Pemex Brochure 2018 by Business Review Asia

TECHNOLOGY AND THE 2017-2021 BUSINESS PLAN PROJECT PARTNER

POWERING PEMEX INTO PROFITABILITY Written by Tom Wadlow Produced by James Pepper

RODRIGO BECERRA MIZUNO, CORPORATE DIRECTOR AND CIO AT MEXICO’S LARGEST ECONOMIC CONTRIBUTOR, REVEALS HOW TECHNOLOGY IS PLAYING A CENTRAL ROLE IN THE IMPLEMENTATION OF THE OIL AND GAS COMPANY’S 2017-2021 BUSINESS PLAN

n 20 December 2013, Mexico’s oil and gas industry entered a new age. Having operated under a monopolised umbrella for 75 years, President Enrique Peña Nieto signed a momentous energy reform bill which opened up the country’s largest revenue-generating Technology to private competition. For national oil and gas giant Petróleos Mexicanos (Pemex), this signalled a huge about-turn, an overnight change of course not witnessed since its formation in 1938. A massive transformation was required, from a company operating as a monopoly to one that can stand up to competitors. Once charged with delivering hydrocarbon energy across the whole of Mexico at whatever the cost, Pemex is now focused on efficiency, profitability

and long-term survival. It was the enormity of this challenge which lured Corporate Director and CIO Rodrigo Becerra Mizuno away from a decade of servitude at Microsoft. “I thought this would be the biggest professional challenge of my career,” he recalls, “so when CEO at the time Jose Antonio González Anaya invited me, I was extremely excited. I knew technology would be at the forefront of this transformation. “On top of this, Pemex is the largest company in Mexico and one of the largest in the world.” The numbers back this up. As the eighth largest oil producer and drilling company in the world, Pemex’s $52bn revenue is equivalent to the entire GDP of Uruguay. It generates 2.5mn barrels of oil and 6mn cubic feet of natural gas a day,

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PEMEX IS THE LARGEST COMPANY IN MEXICO AND IN THE TOP 100 LARGEST COMPANIES IN THE WORLD. HERE ARE SOME OF THE NUMBERS THAT MATTER

>$52BN

ANNUAL REVENUE

70+

NUMBER OF DIFFERENT PRODUCTS SOLD

delivering this to over 11,000 service stations in Mexico and abroad via 83 land and sea terminals. From exploration, production and refining to logistics and marketing, Pemex covers the entire value chain. Technology and the road to profit While the enormity and scope of operations no doubt presents a competitive advantage over new entrants to the market, it exemplifies

2.5MN

NUMBER OF BARRELS OF OIL PRODUCED A DAY

NUMBER OF PEMEX REFINERIES

the challenge Becerra Mizuno and the Pemex leadership are facing. The 56-page 2017-2021 Business Plan signposts Pemex’s road to profitability, and notably sets a target to achieve financial balance in 2019/2020. Technology will be crucial to realising this ambition. “If certain markets we are serving are not profitable, we don’t have to operate in them anymore,” Becerra

NUMBER OF PEMEX GAS PROCESSING PLANTS

NUMBER OF PEMEX PETROCHEMICAL FACILITIES

Mizuno says. “In that case, we have to make better decisions with the information or the data that we have. That’s where technology plays a major role, because it can streamline our operations and create a better more profitable and safer environment.” Brief set, what did the technology landscape look like when Becerra Mizuno arrived in September 2016?

“I found that Pemex had a large amount of technology infrastructure. They own it, they develop it, they construct it, they deploy it. Everything was done in-house. I said to myself, we need to change.” Much of this sprawling infrastructure owes its existence to a self-built telco network, the second private largest in the whole country, which includes 130,000 phone lines and 10 data centres. Pemex was founded nine years before Mexico’s national telecoms company Telmex, and hence had to build its own communications capability from scratch. There was a time when people who worked for Pemex had two telephones at home: one from Pemex and the other one from Telmex. “They got used to building their own technology infrastructure from the bottom up,” Becerra Mizuno says, “and they used to do it extremely well. But the world changed, and there are people that can do it better, because they specialise on that.” Privatisation of these telco assets has proven vital in simplifying

