Mexico Oil & Gas Summit 2019 Impact Report

Page 1

IMPACT REPORT

2019


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2019 Mexico’s historic peak in oil production has dropped from 3.4 MMb/d to levels below 1.7MMb/d in recent months. To reverse this trend and reach production of 2.6MMb/d by 2024, President Andrés Manuel López Obrador plans to strengthen PEMEX and capitalize on the Energy Reform to reach first production in blocks operated by private companies. As cautious optimism returns, we are about to find out if this is the turning point the industry has been waiting for.

Although the spotlight has been on PEMEX in recent months, the private sector maintains its own goals as operators continue advancing steadily their work programs in blocks already won. CNH has already approved the development plans of several oil companies investing billions of dollars. Meanwhile, earlier this month, ENI became the first private company to start production.

There are still matters to be resolved, particularly in terms of public strategies, but there are also reasons to be hopeful. López Obrador has kept his promise to respect contracts signed during the previous administration. At the same time, the Dos Bocas refinery and the development of 22 new PEMEX fields in the shallow waters of the Mexican Gulf scheduled for this year will generate new opportunities for companies along the supply chain.

Mexico Oil & Gas Summit 2019 provides a unique opportunity for industry leaders to offer their views on the future of the country’s oil and gas industry. We are delighted to welcome you to participate in the discussion at this time of great potential.


2019

Quick Look:

“Areas that are lacking in infrastructure, including Oaxaca, the Baja California Peninsula and the southeast of the country, will be a center for pipeline development” Miguel Ángel Maciel Torres, Deputy Minister of Hydrocarbons at the Ministry of Energy

INCLUDING: ∙∙ Miguel Ángel Maciel Torres, Ministry of Energy ∙∙ Manuel Rodríguez González, Chamber of Deputies ∙∙ Sergio Pimentel, Commisioner of CNH ∙∙ José Antonio de la Vega, State of Tabasco

37

TOP SPEAKERS

∙∙ Francisco Noyola, Talos Energy ∙∙ Adam Seitchik, Murphy Oil ∙∙ Luis Vera, ASEA ∙∙ Ángel Casán, Jaguar E&P ∙∙ Robert Pérez, Baker Hughes ∙∙ Sergio Charles, Grupo Protexa


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194 COMPANIES REPRESENTED

“As presented in PEMEX’s Business Plan, public investment will be complemented by private investment through long-term service contracts.” Manuel Rodríguez González, President of the Energy Commission in the Chamber of Deputies

349

PARTICIPANTS

“Extracting industries have a huge impact on their communities and therefore have a responsibility to take care and give back to the environment” Luis Vera, Executive Director of ASEA


