On 6th June, the British Chamber of Commerce’s Energy Group organised a breakfast-conference to present their views on what stage of the energy reform Mexico is currently at with a strong focus on upstream. The conference was also an opportunity to welcome delegates from Aberdeen who had come to Mexico on an energy mission to coincide with the Mexican Petroleum Congress taking place in Puebla that same week.
Rafael Daryanani, Harry Bockmeulen, Ruben Cruz, Nicolás Borda, Karla Torres, David Shields and Jim Peden.
The Group’s Vice President Rafael Daryanani welcomed delegates and thanked the Scottish Chambers of Commerce for their support with this event before introducing the first presenter, Ruben Cruz of KPMG. Ruben began his presentation by showing the audience and delegates who are now the main regulatory bodies and “players” in the market, since former public monopolies CFE (Federal Electricity Commission) and PEMEX (the national Mexican petroleum company) now have to become profitable companies. Because PEMEX had traditionally been used to fund the government budget, there has been insufficient investment in the sector and it is through private sector involvement that the government plans to reach their target of doubling production to 4mbpd. Providing practical and accessible guidance, Ruben flagged up some key areas of future opportunities in the sector, especially for upstream companies. These included:
Recovering refinery capacity through increased efficiencies and/or new refineries
Future deep-water auctions for round 2.4
Need to amplify the pipeline network to reduce cost of transport of gas
Retail: Mexico currently has twice the number of people per petrol station as in Brazil and four times that of the United States
Vice President of BP Alfredo Garcia was then invited to take to the stage to talk about the success BP has had and share practical advice based on his experience. BP is currently involved in three offshore projects and last year won the rights to develop two deep water projects. This year the company opened Mexico's first foreign-branded petrol station and plans to open 200 by the end of this year.
Attendees had a great opportunity to network with companies from the trade mission.
The next stage of the event was a panel moderated by David Shields, editor of Energía a Debate, who introduced the first speaker, Nicolas Borda from HaynesBoone who is a legal expert on the energy reform. Nicolas praised the efficacy of the reform that has secured billions of dollars of investment in the sector in just 3.5 years. He believed that while some aspects of the reform agenda are still pending, Mexico is “about 90% there” and he expected near completion by the end of the year.
To share his operator experience, Harry Bockmeulen of Petróleos Monterrey then added to the discussion based on his experience in Mexico – that includes bringing Petrofac into the country. He began by saying that Mexico was a “perfectly straight forward place to do business” and considered there to be many opportunities in the sector. Over 35 contracts have been awarded so far and there are many more to come. His advice was centred on the true importance of relationships in the country and he recommended the British Chamber as an excellent tool with which to do this. He also recommended AMEXI (the Mexican Association of Hydrocarbon Companies) who also offer very valuable support.
Discussing the importance of local content, Shell’s Karla Torres explained that this needs to be seen as a “journey to competitiveness.” Shell has a sourcing office in Mexico due to its numerous free trade agreements, geographical position and cost efficiencies with highly skilled labour. While there are plenty of good local companies, some are lacking certain internationally recognised certification, hence it is important the sector works with academia and in training. She also indicated areas of opportunity for British companies suggesting there may be a lack of integrated supply chain for upstream projects and also gaps in the market for specialised drilling services, heavy lifting equipment and subsea equipment.
Jim Peden from Katoni Engineering then followed on to offer his perspective as a service company that has recently established offices in Mexico and also as someone with extensive experience in almost all major oil producing countries. He explained that there are many similarities between Mexico and other markets however the system for contracts is different and it can be hard to find the entry points into the market. There is also a lot more competition than people may realise with a well-established supply chain already in the country. Reiterating Harry’s message, Jim explained that local infrastructure is very important and, much to our delight, recommended the network provided by the British Chamber of Commerce. David also agreed that the British community in Mexico is very supportive of what companies are trying to achieve.
The question and answers session directed the panel to provide more tips and practical advice which covered:
The importance of due diligence when selecting partners which should not be rushed into
Being local in Mexico is key so a partner and in-country presence is essential
While the low oil price has hurt the industry in Mexico, this has shifted opportunities towards smaller and mature fields
Mexican law is different to that of the US and UK. Permits in states and municipalities can be complicated
It is important to persevere in Mexico
In spite of these challenges, David explained that there is a political will to attract investment as well as good technology and experienced people working in the industry. Ruben added that, even when the industry does not have the necessary knowledge, they have the capacity to acquire it.
The Chamber would like to thank the Energy Group and panellists for taking the time to share their valuable, first-hand experience with delegates and Chamber members. We would also like to thank all who joined us for the breakfast.
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