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PEMEX’S PARTNER IN DIGITAL TRANSFORMATION Huawei is a leading global Information and Communications Technology solutions provider. Our industry-leading products and solutions have been deployed in more than 170 countries. In the 2017 Global Fortune 500 list, we ranked 83rd, thanks to our customer-centric vision and yearly investment in R&D (at least 10 percent of revenue). Huawei has delivered services to 70 percent of the world’s top 20 oil and gas companies. Mexico and Spain are prime examples. Mexico — Pemex, the largest company in Mexico, dedicated to petroleum and petrochemicals, is undergoing a major Digital Transformation project, expected to be the largest of its kind in the Latin America O&G Industry. Huawei helps Pemex ICT transformation by successfully deploying Agile Campus and IMS(IP Multimedia System) solution. Based on integrated networking and collaboration solution, more than 60,000 employees distributed in 13 branches enjoy ultimate experience. Huawei 8-inch HD video phone provides easy and secure collaboration, Agile campus switch makes network intelligent and smoothly evolution for future. At the same time, Huawei unified solution accelerates and simplifies Pemex network operations, improve O&M efficiency by 50 percent. Spain — CEPSA, one of the leading energy companies in Spain, has to process massive amounts of data during crude oil exploration and production, therefore, there is a need for an effective data analysis solution in order to improve exploration and production efficiency. As CEPSA’s business grew rapidly, traditional databases failed to meet ERP system requirements and were holding back business development. Additionally, traditional servers and storage require high maintenance skills. CEPSA was looking for a cost-effective solution that could be flexibly expanded. Huawei provided solutions for CEPSA, including mission-critical servers, storage, switches to build a reliable and stable new-generation database system. Huawei servers greatly enhance CEPSA’s ERP system performance, which has led to an improvement in production efficiency. CEPSA’s financial analysis system has doubled the number of transactions it can process, meeting strict service requirements.

Huawei servers achieve a failure rate 15% lower than industry average, guaranteeing that the system runs reliably. Huawei uses industry standard components, greatly reducing costs for procurement and future capacity expansion.

Huawei cooperates closely with top global partners in the oil and gas industry. In oil and gas industry, we focus on digital pipeline, oil and gas IoT, High-Performance Computing (HPC), and operations management application platforms. Huawei is committed to providing one-stop ICT infrastructure solutions. Meanwhile, we have established an open, diversified, and win-win ecosystem. These include underlying automation enterprises, upper-layer application providers, and oil and gas engineering design enterprises worldwide. • Huawei’s server and Schlumberger’s reservoir analysis software have completed integration and admission testing • Huawei and Honeywell have jointly developed and officially released a wireless gas detection solution based on Huawei eLTE • Huawei and PCICT, a branch of Sinopec, together have developed a smart engineering solution for oil refining

Huawei is commited to being Pemex’s best partner in its digital transformation. Huawei is dedicated to building innovative infrastructure platforms for enterprise digital transformation by making optimal use of emerging technologies, such as cloud computing, SDN, Big Data, and the IoT. Also, by working closely with skilled partners, Huawei helps enterprises attain their goals of agile, intelligent digital upgrades. To date, 197 companies in Fortune’s Global 500, 45 of which are in the top 100, have selected Huawei as their partner for digital transformation. Huawei looks forward to implementing digital transformation with you and creating a fully connected and intelligent world.

“I FOUND THAT PEMEX HAD A LARGE AMOUNT OF TECHNOLOGY INFRASTRUCTURE. THEY OWN IT, THEY DEVELOP IT, THEY CONSTRUCT IT, THEY DEPLOY IT. EVERYTHING WAS DONE IN-HOUSE. I SAID TO MYSELF, WE NEED TO CHANGE” - Rodrigo Becerra Mizuno, Corporate Director and CIO

Pemex’s technological landscape, which Becerra Mizuno stresses needed streamlining with a degree of urgency. “We needed to kickstart this immediately because we are working on the political clock, so we had to hit the ground running.” Becerra Mizuno is referring to upcoming presidential elections which, depending on the result, could signal further reform at Pemex. The need to demonstrate the viability of the 2017-2021 Business Plan to any incumbent administration, and indeed the Mexican public, is therefore paramount.