COMPA N Y AT T E N DA N C E ABS

CGG Mexico

Exterran

Access

Chamber of Deputies

ExxonMobil

Acclaim Energy

Citla Energy

EY

Actanis

CNH

Finestra Energia

Aeromexico

CNIH

Frontera Offshore

Ainda

COMENER

FUGRO

Air Liquide

Comisión de Energía

GALICIA ABOGADOS

Airborne Oil&Gas

COSL

Gas Liquids Engineering

Akza Consultancy Limited

Crane Worldwide Logistics

Gobierndo del Edo de Campeche

AMESPAC

Credit Agricole

GOLFO ENERGY

AMEXHI

Dentons

Gonzalez Calvillo

AMGN

DHL

Goodrich Riquelme y Asociados

Anixter

Diavaz

Government of Tabasco

AOS Social

DNV-GL

Grupo AMI

Arendal

Dow Chemicals

Grupo Industrial Aguila

Arizona Commerce Authority

Draeger Safety

Grupo Pochteca

ASEA

Drebbel

Grupo Protexa

AVEVA

DuPont

Grupo TMM

Baker Hughes

DURO FELGUERA

Guhring

Banorte

Eaton Crouse-Hinds

Harvey

BASF

Eclipse Solutions

Henkel

Beicip Franlab

Emerson

HOOL Energy

Blue Marine

Enco GNV

Hutchinson Ports

BM Shipping

EnerChem Tek

Idro Meccanica SL

Boluda Towage and Salvage

Energia Integral

IHS markit

Bonatti

Energy to Market

IMEXDI

Bray Valvulas de México

Eni México

IMP

BSM

Entrepose

Indimex

Cairn

Ergon

IPD Latin America

CAMEXA

ERM

IPS Powerful People

Cargotecnia

Estado de Campeche

IPSO

Cayros Group

Exitus Capital

ITAM

Centek

Export Development Canada

Jaguar E&P


Kasoil

Netherlands Embassy

Sick AG

Kelly Services

NETZSCH

Siemens

Keppel Corporation

Nouryon

Sinopec

Kiewit

NRGI Broker

SOFEC

Kongsberg Oil and Gas Technology

Nuñez Rodriguez Abogados

Soluciones Integrales FRAP

Korn Ferry

Nuvoil

STIN

KPMG

Oceaneering

Subsea 7

Kratus Energy, LLC

Oceanpact

Summum Projects México

Latin American Rainmakers

Offshore Technical Compliance

Talos Energy

LDA

OGCS Americas

TARSCO

Lloyd's

OH Maritime Services

Tarsus México

London Offshore Consultants

Oiltanking

Techint

Lukoil

Osisoft

TechnipFMC

MAN Diesel & Turbo

OTCompliance

The Mudlogging Company

MAN Energy Solutions Mexico

P&A Integrity Management Company

Thompson & Knight

Marinsa

PA consulting

TNG Talleres Navales del Golfo

Maritimex

PEMEX

Tonalli Energía

Marsh

Perseus

Top Management

Marverde Infraestructura

Petricore

Tradeon Energy

Matrix Service

Pontones & Ledesma

Transportes Aereos Pegaso

McDermott

Qmax

UNAM

Mettler Toledo

RelyOn Nutec

Univar de México

Ministry of Economy

RigNet

Verisk Maplecroft

Ministry for Energy Development of

Roca Ventures

Vista Oil & Gas

Tabasco

ROSEN

Wood Mackenzie

Mirage Energy

Saint Joseph

Wood plc

Modec

SBM OFFSHORE

Wöss & Partners

Murguia

Schlumberger

Xanor de México

Murphy Oil Corp

Seaway

Muvoil Consulting

Secretaria para el Desarrollo

Nalco Champion

Energético

Naviera Integral

SENER

NDT Global

SES Arrow

Satisfaction Level

46% Very satisfied 45% Satisfied 7% Neutral 2% Dissatisfied

Dissatisfied

Below Average

Neutral

Average

Satisfied

Above average

Networking Quality

Very Satisfied

37% Excellent 35% Above average 25% Average 3% Below average

Excellent



P R O GR AM - DAY 1

08:30

MEXICO’S OIL AND GAS PRIORITIES: WHAT COMES NEXT?

Speaker:

Miguel Ángel Maciel Torres, Deputy Minister of Hydrocarbons at the Ministry of Energy

09:15

INSIDE MEXICO’S EXPLORATION ACTIVITY

Moderator:

Oscar Roldán, Former Head of the National Data Repository at CNH

Panelists:

Adam Seitchik, General Manager of Exploration and New Ventures at Murphy Oil

Rossy Pérez, General Manager Mexico of Beicip-Franlab

Alejandro Scheffler, Commercial Director of Schlumberger Mexico and Central America

James Buis, District Manager Mexico of Nalco Champion

10:15

NETWORKING COFFEE BREAK

11:00

OFFSHORE PROJECT DEVELOPMENT: THE ROAD TO FIRST OIL

Moderator:

Graciela Álvarez Hoth, CEO of NRGI Broker

Panelists:

Sergio Suarez, Chief Strategy Officer of Marinsa

Francisco Noyola, Country Manager - Mexico of Talos Energy

Alberto Sambartolomé, Senior Partner at ERM

Fausto Álvarez Hernández, Head of the Exploration and Production Compliance Unit at CNH

12:00

NETWORKING COFFEE BREAK

12:30

THE ROLE OF DIGITALIZATION IN BOOSTING MEXICAN PRODUCTION

Speaker:

Javier López, Digital Consultant of Software Integrated Solutions at Schlumberger

13:00

ASEA’S APPROACH TO BALANCING INDUSTRY DEVELOPMENT, ENVIRONMENTAL PERFORMANCE AND INDUSTRIAL SAFETY

Speaker:

Luis Vera, Executive Director of ASEA

13:30

NETWORKING LUNCH

15:00

THE FUTURE OF MEXICO’S REFINING AND STORAGE INFRASTRUCTURE

Speaker:

Marco Antonio Osorio, Director General of IMP

15:45

NETWORKING COFFEE BREAK

16:30

TABASCO’S AMBITIONS AS AN OIL AND GAS HUB

Speaker:

Adán López Hernández, Governor of the State of Tabasco

17:00

NETWORKING COCKTAIL


HIG HL I G HTS 202 0

DEPUTY MINISTER MACIEL TORRES OUTLINES ENERGY PROSPERITY PLANS Just one day after the publication of the eagerly awaited PEMEX Business Plan, Miguel Ángel Maciel Torres, Deputy Minister of Hydrocarbons at the Ministry of Energy, opened Mexico Oil & Gas Summit 2019 on Wednesday at the Mexico City Sheraton María Isabel Hotel. In his presentation, titled The New Government’s Energy Vision, Maciel Torres highlighted the challenges that face the new administration in delivering affordable energy solutions and future energy prosperity to the country, while securing the health of PEMEX, currently the world’s most indebted oil major. Maciel Torres began by outlining the steep fall in Mexico’s oil production, which he said was due to the way investment had unevenly risen and fallen throughout the last several decades. This situation, he said, has not been sufficient for the needs of the country. In December 2018, Mexico produced 214Mb/d

