2014 HIGHLIGHTS
The Energy Reform, the most significant economic reform to take place in Mexico for the past five decades, not only marks the beginning of a new phase of accelerated social and economic development for Mexico but also creates unprecedented business opportunities as the Mexican oil and gas industry opens to private participation. Mexico Oil & Gas Summit and Mexico Oil & Gas
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Mexico Oil & Gas Summit is the premier event that brings together the key Mexican and international players who are shaping the development of the country’s oil and gas industry. The conference will
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Mexico Oil & Gas Review 2014 provides the most comprehensive and timely annual overview of the industry’s new operating environment, presented through the eyes of the key stakeholders. This publication is destined to serve as an essential decision-making tool at this time of change and unprecedented opportunity, and will be gifted to all participants of the Mexico Oil & Gas Summit.
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Review are dedicated to connecting the key stakeholders across the Mexican and international public and private sectors and accelerating the exchange of vital industry information to assess the magnitude of these new opportunities and the timeframe within which they will present themselves.
focus on a range of topics that are attracting increasing interest from business and political leaders alike, such as new opportunities resulting from the Energy Reform, Round Zero and the following licensing rounds, the respective roles of PEMEX and the private sector, the industry’s investment outlook, and Mexico’s approach to returning oil production to 3 million b/d.
10:20 Critical Success Factors for the Private Sector
PROGRAM
08:30 Energy reform & Secondary Laws
09:00 Opening of the Mexican Oil & Gas Industry
11:20 PEMEX Production Strategy & Joint Ventures
12:10 Coffee Break
Moderator: José Pablo Rinkenbach, Managing Partner of Ainda Consultores
Panelist: Ernesto Marcos Giacoman, President of AMESPAC Panelist: César Vera Méndez, Area Manager at Nabors Industries
Presentation: Miguel Angel Lozada, Administrator of Cantarell for PEMEX Presentation: Edgar Rangel, Commissioner of CNH
15:30 Unconventional Resources Outlook
13:30 Networking Lunch
Moderator: Arindam Bhattacharya, Director General of Schlumberger Mexico Panelist: Vinicio Suro Pérez , Director General of IMP Panelist: Rogelio Montemayor, President of the Mining and Petroleum Cluster of Coahuila
Moderator: Bud McGuire, Principal and Co-founder of Alpha Petroleum Services Panelist: Ernesto Iniesta, Commercial Director, Subsea Division Latin America of FMC Panelist:TechnologiesJuanTrebino, Vice President / Partner, Leader of the Energy Practice in Hispano-Americas at Strategy&
Presentation: Luis Ramos Martínez, Acting Subdirector for Planning and Evaluation of PEMEX Exploration & Production
17:30 Networking Cocktail
07:30 Registration
10:00 Coffee Break
Presentation: Arturo Henriquez, Chief Procurement Officer of PEMEX
16:30 The Future of Contracting with PEMEX
09.30 Matching Mexico’s Fields with New Operators
12:30 Challenges and Opportunities in Mature Fields
14:30 Blueprint for Mexico’s Deepwater Future
Presentation: David Penchyna Grub, President of the Senate Energy Commission
Presentation: Luis Vielma Lobo, President and General Director CBM Ingenieria Exploración y Produccion
Presentation: Gabriel Heller, Director General of Investments of SENER
who oppose the Reform, Penchyna said: “It would be enough to read the Constitution to see that no one is selling Mexico’s oil reserves; we are simply creating a competitive model to maximize the energy sector.” He highlighted that the ongoing debate on the secondary legislation comes from constitutional premises that have already been approved. The Constitution points out strategic sectors that are under the government’s economic regulation. In this sense, Penchyna urges legislators to be critical and to understand the regulatory framework being crafted with the secondary laws. “Back in the 1990s, the reforms on the telecommunications sector did not result in an appropriate legislative framework, which led to a monopoly. We took chances in opening this sector and we did not do it properly. Mexico now has little if any competition in this area and the monopoly does not provide the Mexican people with services similar as those offered in other countries. This was a valuable lesson for legislators and policymakers, and this will definitely not be the case for the energy sector.”
of the Senate’s Energy Commission explained that a trait of contemporary democracies is an often limited ability to reach agreements at the legislative levels. “After 15 years of failed attempts to restructure the energy sector, the country’s political forces decided to stop blaming each other and work to reach agreements instead.” He claims the “Pacto por México” led to two-thirds of Congress approving the Energy Reform, and the number of reforms passed in the last 18 months surpassed the number of reforms passed in the past 25
Senator David Penchyna inaugurated the summit with a speech that both praised and explained the benefits of the Energy Reform, claiming that the summit provides a great opportunity to think about the current state of the country. He emphasized that the Energy Reform is one of the most important legislative changes Mexico has seen in the past 60 years because it replaces an obsolete model with one that will maximize Mexico’s hydrocarbons potential.