THE GREAT ENABLER Tangible progress has already been made. According to Becerra Mizuno, $50mn of savings have already been realised through strategic moves such as telco asset stripping, and by the end of the year Pemex will be relieved of its data centre management burden, instead operating on a hybrid cloud model and paying on demand for what it uses. Becerra Mizuno also points to a shift in spending priorities. “When

I arrived, our budget was 90% focused on investment, 10% on operational excellence. That means that 90% of things we did here with our budget was purchasing, which is how we arrived at this point where we have amassed a large amount of infrastructure.” “This year, we’re shifting that mix to 70% opex, 30% capex. We’re still not done, but we have changed the way we’re doing business now. We’re hiring service, not buying it.” The CIO points to the influence of both CEOs he has worked under – Jose Antonio González Anaya and now Carlos Treviño Medina. Without their leadership, much of this change would not have materialised. This shift in priorities is better demonstrated by the recent Pemex Drive event, which invited key industry stakeholders to learn about the company’s new technologydriven strategy. “We also wanted to create excitement around the company, which had been lost. It’s only now been revived by this and many other factors as well, including the efforts of the CEO.”

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Automation and the Industrial Internet of Things

Why is is everyone everyone talking talking about about it? it? Why Improved sensing technologies Cost-effective, secure connectivity Advanced computing and analytical methods

Leveraging decades of digital automation expertise, Emerson introduces the expanded Plantweb digital ecosystem, a scalable portfolio of standards-based hardware, software, intelligent devices and services for securely implementing the Industrial Internet of Things (IoT) with measurable business performance improvement. Plantweb becomes the most comprehensive and integrated Industrial IoT portfolio in the industry.

@EMR_Auto_Latam @EmersonAutomationLatam

IIoT, the key to achieve a Top Quartile Performance in the oil and gas industry Oil and gas companies strive to meet business and performance goals. Constantly changing market dynamics and operational challenges can make it difficult. Whether you are producing from a conventional or unconventional field, key challenges like reducing operating costs, minimizing HSE risks, and maximizing production are paramount. For decades, the industry has primarily used closed, private networks to control critical plant functions, or Operational Technology (OT). But in recent years, oil and gas companies have been among the first to explore Internet of Things (IoT) applications that enable more widespread and cost-effective monitoring and control of facilities, along with reduced costs and increased flexibility. Companies are dramatically improving the speed and accuracy of decision-making based on having the right information in the hands of the right expert, no matter where they sit. The Industrial Internet of Things (IIoT) is ushering in a digital transformation that enables companies to exploit technology and expertise better than ever before, but only if the right scalable technology strategy is matched to your business goals. The digital era is a reality for oil and gas leaders like Pemex, where state-of-the-art technology will bring about important operating improvements and increase productivity throughout the company’s value chain. Digital transformation has become a fundamental tool to bring about a change that will lead the company towards modernity and that will help Pemex face the challenges of the new Mexican energy model. This digital transformation will add value to production, reduce the overall costs of production processes, and optimize and streamline logistics, in addition to increasing the operating security of the company. This is why Emerson introduces the extended the extended Plantweb Digital Ecosystem, a scalable portfolio of standardsbased hardware, software, intelligent devices and services for securely implementing the Industrial Internet of Things (IIoT) with measurable business performance improvement. Plantweb Digital Ecosystem harnesses the power of Industrial IoT to expand digital intelligence to the entire manufacturing enterprise, while also providing an architecture for on-premise applications. Plantweb provides a comprehensive framework to help manufacturers achieve Top Quartile performance in the areas of safety, reliability, production and energy. Top Quartile is defined as achieving operations and capital performance in the top 25 percent of peer companies. In addition to highly secure process control, safety and asset management systems, Plantweb supports enterprise-wide operations with an expanded portfolio of Pervasive Sensing field instruments, the Secure First Mile family of software, gateways, security devices and services, the Plantweb Insight™ and Plantweb Advisor™ scalable suite of software applications, the Plantweb Optics™ Platform, and Microsoftenabled, cloud-based remote expert Connected Services.