“Investment into exploration has risen to 30 percent of the federal budget from 15 percent, which has helped us replenish our production reserves” Miguel Ángel Maciel Torres, Deputy Minister of Hydrocarbons at the Ministry of Energy

of gasoline while imports reached 603Mb/d to supply the national demand of 791Mb/d. According to Maciel Torres, the government is working to resolve this. “Investment into exploration has risen to 30 percent of the federal budget from 15 percent, which has helped us replenish our production reserves,” he said. He also underlined the need for Mexico to move away from relying on foreign nations, particularly in the area of national gas, saying that “high dependence on any

foreign market could be catastrophic.” To ensure that populations in diverse areas of the country have sound access to fuels, Maciel Torres said that strengthening Mexico’s national pipeline network would be a focal point of the government in the coming years. Private companies would be involved in this development, he added. “Areas that are lacking in infrastructure, including Oaxaca, the Baja California Peninsula and the southeast of the country, will be a center for pipeline development.” Speaking just a day after the launch of PEMEX’s Business Plan, Maciel Torres said what was published yesterday was “only a fragment of the 100-page document.” The


H I GH L I GH TS 2 02 0 plan, which covers the first four years of President Andrés Manuel López Obrador’s administration up to 2022, announced financial support of US$6.6 billion over the next two years. The government’s intention to reduce PEMEX’s financial burden, set to free up an additional US$7.2 billion across the next three years, was also announced. Maciel Torres also spoke about hydraulic fracturing, better known as fracking, as a method that could be used to reach Mexico’s copious unconventional resources. While he did not dismiss the potential of fracking, Maciel Torres said the method was not part of Mexico’s current production plan. “To be clear: all of PEMEX’s cards are on conventional resources,” he said, adding that unconventional resources has not been ruled out entirely. “Unconventional investments are being contemplated.” The Deputy Minister blamed the free market for preventing the government from lowering energy prices, but also pointed out that the administration had successful achieved a drop in fuel theft. In 2019, PEMEX hopes to recuperate 80 percent of the MX$40 billion losses that theft inflicted the previous year, he said. Maciel Torres also explained that the government is pushing the role of technology in Mexico’s energy sector. He said the country has six specialist institutions and two universities producing technological advances and “human capital of over 25,000 scientists that we are now taking advantage of.”

OFFSHORE FIELDS: PROMISED LAND FOR EXPLORATION

KEY SPEAKER

Mexico’s bidding rounds opened the doors to previously unexplored areas both offshore and onshore. According to Oscar Roldán, former Head of the National Data Repository at CNH, around 130 exploratory wells are scheduled to be drilled following the latest rounds. On the first day of the Mexico Oil and Gas Summit held at the Sheraton Maria Isabel hotel, speakers on the panel Inside Mexico’s Exploration Activity, moderated byRoldán, agreed that Mexico is a greenfield in terms of exploration activities. “We are excited about the opportunity Mexico presents to the global industry,” said Adam Seitchik, General Manager of Exploration and New Ventures at Murphy Oil.

OSCAR ROLDÁN

“Offshore exploration, in particular, is unique in Mexico and it was very sought after

Former Head of the National

in Rounds 1 to 1.3.”

Data Repository at CNH Oscar Roldán was the Head of the

The country has become a hotspot for exploration and there are still many areas to

National Hydrocarbons Information

be explored. According to Alejandro Scheffler, Commercial Director of Schlumberger

Center. His career in the oil and gas

Mexico and Central America, years ago IOCs did not have Mexico on the radar.

industry began in 2001 at the Ministry

However, the country is now in many of Schlumberger’s clients’ prospects. “It is

of Finance, where he was part of the

not only offshore. Onshore exploration is also attractive, especially after the Ixachi

team involved in the development of

discovery in 2018,” he said.

PEMEX’s new fiscal regime. In 2007, while at the Ministry of Energy, he

Exploration, however, entails risk and while some projects may be immediately

participated in the first Energy Reform.

successful, others may not be. According to Seitchik, the best way to mitigate risk is

In 2009, he was among the founding

by generating and analyzing information to identify the best opportunities. “There

members of CNH. Roldán has a B.A.

is a learning curve and we need to take advantage of the information generated at

in Economics from the Autonomous

all drilled wells,” he said. Rossy Pérez, General Manager Mexico of Beicip-Franlab,

Technological Institute of Mexico

highlighted Mexico has invested in data generation for the most important fields in

(ITAM) and a Master’s degree in

the country to get the best results and, according to Scheffler, the country is among

statistics and econometrics from the

those with the most data to make decisions regarding well planning and development.