He explained that in the new model, oil revenues equal to 4.7% of the GDP will go to public expenditure, remaining profits equivalent to 3% of the GNP will go to a long-term savings fund, and the rest will be destined to social programs.
David Penchyna Grub has been representing the state of Hidalgo in the Mexican senate since September 2012 as a member of the ruling PRI party. He has previously served as a representative and as a minister of social and economic development in Hidalgo’s state government. As a senator, he has been one of the chief designers and supporters of the Energy Reform from his position as President of the Senate’s Energy Commission. Other relevant government positions include his time as Director General of the National Banking Commission from 1995 to 1997 and his work as General Coordinator of the Ministry of Social Development from 1998 to 2000.
Thedevelopment.President
President, Senate Energy Commission
Gabriel Heller has extensive experience in the energy and finance sectors. He started his professional career in the Central Bank of Mexico where he collaborated in the Directorate of Economic Research on issues of monetary policy and in the Directorate of Operations for operations in the primary market. In the following years, he joined the PMI Group, a subsidiary of PEMEX, in the Mexico City headquarters, where he was tasked with funding the institution. Later on, Hellar was moved to the Houston office as commercial liaison with crude oil international clients, and he was also responsible for promoting and marketing Mexican crude oil exports to the American, European, and Asian markets. Currently, Heller is the Director General of Investor Relations & Promotion at the Ministry of Energy.
The forum continued with a presentation by SENER’s Director General of Investments, Gabriel Heller, whose presentation dealt with the opening of the oil and gas industry. He began by saying that there is external investment coming to Mexico, but there is also interest in seeing what the domestic market will bring to the table, particularly regarding SMEs. “We should help national SMEs become highly important enterprises that can someday both export their technology and expand overseas.” He stressed that the Energy Reform seeks free competition in which the productive enterprises of the state can participate with other NOCs and IOCs in equal circumstances. This will be achieved by the creation and empowerment of flexible, independent government agencies that give companies legal certainty.
Director General of Investor Relations & Promotion at the Ministry of Energy
| ROUND ZERO & LICENSING ROUNDS
Senator Penchyna mentioned more cases in which opening a sector backfired and detailed how these lessons were applied to the Energy Reform. He noted that Mexico, as a society, is not used to liberalizing its industries and many actors take advantage of this resistance for political purposes. The senator stressed that the government does not want to impose partners on PEMEX; what it wants is a transparent sector where years of corruption can be fought through healthy competition, which will only yield results through a solid regulatory framework.
| ENERGY REFORM & SECONDARY LAWS
Gabriel Heller
Heller talked about the upstream segment, saying that in Round Zero, PEMEX already gave SENER a list of the fields it would like to keep or develop. In the upcoming Round One, both private and state companies will participate in tenders. However, Heller said that there are discussions regarding the possibility of a pre-qualification round as not all contracts will be the same. “Each contract will have its own rules and the winning company will be the one to offer the best conditions. We are now implementing a process that is new to us and that makes transparency an extremely crucial factor.” Heller says the new scheme will seek 25% of national content annually in E&P projects. The percentage will vary according to each contract. For instance, deepwater projects will seldom require high national content, but the percentage will be leveraged in mature fields and shallow waters.
David Penchyna Grub
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Regarding midstream, Heller reminded the audience that after the Reform industrial transformation is no longer considered a strategic sector. This means PEMEX is no longer the sole responsible party and SENER can grant permits to private actors. He mentioned how the National Center of Natural Gas Control (CENAGAS) has already contemplated expanding infrastructure for transportation and storage. This agency has 18 works for natural gas transportation planned for 2018, involving 10,000km of pipeline and an investment of US$13.3 billion. “We expect these developments to be ready by 2018. This network will be one of the country’s industrial motors.”
Heller talked about gasoline and diesel, telling the audience that he, in representation of SENER, does not feel that the current infrastructure fosters competitiveness. As part of the transition that accompanies the Energy Reform, a maximum price for gasoline will be gradually established from 2015 until 2019. Nonetheless, gasoline prices will adjust to inflation during this period. According to Heller, prices will be liberated and guided by international, markets in 2020. “In 2017 we will start seeing gas stations of foreign companies selling PEMEX products but with differentiating factors. They might import their products, but we will stick to the maximum price scheme until 2020,” explained Heller.
