strong prospects for us to bring our EPC services experience under different contracting models.
Q: How does Worley approach shallow and deepwater operations and where can it provide support for PEMEX’s offshore projects?
A: We have both shallow water and deepwater expertise. The deepwater environment is more complex and the technologies often require a greater degree of expertise, which is in the sweet spot of our technical capabilities. But we’ve found that shallow water projects have their own challenges. Though they tend to be technically simpler, the supply chain, execution and costs and scheduling concerns remain the same. We have a combined team with complementary experience across both shallow and deep water, and our customers benefit from this.
We can leverage our experience with different technologies, fabrication and installation methods and contracting strategies to add value in any offshore project. Our experience in Mexico has shown us that the work processes and quality of local companies are comparable to other NOCs around the world. But we don’t expect customers to adapt to our business model – it’s quite the opposite. We’re flexible, and we take the lessons learned from the international stage and apply them in-country.
Q: How has Worley helped to improve the use of technologies in Mexico?
A: The use and application of technology has dramatically improved since the opening of the market. NOCs always need to balance efficiency in executing projects against the incorporation of new technologies, but the uptake has been steadily rising over time. In particular, we’ve seen very lightweight and more efficient offshore facilities being embraced. In the past, these have tended to be big and overbuilt. Now, it’s all about efficiency supported by the latest technologies.
The other driving force is that international oil companies are delivering their increasingly advanced technology and experience to Mexico. This is particularly the case in big, deepwater fields under development, and their presence will continue to drive technological progress.
Of course, technology is not the only factor in the evolution of the national industry. Lumpsum EPC models have been the default to execute contracts in the past. But this is changing, and with it are the services that are being offered. Reimbursable EPC is one such avenue. The open book contract model is another, which allows companies to negotiate on margins and additional incentives. For some contracts, the lumpsum EPC model continues to make sense. But contracting models are becoming more reflective of the unique challenges the industry faces.
Q: How will the recent oil price collapse and impact of the COVID-19 outbreak fundamentally change the Mexican market and the global oil and gas industry as a whole?
A: Concerns around how COVID-19 may impact offshore projects and the industry as a whole are pressing issues for everybody in oil and gas. In terms of the oil price collapse, though the situation is challenging, the good news is that we have been here before in terms of historic price drops. This means the situation is not entirely unique.
Part of the solution must be incremental improvements in efficiency, because projects need to be viable under any economic conditions. We had seen indications of this move toward heightened efficiency prior to the recent collapse. For example, we are involved in the execution of a semi-submersible project in the Gulf of Mexico for a major oil and gas company. This started as a normal project with considerations of the weight of the platform based on the volume handled by the facilities. However, it quickly became apparent that to make the project viable, we would need to change our mindset regarding the design of the platform.
This necessitated an ongoing, dynamic conversation with our customer that required flexibility and understanding. All operators have requirements that are logical and based on the needs of the project, so the reconsideration of those needs is not always an easy conversation to have. However, doing so delivered a facility that set a new benchmark from a weight efficiency perspective. The reduction in steel and weight consistently delivers budget savings and reduces construction time.
This is a lesson we are taking into all FPSO designs, which will play a major role in Mexico. Even incremental improvements in the design of one FPSO will result in future savings when you consider the sheer number that will eventually be built. And with a growing number of projects in Mexico and Brazil, this represents a big opportunity to deliver projects more cheaply.