University of Essex in the UK.


HIG HL I G HTS 202 0 Naturally, when drilling exploratory wells, there may be some that turn out to be unsuccessful. However, these ventures should not be dismissed, according to Scheffler. “Even unsuccessful wells can generate important data for future decisions through the necessary investment in data collection and analysis,” he said. James Buis, District Manager Mexico of Nalco Champion, added that analysis of early samples can help to understand the investment needed to reach a successful production design. There are still areas to be explored, both offshore and onshore, and according to Buis, there might be still ore surprises like Ixachi, especially considering the untapped opportunities in Mexico’s Gulf of Mexico. “Companies think Mexico is a very explored country but that is not the case,” said Roldán. The oil industry in Mexico is mature but there are areas, especially in the north part of the Gulf of Mexico, where advanced infrastructure and technology are needed to support deepwater and shallow-water projects, according to Scheffler. “Companies have focused on the Perdido belt but mostly on the US side,” said Seitchik. “However, geology does not stop at country borders. The Salina basin offers great opportunities but it has barely been tapped into as a subsalt area.”

A CROSS-SECTION OF UPCOMING OFFSHORE PRODUCTION As new offshore operators continue to settle into their awarded blocks and develop them into a stable production phase as quickly as possible, new models of collaboration between the public and private sectors must arise in view of the new administration’s focus on PEMEX, panelists at the Mexico Oil & Gas Summit said on Wednesday in Mexico City.

“Optimization has been a key priority for CNH, particularly in approvals, as well as simplification in the documentation needed to present a project” Fausto Álvarez Hernández, Head of the Exploration and Production Compliance Unit at CNH

According to Graciela Álvarez, CEO of NRGI Broker, both private operators and Mexican service providers are ready to collaborate with the government’s plans to strengthen the NOC while also building upon the many successes achieved in a short period of time within the fields awarded through the bidding rounds. “The number of new discoveries highlights the need for exploration activities to capitalize on the available opportunities in the country,” she said. Álvarez made her remarks on the first day of the two-day summit held at the Sheraton Maria Isabel

Hotel as part of her introductory remarks to the panel she moderated, entitled “Offshore Project Development: The Road to First Oil.” Four panelists from key public and private institutions provided a crucial mix of perspectives on Mexico’s offshore development, particularly in terms of achieving production in new shallow water fields.


Francisco Noyola, Country Manager of Mexico for Talos Energy, was the first to provide the necessary background with a chronology of Talos’ success with its Zama discoveries, of which the latest appraisal well, Zama-3, was completed this past June. He highlighted the historical breakthroughs made by Talos in the Mexican context, which have included the most core samples extracted (over 440m) and the first block unification agreement with PEMEX in Mexico’s history. The historical dimension of

KEY SPEAKER

these milestones promoted a transparent relationship with regulators and authorities that he believes plays a key role in their current and future success. “Talos wants to have a positive impact in Mexico. The president has set his production goal and we aim to do our part to help,” Noyola said. The panel then progressed toward the perspective of another private player whose successes have also been quite public as of late: Marinsa, represented by Chief Strategy Officer Sergio Suarez. After detailing the ways in which the crisis period during 2016 and 2017 prepared them for the road ahead, Suarez noted that “under the conditions established by the current administration, being a national player gives

GRACIELA ÁLVAREZ HOTH

us a competitive advantage. However, we also have strong alliances with international

CEO of NRGI Broker

companies.”

Graciela Álvarez Hoth founded NRGI Broker more than 30 years ago. Under

Fausto Álvarez Hernández, Head of the Exploration and Production Compliance

Hoth’s leadership, the specialist

Unit at CNH, provided a direct public sector assessment of the success factors for

insurance company has promoted a

offshore projects looking for a quick launch procedure. He noted that CNH has had

prevention culture within the country’s

to experience “logarithmic learning” in order to perform its duties as a regulator

oil and gas industry, while delivering

as effectively as possible. He also praised the efficient path forward forged by ENI,

risk and insurance services to many

Hokchi and Fieldwood toward first oil and eventual full production, which might

major players within the energy sector.

total up to 220Mb/d from all three. “Optimization has been a key priority for CNH,

Hoth has provided consultancy services

particularly in approvals, as well as simplification in the documentation needed

to the industry’s environmental safety

to present a project,” he said. He also made a point of specifying that CNH now

agency, ASEA, and works closely with

could reach turnaround times for approvals as low as 34 days on average, which he

other government entities. She created

considers an extremely important component of fast offshore development.

the Voices of Energy initiative, bringing together public and private industry

The fourth and final participant in the panel was Alberto Sambartolomé, Senior

leaders to analyze the country’s oil

Partner at ERM, which has participated significantly in the sustainability assessments

industry.