“There are representatives of both national and foreign companies in this room that are interested in Mexico’s business opportunities. The old monopoly model did not allow the flow of foreign investment, but now there is judicial certainty.” Penchyna also noted that Mexico cannot be isolated from the models that operate in the rest of the world; therefore the Energy Reform provides adequate international standards that allow for better economic
Ernesto Marcos Giacoman asserted that what Mexico really needs is a Cemex for oil. In the meantime the Mexican companies that work for PEMEX must increase standards and internationalize so that they can become global actors. Marcos added that Mexico has begun to generate a national database for the companies that provide specific types of services, which the country has not had until now. This will help the financial sector, which currently has no idea of what the industry actually looks like. All parties agreed that the private sector should not wait for a 3rd party to provide guidance on how to improve human capital but rather start working with the educational and public sector to create the right conditions to support sector growth
Luis Vielma Lobo, President and Director General of CBM Ingeniería Exploración y Producción drew on his extensive experience across Latin America to praise Mexico’s Energy Reform. He said that both he and other senior oil executives had been surprised by the depth of the Energy Reform and said it surpassed similar efforts seen in Colombia and Ecuador. He said that the optimism shared by these executives is a powerful symbol of the intentions of their companies, and others, to participate in the Mexican oil and gas sector.
Managing Partner, Ainda Consultores
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Luis Vielma
Jose Pablo Rinkenbach, Managing Partner of Ainda Consultores chaired a panel with Ernesto Marcos Giacoman, President of AMESPAC, and Cesar Vera Mendez, Area Manager at Nabors Industries, discussing the key factors that will contribute to the success of the private oil and gas companies following the sweeping reforms to the industry.
The right drilling technologies must also be taken into consideration, given their environmental impact. In the US, certain states have harsher regulations, impacting the location of clusters and the ability to fracture wells from the start to improve efficiency. As such, Mexico will have to measure how and where these should be deployed, to avoid unpleasant environmental side effects.
Rinkenbach opened up the panel with a discussion surrounding the state of the private industry as it stands today in Mexico, presenting facts and figures elucidating the extent of investment. Rinkenbach explained that there are almost 1000 private companies operating within the National Energy sector, 370 of which are dedicated to the well services segment, which makes up 50-60% of the industry’s CAPEX. 20 services lines currently support well construction, and 20 national companies operate within this area. The focus of the remainder of the panel discussion covered what needs to be done to grow the sector and support new companies starting up, particularly national ones.
| CRITICAL SUCCESS FACTORS FOR THE PRIVATE SECTOR
Pablo Rinkenbach obtained a bachelor’s degree in business administration from the Autonomous Mexican Technological Institute (ITAM), where he graduated with honors. He also earned an MBA from the University of Rochester and a postgraduate diploma on International Strategic Scenarios, also from ITAM. Afterwards, he worked in the energy practice of Mercer Management Consulting, reaching the position of Mexico Office Partner. He has directed and participated in a diverse array of consulting projects based on strategic, financial, economic, organizational and operative analysis. He is currently the Managing Partner of Ainda Consultores, founded in 2006; he is a professor of Corporate Finance at ITAM.
He explained that Mexico’s recovery factors are below those of US fields, showing the need for improved recovery techniques. He provided the example of fields containing shale gas, where companies will look for sweet spots with a substantial accumulation of resources. Seismic studies, such as those that implement 3D technology, will be the key to finding these sweet spots.
The third kind of technology is associated with deepwater sites. Given the amount of investment needed to drill in deepwater, 3D scanning and imaging technology play an important role in helping companies strike the jackpot from the start. Vielma Lobo pointed to Petrobras as having pioneered drilling solutions to avoid unnecessary steps, and when dealing with tricky geologic formations. Robotics have also allowed the development of subsea facilities that outpace conventional methods. “All these technologies are looking to maximize the value creation for anyone who wants to invest in these regions,” he said.
Director General, CBM
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fields with the technologies they need. “For example, mature fields do not need complex technology, medium technology is used for associated fields like Chicontepec, and finally, the challenges associated with deepwater require the most complex technology,” said Vielma Lobo.
As such, SENER and CNH have to match operators with companies to generate the best profit and yield possible. Leading third-party companies are already experts in extracting shale gas from reservoirs due to their experience, according to Vielma Lobo. “They know from the outset how to define the spacing of clusters, the well architecture, at what speed to extract, and how to be environmentally and socially responsible. These elements are what will make the difference. The design must be done immediately to allow for injection methods and artificial lifting of heavy oil to be possible. Mexico has a wealth of expertise for such operations, but the challenge is to understand the characteristics of each particular well in a variety of fields.” For Vielma Lobo, the availability of drilling equipment and of new facilities matching those of PEMEX will prove seminal in creating the right spirit of competition in post Energy-Reform Mexico.