Pervasive Sensing expands the industry’s largest portfolio of measurement and analytical technologies. Secure First Mile is a security architecture that allows customers to selectively connect highly secure data from protected control and operation systems (OT) to operational performance applications in the cloud environment (IT). Plantweb Insight Software provides a comprehensive, lightweight portfolio of IT-friendly applications with analytics for monitoring asset health which can run independently of existing business systems and distributed control systems (DCS) and provide a simple and powerful entry point to Industrial IoT. Plantweb Advisor Software is a robust suite of integrated analytical expert applications for asset health, performance modeling and facility-wide energy optimization. The widely adopted OSIsoft PI System’s highly scalable open data infrastructure is used as a platform for these applications. Plantweb Optics is a mobile-ready collaboration software platform that provides cross-functional collaboration and decisionmaking to help plants operate safely and profitably. Lastly, Connected Services is an Industrial IoT-enabled cloud services offering for real-time monitoring of important assets’ health, energy consumption and other operational applications. But the Industrial IoT is not only transforming the way information is conducted across the company to improve decision making. Industry is at a critical inflection point where efficiency-focused operational improvement programs have reached a point of diminishing returns, and personnel are being strained to achieve more with less than ever before. In the next era of manufacturing, Top Quartile performers will embrace digital transformation through the Industrial Internet of Things (IIoT) to accelerate, institutionalize, and sustain best-in-class behaviors across their workforces. The Emerson Digital Workforce Experience, is an immersive experiential environment that transforms, via Industrial IoT, the nature of work and improves workers’ lives through real-life work scenarios in five key industrial areas: project engineering, commissioning, control and simulation, maintenance, and reliability. The Digital Workforce Experience empowers workers to transform traditional behaviors and deliver value in fundamentally new ways by adopting innovative approaches enabled by Emerson’s Plantweb digital ecosystem. In summary, the potential of the Industrial Internet of Things (IIoT) is bound only by the limits of our creativity. But its realization will forever be tied to security. This trend is already playing out among early Industrial IoT adopters in the oil and gas industry, where there is tremendous motivation to adopt networked technologies and smart sensors. Many oil and gas facilities, especially offshore platforms, are located in dirty, distant, dull and dangerous environments. In these harsh areas, automation and remote management can increase efficiency, improve performance, and enhance profitability. But most importantly, they keep people out of harm’s way. TO LEARN MORE ABOUT EMERSON’S PLANTWEB DIGITAL ECOSYSTEM GO TO EMERSON.COM

POWERED BY PARTNERS Touting potential partners was also a key objective at Pemex Drive. Indeed, a major facet of the 2017-2021 Business Plan involves the creation of joint ventures along the companyâ&#x20AC;&#x2122;s entire value chain as a mechanism to increase investment and efficiency. One example of this in action is a software factory developed with French consulting giant Capgemini. Based on mutual incentives such as delivering cost savings for one another, this initiative has already helped Pemex to begin cutting the sprawling number of costly applications embedded throughout

its operations. By carefully identifying which processes could either be outsourced, merged or removed entirely, Becerra Mizuno hopes to cut 800 line of business applications down to 200-250, which even by his admission is still high. Accenture is another company helping Pemex to develop a digital ecosystem based on mutual benefit, while Microsoft and Emerson Work Services are helping deliver important work regarding migration of applications and processes to the cloud. Longstanding partnerships have also been redefined, such as the

“WE’RE OPEN, WE’RE LOOKING FOR TALENT, WE’RE LOOKING FOR YOUNG PEOPLE, AND WE’RE GOING TO GIVE THEM THE OPPORTUNITY TO DEVELOP THEIR SKILLS”

one with SAP. Having utilised SAP’s oil and gas expertise for more than 50 years, Becerra Mizuno explains how this venture has evolved to provide all important flexibility to Pemex. “We have established a new partnership with them, where it’s not only them charging for their licenses or their service, but it’s also on a payas-you-use scheme on some of their modules, especially the oil and gas modules. Before, we had to pay for these no matter what, but we can now take into account peaks and troughs.” Becerra Mizuno further highlights an increasing number of pilot projects

- Rodrigo Becerra Mizuno, Corporate Director and CIO

being initiated with suppliers in a bid to uncover the next game-changing solution. Typically lasting eight to 12 weeks across all business units, these programmes are helping convert vendors and suppliers into true partners which build solutions tailored to Pemex’s priorities. “I’ll give you a small example,” Becerra Mizuno says. “In the refining process, one of the things that affects us the most is unprogrammed outages, because of the resultant

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maintenance. So, we’re working with Baker Hughes, part of GE, to create a pilot around these. The idea is that we can create savings, which will increase the value of the partnership to both parties. We’re not just buying sensors from them or their software, we’re doing things in a mutually beneficial way.”