HIG HL I G HTS 202 0 of many of Mexico’s offshore production projects. Sambartolomé highlighted the chief importance of efficiently introducing new operators to the legal and social expectations of the Mexican environment. This not only leads to reduced downtime for drilling and development through quick regulatory compliance, but it also ensures the longevity of production once first oil is reached. Projects that engage with regulators and communities early and promptly can look forward to productivity uninterrupted by protests or shutdowns, he said. “Transparency and a long-term vision are key for sustainable social development projects. Being transparent and informing the local community of plans is important for operators to be good neighbors.”

KEY SPEAKER

DIGITALIZATION KEY TO EVOLVING INDUSTRY, SAYS SCHLUMBERGER EXPERT Despite the oil and gas industry’s reputation for being a late adopter of technology, Javier López Vargas, Digital Consultant of Software Integrated Solutions at Schlumberger, told the Mexico Oil & Gas Summit 2019 audience that the adoption of digital technologies and systems can help companies more quickly achieve their goals, as long as this adoption is carried out properly. López explained that any system can be divided into two separate parts, the control component and the power component. The application of technology

JAVIER LÓPEZ

is the method of transferring those components from humans to machines, he

Digital Consultant of Software

said during his presentation at the Sheraton Maria Isabel Hotel in Mexico City

Integrated Solutions at Schlumberger

on Wednesday.

Javier López is an expert in digital transformation and since 2003

Digitalization has been key in reducing the need for extensive work teams, thereby

has held various positions in

reducing costs to companies. “In the Industrial Revolution, we made power from the

Schlumberger, including Informational

steam engine. Later, this became the electric motor. This was a significant change

Technologies Transformation Program

and removed human’s need for physical effort,” he explained.

Manager and Management Consultant for Schlumberger Business Consulting.

Now, however, digitalization is bringing about the transfer of control to machines too.

He has executed projects throughout

“Every system has a control component and a power component. We have already

Latin America and has specialized in the development of value generating strategies, economic models and analysis focused on the new digital environment. López holds a Bachelor’s in electrical engineering from Javeriana University and an MBA from INALDE Business School.


delegated the power component to motors and engines but we are now transferring control to machines,” he said. In an industry like oil and gas, where data is closely guarded, this can deliver great advantages. “This is a change reflected in the world and, while it can be unnerving, it can also be very positive.” One of the digitalization trend’s most known tools, the cloud, offers many benefits to companies willing to switch. The cloud makes the balancing of CAPEX and OPEX far easier and can deliver flexibility in mobility via

“In the Industrial Revolution, we made power from the steam engine. Later, this became the electric motor. This was a significant change and removed human’s need for physical effort” Javier López Vargas, Digital Consultant of Software Integrated Solutions at Schlumberger

new software like Digital Twins, he said. However, the digital transformation expert warned that oil and gas companies should understand the problem they are trying to resolve with a system before designing it. López used the example of Renault’s successful F1 victory in 2002 to illustrate how companies should adopt digital systems. “The design team did not just demand more torque or more power. Instead, they found out what they needed to win and designed toward that,” he said. User friendliness is also key and helps in the uptake of new technologies, said López. A high-level of technical understanding should not be necessary. “Technology adoption is not fostered by incentives but by a good design that makes the transition easier for the user,” he said.

KEY SPEAKER ENVIRONMENTAL PROTECTION TAKES CENTER STAGE In line with the social vision championed by President López Obrador’s administration, ASEA has revamped its strategy to ensure environmental integrity, justice for communities and safety in operations. On the first day of Mexico Oil & Gas Summit 2019, held at the Sheraton Maria Isabel hotel in Mexico City, Luis Vera, Executive Director of ASEA, outlined the agency’s new work plan to foster a more social and environmentally friendly industry. Among its responsibilities, ASEA is in charge of safe and environmentally and

LUIS VERA

socially responsible production, which means creating and supervising regulations

Executive Director of ASEA

to guide public and private extracting activities. As a branch of SEMARNAT, the

Luis Vera was appointed Executive

agency must align to the ministry’s social vision, which is also shared by the new

Director of ASEA in December 2018.

administration’s National Development Plan.