José Pablo Rinkenbach
Luis Vielma Lobo has over 31 years of experience in exploration and production in the hydrocarbon sector. He holds graduate degrees in petroleum engineering from Tulsa University, Oklahoma University, and the Central University of Venezuela, in addition to having certificates in process engineering and leadership for business development from Harvard University. He is a member of the Petroleum Engineers International Society, where he held the title of Regional Director for Latin America and the Caribbean for the 2002-2005 period. He has worked as Director of Production and Director of Exploration and Production at Petróleos de Venezuela, Director of Drillmar Oil & Gas, and President and General Director of COPYRBVPA.
Cesar Vera Mendez discussed the role of PEMEX in supporting the development of the private sector, saying that the historic monopoly has played the major role in establishing the industry and will continue to be a crucial client. Private companies need to be a part of PEMEX’s procurement projects and therefore the reform and opening of PEMEX practices is key. Vera also purported that going forward what exactly defines a national company needs to be established. “Talking about national content we need to look averages. It is easy to define when you are talking about tangible products, but what about when we are talking about services for example. Corporate structure is also relevant; if a foreign investor decides to start a company by issuing bonds or shares to a local investor, then that can be classified as local content,” Vera said.
MATCHING MEXICO’S FIELDS WITH NEW OPERATORS
Vielma Lobo pointed to SENER studies that placed Mexico in the top 5 countries worldwide for shale gas and oil. These opportunities are bound to attract a lot of international capital, so CBM is now part of the efforts to match Mexican
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that the cost of operations can almost double if enhanced recovery factors take the recovery factor from 35% to almost 50%. When this goes over 50%, costs increase significantly again, leading Lozada to caution that thought would have to be given to Mexico’s tax regime and PEMEX’s investment allocation to match these rises in cost.
Director, Nabors Mexico and Guatemala
Ernesto Marcos Giacoman holds a PhD in economy from Notre Dame University. His work in the public sector includes being Undersecretary of the Mexican Ministry of Industry, Chief Financial officer of PEMEX between 1989 and 1994, and acting as President of Nacional Financiera, Mexico’s development bank. He has been a professor of economic analysis, economic development, and economic planning at universities in Mexico and the United States, and is currently a sought financial consultant and keynote lecturer in Mexico and other countries.
Edgar Rangel, Commissioner of the National Hydrocarbons Commission (CNH), took over to explain that IOR and EOR would help Mexico be successful in its brownfield projects and in mature fields, as these methods aim to extract up to the last drop of available. However, the way in which they are used must depend on the conditions of each field involved. “We have different strategies available to use IOR and EOR that can be combined to get better displacement and retrieve the hardest to reach oil by getting to the furthest corners of a well and use chemicals to extract it,” he said.
After getting a BS on Electronics Engineering from Instituto Politécnico Nacional and an MBA from Instituto de Estudios Universitarios, he joined Schlumberger Mexico as a field engineer and a technical support engineer 1988. In 1996, he immigrated to Scotland to be a sales engineer for the company for the next three years. Vera went to M-I SWACO where he underwent through different management positions all around the American continent for 12 years. Vera has been Nabors’ Director for Mexico and Guatemala since, working in developing client relationships to ensure contractual assignments of drilling rigs and cargo vessels, as well as in the administrative side of the company.
César Vera Méndez
President, AMESPAC
PEMEX PRODUCTION STRATEGY & JOINT VENTURES
Luis Ramos Martínez, Acting Subdirector for Planning and Evaluation of PEMEX Exploration & Production spoke about PEMEX’s ongoing strategy to continue being the leading producer of oil in Mexico. Ramos explained that the main PEMEX strategy is to align itself to work and reach several objectives and that a business plan is being defined for the requirements in terms of expenditure and growth. “We believe that the reform is going to allow for better management, better decision-making processes and more financial efficiency. We need to generate a culture directed to results,” said Ramos.
Ernesto Marcos Giacoman
Luis Ramos is responsible for the design and execution of PEMEX upstream strategy and portfolio management as well as coordinating Pemex Round Zero nomination and the response team to energy reform obligations. Most recently, he served as Strategic Planning Manager. In addition, he has been responsible for the certification of hydrocarbon reserves of Mexican fields having served as Hydrocarbon Reserves and Resources Manager as well. Ramos is a native from Mexico City. He graduated as a Geophysics Engineer in the National Autonomous University of Mexico (UNAM) and obtained his PhD from Stanford University.