CULTURE CATCHES UP Pemex is not just embracing innovation with its partners. Internally, something of a cultural revolution is underway. This is no minor undertaking for Becerra Mizuno, who is responsible for around 3,000 employees spanning engineers, consultants and decision makers, many of whom are from an older generation and more cautious about new technologies. “How do I get an aging work force to adopt new things?” he asks. “That’s usually very difficult. We have to see that becoming digital was largely about a new mindset. It’s a radical change in the way we do things – we’ve run a tonne of programmes to get people who have

not used technology to embrace it.” An initiative which has fostered innovation internally is Idea Lab, which allows employees at all levels to submit pitches in a venture capital style, progressing through various rounds until a winner is chosen and their idea funded. Harnessing innovation by attracting new talent is altogether a different challenge, especially when it comes to luring younger, techsavvy recruits into oil and gas. Partnerships with educational institutions like Mexico City’s Tec de Monterrey will help to bridge this gap. Pemex Drive was hosted on one of its campuses, and Becerra Mizuno says Pemex is working closely with the university to develop interest in oil and gas IT careers. He cites his own example of leaving a private technology giant for a public-Technology oil and gas firm. “When I was at Microsoft, it was an extremely optimised company, so the things that I was able to do were very narrow. They were perfect, but they were narrow. “At Pemex, there’s so much to do,

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“HOW DO I GET AN AGING WORK FORCE TO ADOPT NEW THINGS? THAT’S USUALLY VERY DIFFICULT. WE HAVE TO SEE THAT BECOMING DIGITAL WAS LARGELY ABOUT A NEW MINDSET. IT’S A RADICAL CHANGE IN THE WAY WE DO THINGS – WE’VE RUN A TONNE OF PROGRAMMES TO GET PEOPLE WHO HAVE NOT USED TECHNOLOGY TO EMBRACE IT” - Rodrigo Becerra Mizuno, Corporate Director and CIO

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and we need so much help. If you’re someone that is ambitious, that is young and can see the silver lining coming to work for us, it’s the perfect place. That story has not been told or communicated yet – we’re seen as a monolithic company and what we’re trying to show is a different kind of Pemex. We’re open, we’re looking for talent, we’re looking for young people, and we’re going to give them the opportunity to develop their skills.”

THE ROAD AHEAD Both from a cultural and implementation point of view, Pemex is beginning to make strides, evidenced by the fact that Becerra Mizuno has been recognised as a top 100 CIO in Mexico and a HITEC-50 2018 Award winner. “I think success is something that you share,” he says. “It’s something that you can’t do alone. I’m very fortunate to have the people that I have around me. The most important thing for me has been the support of the two CEOs that I’ve had the pleasure to work with. The current CEO Carlos Trevino is so open, so dynamic and

so supportive of what we do. He is really the transformation CEO for us.” But what about the path in front of Pemex and Becerra Mizuno? For the CIO, three important targets and ambitions remain. “The first thing is to deliver the things that we said we would deliver. To make sure that we overdeliver what we have promised and that we meet the expectations that we have set for the team and for the technology department of Pemex. “The second thing for us is, as you know, we have a big transition coming with a new administration coming in December. I would love to see a lot of the building blocks and the strategies that we have implemented become lasting. Pemex is going in the right direction, which has been validated by many experts. “The third big piece is to make sure the people in the team continue to believe that there are good things coming ahead, that they continue to be motivated, so the momentum continues whether I’m here or not. That’s the most important thing for me.”

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MARINA NACIONAL #329, COL. VERÃ&#x201C;NICA ANZURES, AMEXICO CITY, 11300 +521 19448676 www.pemex.com