This administrative body is in charge

According to Vera, the idea is not to fight industrial growth or activities but to

and operational safety in the country’s

of ensuring environmental protection properly measure the impact that projects have on surrounding communities, not

hydrocarbon sector. Vera brings

only in terms of revenue but in social and environmental terms. “Extracting industries

significant legal expertise to his role,

have a huge impact on their communities and therefore have a responsibility to take

having been Managing Partner of the

care and give back to the environment,” he said.

social-environmental law firm Vera & Asociados from 1997 to 2018. He

Vera pointed out that, unlike PROFEPA, ASEA does not take a criminalizing attitude

holds a law degree from the Escuela

toward companies. However, the agency does have the responsibility to hand out

Libre de Derecho, a Master’s in law

sanctions and fines when companies fail to comply with social or environmental

and environment (LL.M) and another

standards. Based on ASEA’s new assessment strategy, “sanctions are now determined

one from Tulane University, as

in a way that companies can repay for the environmental impact they had on their

well as a Ph.D. in environment and

communities,” said Vera.

development from IPN.


HIG HL I G HTS 202 0 ASEA gathered all players that could help it make better decisions regarding regulations and transformed its operations to address the needs of the industrial communities. “Our goal was to make this an active agency that does not only grant licenses left and right,” said Vera. “We analyze every initiative individually and find the best conditions for projects to work for companies and communities.” The agency even made agreements with players like the National

“Sanctions are now determined in a way that companies can repay for the environmental impact they had on their communities” Luis Vera, Executive Director of ASEA

Protected Areas Council to trade fines for investment in recovery projects to ensure sustainable development in communities and protected areas. Vera also highlighted the work ASEA has done to boost efficiency in managing permits and licenses. “We received an agency with a backlog of 7,500 applications, plus over 7,000 we have received since December 2018,” he said. “Today, despite budget cuts, we are at a 98 percent on-time response rate for all applications received since December

and we have resolved 5,000 of the backlogged applications we inherited.” The agency has also worked with its authorized third-party partners to ensure their inspections follow ASEA standards. “We may not have enough inspectors to follow up on all requests but we are trying to establish agreements with local governments to collect data and receive applications,” he said. Vera has positive expectations for the industry and expects new discoveries will generate greater activity for ASEA. However, he is confident that there will be collaboration between the agency, operators and the scientific community and is even pleased about the response of companies regarding sustainability and environmental matters. “Although we do not have much about the Dos Bocas refinery yet, all interested parties are considering the environmental aspects of the project.”


DOS BOCAS ONLY ONE PIECE OF THE PUZZLE Although the Dos Bocas refinery project continues to attract the most attention

KEY SPEAKER

within the new administration’s portfolio of flagship infrastructure and development projects, this initiative can only be understood within the larger context that calls for a massive reactivation of Mexico’s National Refining System, Director General of IMP Marco Antonio Osorio said today in Mexico City. Osorio conveyed this vision as part of a presentation entitled The Future of Mexico’s Refining and Storage Infrastructure, which took place in the afternoon session of Day 1 of the two-day Mexico Oil & Gas Summit at Sheraton María Isabel Hotel. Osorio began his remarks by addressing the doubts often repeated in the media regarding the centralization of fuel supply and availability in the new administration’s energy policy.

MARCO ANTONIO OSORIO

“We understand that investing in fossil fuels seems contrary to the contemporary

Director General of IMP

global trend toward renewable and clean fuels, but we must strengthen key aspects

Before becoming Director General,

of our energy supply security while this long-term transition takes place,” he said.

Marco Antonio Osorio was the Product Technology Director of IMP.

While specifics can differ greatly, Osorio identified the best possible scenarios for

He participated in the integral energy

this transition still call for 50 percent of overall energy sourcing in fossil fuels by

analysis of the Tula and Cadereyta

2050. “Taking this and other factors into account, such as Mexico’s ever-growing

refineries and in the analysis of

national automotive fleet, it is clear that we must position ourselves to take as much

cogeneration alternatives for the

advantage as possible of our upcoming oil and gas production increases through

modernization and expansion of

the regeneration of our National Refining System.”

the Minatitlan refinery in Veracruz. Osorio has a Master’s degree in

In Osorio’s estimation, the threats to the security of Mexico’s fuel and energy supply

chemical engineering from UNAM and

were multifaceted; although fuel theft was mentioned, Osorio insisted on looking at

a Bachelor’s in industrial chemical

the bigger picture: “For example, our reliance on US imports, specifically those from

engineering from IPN. He has

the Gulf Coast, put Mexico at the mercy of the weather emergencies that characterize

experience in project management

this region.” Osorio’s argument also relied heavily on the contrast between Mexico’s

working with various companies such

24 percent of energy consumed being produced nationally and Colombia’s proximity

as Texaco, TECO Power, Alstom, GE

to 90 percent in this same metric, not to mention China’s 100 percent.

and Babcock.