Luis Ramos Martínez
In the first of two presentations on how to address mature fields, Miguel Angel Lozada, PEMEX’s Administrator for Cantarell said that the major challenge in mature fields was to increase the recovery factor in the long-term. “We need to rejuvenate these mature fields. We want to accurately project the states of the fields, project when we need to apply enhanced recovery methods. This challenge involves IT, technology and financing,” he outlined.
He also gave some statistics as to how Mexico’s production will fare compared to the rest of the world. Mexico’s 1P reserves will allow it to produce for 10.6 years at current global average production rates, as opposed to over a century of production for the world in total. For 2P reserves, there are fields that will see their reserves exhausted in 20 years, although others may last up to 60 years, making their particular exploitation of great interest. For example, Akal has a remnant reserve of 2.3 billion barrels. “The challenge lies in that the recovery factor in PEMEX’s fields reaches 35%, but our forecasts shows this rate could jump by 10% once the right technology and applications are in place,” said
Lozada explained that since the boom in IT development for horizontal well drilling and multi-stage well drilling in the 1990s, Mexico has seen a regular increase in production from the application of these techniques. He calls for the same logic to be applied to newer technologies such as horizontal wells. “Mexico has stressed the importance of increasing production from existing wells. The enhanced recovery methods used led to an increase in production from declining wells. Artificial lift systems, water injection, gas injection were all used to illustrate the proper management of such wells,” added Lozada.
Giving specific examples of fields, he pointed out that Cinco Presidentes began declining in 2001. But 3D seismic data elucidated new resources that had not been drilled and horizontal wells were used to recover them. In the Northeast Marine Region, Ek-Balam produced 6,000 bpd but this now stands at more than 60,000 bpd, in large part due to the use of horizontals wells. He added that sand control technology will be implemented and horizontal drilling would be maintained until Ek-Balam reached 100,000 bpd.
IOR methods involve any post-primary recovery methods and EOR, is a tertiary recovery technique which typically recovers remanent oil by injecting chemicals such as surfactant polymers. Rangel confirmed that the wise combination of IOR and EOR would significantly improve the recovery factor, while not wasting resources like water and gas. “Mexico has a lot of potential for the use of all these technologies. Pilot tests will prove the viability of IOR and EOR and then lead their utilization to become massive,” he said. As part of PEMEX’s catalog, the country has a commitment to meet outputs of 3 billion barrels a day and then 3.5 billion barrels. He concluded that IOR and EOR will determine how efficient authorities can be in reaching that production level.
Acting Subdirector for Planning and Evaluation, PEMEX E&P
One of the key focal points, and one that Ramos spoke of at length, was the company’s strong focus on human capital development. He explained that there will be a different dynamism as PEMEX tries to improve its offerings as an employer. The payment model is going to be different and will be adjusted to international best practices in order to retain and attract the right people. “We are going to try and generate rotation schemes that will encourage knowledge regeneration. We are going to work on payback schemes that are on a par with international practices,” said Ramos. There will be higher salaries for expert positions, as well as long-term development strategies. When asked by the audience how PEMEX planned to recapture lost talent Ramos also confirmed that they are working with retired engineers to provide coaching services. Ramos also explained PEMEX’s goal to prepare for non-conventional sites in deep waters, adding that the challenge ahead is to monetize the current hydrocarbons base.
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| CHALLENGES AND OPPORTUNITIES IN MATURE FIELDS
Cantarell Administrator, Pemex
Miguel Ángel Lozada
Country Manager, FMC Technologies
Panelist Ernesto Iniesta, FMC Technologies’ Commercial Director of the Subsea Division Latin America, said drilling in deepwater is mostly intended to explore and estimate reserves. When a reserve is found, he tells, an exploratory well is drilled. But in deepwater, three or more exploratory wells have to be drilled. “Mexico has been exploring deepwater reserves for 14 years. The country began with 400m and now it almost has 3,000m in Perdido.” For him, the challenge is to bring the fluids up to the surface. “Chevron managed to drill to depths of 2,400-2,900m. It took nine years to develop the technology to bring oil to the surface in Perdido. We need to improve efficiency in this area. Given the deepwater conditions in the Gulf of Mexico, there is not a system that can meet Mexico’s deepwater production targets,” Iniesta said. He added that the country will face companies that have a 30 year technological advantage over PEMEX. Therefore Mexico has to develop the technological and human resources to reach the heights of other international players. “The northern area of Perdido is very complex and production will require at least six players.”