HIG HL I G HTS 202 0 As is well-known, Mexico’ refining systems operated at 40 percent of its installed capacity in 2018. Osorio explained the historical and petrochemical background of this particular deficiency of the system, while also using it as a central part of his argument that Dos Bocas must really only be one component of a strategy that calls for finishing the reconfiguration of the three (out of Mexico’s six) refineries that are not able to efficiently process the majority heavy oil produced by national assets. Osorio noted that of these three refineries, Tula is the one closest to being ready for this process of optimization. Osorio made it clear that his goals covered not only supply security but also equity of access to energy products through lower costs and an expanded distribution network, in addition to ambitious fuel production goals to reduce fuel imports. “Our ideal scenario calls for reducing fuel imports from our current 620 Mb/d to 120 Mb/D,” he said.

NEGLECTED OIL GIANT SEEKS TO REGAIN FORMER GLORY Although exploratory activities in the 1970s strengthened Tabasco’s position as an oil-producing state, the end of the oil boom in the 1990s relegated the state to a neglected position in the federal development plan. Now, Tabasco seeks to regain its position and become Mexico’s energy capital mainly through one of President López Obrador’s flagship projects: the Dos Bocas refinery in the Paraiso municipality. Closing the first day of Mexico Oil & Gas Summit at the Sheraton Maria Isabel hotel in Mexico City, José Antonio de la Vega, Minister for Energy Development of the State of Tabasco, outlined his administration’s strategy to take Tabasco back to its leading position in the oil and gas industry. “Our goal is to become a key center for oil production and an oil development model for all kinds of fields – onshore, shallow water and deepwater,” he said. According to de la Vega, Tabasco is still an important player in the oil and gas scene. Out of the 111 areas adjudicated through bidding contracts to private companies, 39 are located in Tabasco. The state expects direct investment of US$1.7 billion and de la Vega highlighted projects from leading oil and gas players ENI, Hokchi and Talos Energy as success stories for the state’s oil and gas development. From the public sector, Tabasco expects to receive part of the MX$50 billion (US$2.6 billion) budget that PEMEX will destine for E&P activities in 17 fields, most of which are located in the state. However, the big opportunity will come from the construction of the Dos Bocas refinery in the Paraiso municipality. “The project will require an investment of MX$150 billion (US$7.9 billion), will generate 100,000 jobs and will have a capacity for 340Mb/d,” said de la Vega. Conditioning of the Dos Bocas port has already started and de la Vega said six packages have already been tendered for the construction of the refinery, all of them won by foreign companies except for one won by ICA in collaboration with Fluor.


De la Vega expects the refinery will bring better days for Tabasco and said the government is already preparing for related investments in terms of infrastructure, real estate, water and waste management to support the project, including a bypass for the city of Paraiso. The state government also has the priority of fighting corruption, boosting social development and solving the security issues hindering private companies’ and PEMEX’s development. At the same time, there is a project to develop the port Frontera between Dos Bocas and Ciudad del Carmen to boost oil and gas trading activities, as well as serve shallow and deepwater oil rigs in the area. “The state government is already in talks with PEMEX to advance this project. Refineries will require hydrocarbons that are not currently

“The state government is already in talks with PEMEX to advance this project. Refineries will require hydrocarbons that are not currently produced by PEMEX, which means we need investment in ports to ensure the energy sovereignty sought by the government” José Antonio de la Vega, Minister for Energy Development of the State of Tabasco

produced by PEMEX, which means we need investment in ports to ensure the energy sovereignty sought by the government,” said de la Vega. Tabasco is also aware of the changes in energy and sustainability strategies. “Even though hydrocarbons are a bet for the state, we cannot deny that new technologies are the future in terms of efficiency and environmental development,” said de la Vega. The state is considering other projects in wind, hydraulic, biomass and solar energy that can lead to the generation of 2,000MW. “We want to accompany President López Obrador in the transformation of the southeast into an empire of progress and development,” he said.



P R O GR A M - DAY 2

08:30

VISION FOR A THRIVING MEXICAN OIL AND GAS INDUSTRY

Speaker:

Manuel Rodríguez González, President of the Energy Commission in the Chamber of Deputies

09:15

DRIVERS OF SUPPLY CHAIN COMPETITIVENESS

Moderator:

David Enríquez, Senior Partner at Goodrich, Riquelme y Asociados

Panelists:

Juan Acra, President of COMENER

Sergio Charles, Director of Strategic and Institutional Relations at Grupo Protexa

Luis Ocejo, Senior Managing Director Maritime Business of Grupo TMM

César Vera, Chief Commercial Officer of Naviera Integral

10:15

NETWORKING COFFEE BREAK

11:00

ONSHORE E&P DEVELOPMENTS

Moderator:

Gaspar Franco, Professor at UNAM

Panelists:

Steve Hanson, Director of Tonalli Energía and President & CEO of International Frontier Resources

Yann Kirsch, Chief Business Development Officer of Perseus

Ángel Casán, Vice President of the Board of Directors Administration at Jaguar E&P