Vice President / Partner, Leader of the Energy Practice in Hispano-Americas,JuanStrategy&Trebino
As Administrator of Cantarell, currently México’s second largest field in terms of daily production and one of the largest supergiant oil fields in the world, Lozada Aguilar has been credited with the successful introduction of EOR technologies such as horizontal drilling to optimize production. He has also coordinated research teams and executed technological tests to find the best techniques available to optimize Cantarell’s long-term production. Lozada Aguilar remains positive on the future of this mature field: “Regarding Cantarell’s future, it remains the second most important asset of the country behind KMZ after having been the first for many years. We expect it will remain in this position for years to come.”
Commenting on how Mexico can push its deepwater segment, Juan Trebino, Vice President and Partner at Strategy&, said Mexico is competing not only with international players, but also with different types of hydrocarbons that the market wants to develop. In this sense and before technological discussions, Trebino says Mexico has to ensure an environment without legal or environmental restrictions so that national champions and international participants can compete and attract capital. “Deepwater developments are enormous projects with very long life cycles that force us to create contractual frameworks. It is important for parties asking for loans to be able to use the oil molecule as hedging.”
Edgar Rangel was appointed as CNH Commissioner by Former President Felipe Calderón in 2009. He holds a BSc in Petroleum Engineering from UNAM, as well as MSc and PhD degrees in Petroleum Engineering from Stanford University. He has worked as a research associate at Stanford University, an engineer at PEMEX, Chief Technical Advisor to the Undersecretary of Hydrocarbons at SENER, and Director General for Hydrocarbons, Electricity and Water Project Evaluation at the Ministry of Finance in Mexico. His areas of interest are static and dynamic fractured reservoir characterization, enhanced oil recovery, physics of fluids, heavy oil reservoir simulation, and economic evaluation of oil and gas, electricity, and water projects. Commissioner at CNH
As for technology, Trebino expressed the importance of creating technology centers in Mexico. “There are four deepwater technology poles in the world: the Gulf of Mexico, Brazil, Singapore, and the North Sea. Mexico should join these poles through its Gulf of Mexico operations. This is not about simply creating specific capacities, but to develop the entire deepwater value chain, from subsea well completions to transportation tankers.”
Bud McGuire
Ernesto Iniesta
Juan Trebino has over 28 years of experience in the global oil, gas, power, and chemicals industries in the US, Latin America, Europe, and Asia. His expertise covers mainly upstream transformation and operating model alignment, strategy and operations improvement for companies in the upstream segment, and the development of performance management oriented strategies. He holds a BS on Chemical Engineering from the Texas A&M University, a BS on Chemistry by SHSU, and an MBA by the Case Western Reserve University. Prior to working as a Partner for PwC Strategy&, he worked at BP and Sempra Energy.
Principal and Co-founder, Alpha Petroleum Services
| BLUEPRINT FOR MEXICO’S DEEPWATER FUTURE
Bud McGuire, Principal and Co-founder of Alpha Petroleum Services, moderated the panel entitled ‘Blueprint for Mexico’s Deepwater Future.’ He pointed out that the challenge to deepwater development is not technology, but licensing terms that are competitive with other investment opportunities in other parts of the world. “A contract is not good unless it is good for both parties. This approach will attract the technology that Mexico needs,” McGuire said and insisted that capital follows projects that yield good returns. He stressed that deepwater developments require a tremendous amount of capital. “These are mega projects of US$1 billion or more. Projects require capital and very long planning, as mistakes are really expensive.” McGuire also mentioned qualified personnel as a crucial element for deepwater that Mexico does not have. Because foreign companies will bring their talent, McGuire suggests native companies such as PEMEX should recruit from the global market.
Edgar Rangel
“Bud” McGuire is a Principal and Co-founder of Alpha Petroleum Services. Bud has held senior positions with Mariner Energy, Enron Oil & Gas International and was formerly Senior Vice President, Kerr McGee, responsible for world wide production operations. He has held positions in engineering, research and drilling at Conoco and Hamilton Oil, including responsibility for Hamilton’s North Sea Operations. Bud’s areas of expertise include drilling and project management with extensive experience in subsea, floating production facilities and field development concepts. Bud is a graduate of LeTourneau University with a BS in Engineering.
Ernesto Iniesta is a Petroleum Engineer of the Polytechnic National Institute with more than 25 years of experience in the oil and gas industry. He has been working extensively to promote deepwater technological development in Mexico, previously through various positions in the public and private sectors and currently through his position as Commercial Director of Subsea Technologies in Latin America for FMC Technologies. He has also participated as a legal and technical advisor in the design of contractual models for oil and gas projects in shallow waters and deepwater in both Mexico and Latin America.
Prior to taking up his present role in Mexico, Arindam was the Director General for the Venezuela and Caribbean operations based in Caracas, and prior to that the Vice-President for Integrated Project Management in South America based in Rio de Janeiro. Arindam holds a Masters degree in Petroleum Engineering from the Heriot-Watt University, and a Bachelors degree in Electrical Engineering from the Indian Institute of Technology.
Bhattacharya began by outlining differences between the US and Mexico. “The US has 60 billion barrels of oil equivalent in unconventional resources and 32,000 wells have already been drilled to tap into these reserves. Can Mexico match that level of activity?” he asked. He divided the challenges associated with unconventional resources into above and below ground. Above ground, efficiency must be maximized in unconventional operations. To do so, logistics, infrastructure, resource management (water, sand), and community relations are all essential.
Arindam Bhattacharya
Vinicio Suro Pérez
He spoke of an institutional weakness at the federal and local levels that the six committees of the Coahuila cluster are aiming to pally. But as the obstacles in the way of the Energy Reform are overcome, such as the legal framework, he expects that such weaknesses should begin to fade. “The reform will help solve local issues faster. Our association is working to help solve these through fast procedures and permitting processes that carry no surprises. We are working to shorten administrative time and improve project productivity.” Montemayor concluded that institutions like the cluster could take the initiative to convince companies already working in the Eagle Ford to cross the border. Bhattacharya agreed, saying that the Eagle Ford already has 60 operators. “The appraisal of each side of the border will reveal the need for operators on each side. The projects in the US and Mexico are at utterly different levels of development so the country needs to catch up,” he
Director General, IMP
Bhattacharya is the President of Schlumberger for Mexico and Central America. He has 19 years of leadership experience in the Oil & Gas industry with Schlumberger, working in various operations and management roles in Latin America, North America and the Middle East and Asia.
Rogelio Montemayor
Suro admitted that so far, IMP had treated unconventionals much in the same way as conventional resources, even using the same tools. “We explore with seismic data, we drill with the same equipment, and we use resources in the same way. We have to free ourselves from the conventional line of thought, and treat unconventionals differently,” he said. He added that while sweet spots might be easy to fracture, engineers need to find them, meaning that close attention must be paid to each formation’s saturation, such as those with deeply embedded hydrocarbons. He said that carrying out such a careful analysis of the lithology would define the saturation, revealing the sweet spots and indicating where to frack.
In a panel seeking to answer major questions about the future of unconventional resources in Mexico, Arindam Bhattacharya, the Director General of Schlumberger Mexico, sat down with Vinicio Suro Pérez, Director General of IMP, and Rogelio Montemayor Seguy, the President of the Mining and Petroleum Cluster of Coahuila.
For subsurface activity, a lot of wells are vertically drilled and new scientific advances have not yet been applied in the shale assets of the Mexican oil and gas industry. Schlumberger has sought to help science catch up, by investing a lot in technology and shale exploration. “Science-guided exploration will help find sweet spots, optimize the completion design to ensure we only complete where we can return our investment. We have to maximize production while minimizing resource usage. This is why a complete unconventional field development plan is needed. This would involve identifying specific drilling techniques and optimum circulation techniques on a well-by-well basis to help ensure resource optimization,” said Bhattacharya. He added that doing so could improve resource utilization between 20 and 50% on different wells as well as improving efficiency by focusing on sweet spots only. He added that the successful development of shale resources would depend on collaboration between many stakeholders, including education, security, social, fiscal, logistics, resource management and infrastructure.
Montemayor has a BA in economics from the ITESM and an MA and PHD in economics from the University of Pennsylvania. He worked at the Treasury Department of Federal Government (SHCP), the Budget and Planning Department of Federal Government (SPP), and served as Undersecretary of Development Planning. He was President of INEGI from 1985 to 1988, was a Federal Representative from 1988 to 1991, Federal Senator for Coahuila from 1991 to 1993, and Governor of the State of Coahuila from 1993 to 1999. In 2000, Rogelio Montemayor became Pemex CEO, and from 2001 onwards he has worked as an independent consultant. Since 2014 he has been the Chairman of the Mining and Petroleum Cluster of the State of Coahuila.
President, Mining and Petroleum Cluster of Coahuila
Montemayor, from his vantage point, spoke about how Coahuila is aware of the important unconventional resources within its borders. He extended a formal invitation to Mexican corporations to participate, although he said the state was aware of its border with the Eagle Ford and of the differences in infrastructure it had with the US giant. “Nevertheless, we have kept fighting to create links with universities, including 11 in Coahuila, and to help graduates work in the oil and gas industry. Coahuila is always asking itself how to improve its educational offering in the near future, while also improving needed infrastructure in dozens of places in the state.”
Director General, Schlumberger Mexico
| UNCONVENTIONAL RESOURCES OUTLOOK
Vinicio Suro Pérez has been involved with PEMEX for over 20 years, where he has worked as Hydrocarbon Reserves Manager, Assistant Director of Planning, and Assistant Director of Production for the South Region at PEMEX E&P. He studied geophysical engineering at UNAM, where he was awarded the prestigious Gabino Barreda Medal, and obtained a Sc.D in applied earth science at Stanford University, where he focused on the field of geostatistics. He was appointed Director General of the Mexican Petroleum Institute (IMP) in June 2012, where he replaced Dr. Efrén Parada Arias. He is a noted researcher and writer who has contributed a wide variety of articles to numerous international specialized publications.
said.Arindam
| THE FUTURE OF CONTRACTING WITH PEMEX
Henriquez explained that the other pillars of the procurement department overhaul will be integrated shared services, strategic sourcing, technology and human capital development. In terms of the last and much discussed point, human capital development, Henriquez explained that in terms of procurement the focus will be on making current specialized employees generalists, and then specialists in procurement. Further procurement employees need to be experts in what PEMEX buys while also understanding the technical, legal, and commercial aspects of procurement.
Arturo Henriquez, Chief Procurement Officer of PEMEX, spoke about the importance of the new centralized procurement function at PEMEX; the importance of this new office is such that its consolidation process has been accelerated to match the passing of the Secondary Laws. US$120 billion is produced by PEMEX every year and this is expected to increase steadily with the new reforms. The vast infrastructure involved in its operations makes PEMEX a national heavyweight; this infrastructure includes six refineries, eight petrochemical complexes, 60,000 km of pipelines, storage units, cars, roads, tractors, hospitals, and more. The procurement division of PEMEX is also a force to be reckoned with; its operations involve anywhere from US$20 to US$30 billion a year, and 20,000 contracts. There are 100 contracting offices and more than 3,000 employees dedicated to procurement at PEMEX. This has been taking place in a very decentralized and unstructured environment. Last year, PEMEX visited global oil companies to study their procurement divisions, as well as getting advice from international consultants. Henriquez explained that PEMEX wants to create a unified procurement division which results in centralized planning. Most major oil companies are working on a centralized or hybrid-centralized procurement model today, and PEMEX intends to follow this.
Henriquez concluded by admitting that, historically, doing business with PEMEX has been very challenging for suppliers because of its bureaucratic nature, but that the implementation of international best practices on three main subjects (strategy, suppliers, and procurement) aims to resolve this.
Arturo Henríquez Autrey has been involved in the creation and management of multinational companies in the areas of logistics, commercialization, and real estate. He has worked in renowned international firms such as Goldman Sachs and KPMG. Henríquez Autrey has a BA in economics from Boston University, a MBA from the Kellogg Graduate School of Management at Northwestern University, and an MA in international relationships and communication from Boston University. He has worked as Financial Director and advisor at Maxim Oil and Gas, General Director of PEMEX Procurement International, and advisor for Repsol. Currently, Henríquez Autrey serves Chief Procurement Officer of Pemex.
Centralizing the procurement role and having a Chief Procurement Office that will report directly to the CEO gives procurement the importance it has always had from a strategic standpoint. PEMEX is going to be conducting strategic sourcing through category management. Category management means taking a step back and analyzing purchasing needs through spend analysis, rather than taking a needs-based reactive approach. Spending is identified, categorized, and subcategorized. The hope is that this will make PEMEX procurement officers specialists in their fields.
Chief Procurement Officer, PEMEX
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7 UNCONVENTIONAL RESOURCES 14 FUTURE OUTLOOK 6 MATURE FIELDS 13 BUSINESS & FINANCE 5 DEEPWATER 12 HUMAN CAPITAL & INDUSTRY TRANSFORMATION 4 E&P STRATEGY 3 ROUND ZERO & LICENSING ROUNDS 11 REFINING & PETROCHEMICALS 1 STATE OF THE INDUSTRY 10 PIPELINES & LOGISTICS 2 LEGAL & FISCAL FRAMEWORK 9 TECHNOLOGY & INNOVATION 8 PROCUREMENT & SUPPLIER DEVELOPMENT
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