Robert Pérez, President Mexico & Central America of Baker Hughes

12:00

NETWORKING COFFEE BREAK

12:30

PROCUREMENT STRATEGY AND SUPPLY CHAIN INTERACTION

Moderator:

Francisco Vargas, Finance and Legal Committees Secretary at AMEXHI

Panelists:

Antonio Juárez, Director General of AMESPAC

Marcos Ávalos, Head of the National Content and Productive Chain and Investment Promotion Unit in the Energy Sector at the Ministry of Economy

13:30

NETWORKING LUNCH

15:00

TRENDS SHAPING THE MIDSTREAM AND DISTRIBUTION MARKETS

Moderator:

Ángel Sánchez, Business Director Performance Chemicals at BASF

Panelists:

Vernon Murray, President Latin America of Emerson Automation Solutions

Luis Felipe Echavarría, Director General of Enco GNV

Jan Frowijn, Vice President USA, Mexico & Central America at ROSEN Group Mexico

David Madero, Director of Energy Solutions at Acclaim

José García Sanleandro, Vice President of AMGN

16:00

PRIORITIES OF MEXICO’S PRIVATE OPERATORS

Speaker:

Merlin Cochran, Director General of AMEXHI

16:30

NATIONAL HYDROCARBONS COMMISSION: RESULTS AND CHALLENGES

Speaker:

Sergio Pimentel, Commisioner of CNH


KEY SPEAKER

ENERGY COMMISSION PRESIDENT SAYS PRIVATE SECTOR VITAL TO MEXICO’S ENERGY SOVEREIGNTY The President of the Energy Commission in the Chamber of Deputies, Manuel Rodríguez González, opened the second day of Mexico Oil & Gas Summit 2019 by saying the private sector would play a vital role in confronting the challenges Mexico’s energy policy must overcome to provide a long-term, accessible and sovereign energy solution. Rodríguez González began his keynote presentation by pointing out the challenges the new energy policy, brought in under the current administration, faces. He noted

MANUEL RODRÍGUEZ GONZÁLEZ

that between 2008 and 2018, PEMEX production fell by almost 50 percent while by 2018, Mexico’s National Refinery System was operating at a rate of just 41 percent.

President of the Energy Commission

Oil theft, a problem that has plagued Mexico for decades, was also underlined as

in the Chamber of Deputies

a major problem to both PEMEX’s and the country’s financial position. “The theft

Manuel Rodríguez González was

of hydrocarbons between 2014 and 2018 represented a loss to PEMEX of MX$100

appointed President of the Energy

billion (US$5.2 billion),” he said.

Commission in the Chamber of Deputies in September 2018. Before

He also highlighted the country’s high gas imports, which must be reduced, and low

this, Rodríguez held several high-

storage capabilities as areas that need to be improved. “It is worthwhile pointing

level political positions including

out that 90 percent of the gas consumed in Mexico is imported from the US,” said

Deputy Minister of the Government

Rodríguez González.

of Tabasco and Deputy Minister of Government and Political

However, he said that the necessity to formulate a plan that will develop the country’s

Development of the State of Tabasco.

energy sector and guarantee the population has access to an affordable energy

Rodríguez has a law degree from

source is essential. “The establishment of a sovereign energy policy, low in emissions

Juárez Autonomous University of

and high in efficiency, is of vital importance to guarantee both the national economy

Tabasco and a Master’s in political

and the accessibility of competitive energy prices. This will lead to the energy security

science and community law from

of Mexico,” said Rodríguez González.

Sorbonne University. As the private sector continues to chew over PEMEX’s Business Plan, released on Tuesday, Rodríguez González sought to reassure the private sector that it would have an ongoing role under the new government. He underlined the recent success of Italian super major Eni, which at the start of this month began production on its Mitzón


H I GH L I GH TS 2 02 0 field platform, and said that private sector involvement was essential to Mexico meeting its energy goals. “The participation of the private sector occupies a place of first order in meeting the challenges faced by the hydrocarbon chain, and in the Energy Reform, whose foundations remain intact,” he said. “As presented in PEMEX’s Business Plan, public investment will be complimented by private investment through long-term service contracts.” He also pointed to the construction of the Dos Bocas refinery, to begin this year, as a moment of opportunity for private players. “The authorities have made very clear that during the distinct stages of the Dos Bocas construction, licensing rounds will be opened for the participation of national and international companies. That is to say, private

“The establishment of a sovereign energy policy, low in emissions and high in efficiency, is of vital importance to guarantee both the national economy and the accessibility of competitive energy prices. This will lead to the energy security of Mexico” Manuel Rodríguez González, President of the Energy Commission in the Chamber of Deputies

participation is guaranteed.”

COLLABORATING TOWARD FIRST OIL

KEY SPEAKER

Bidding-round results and PEMEX’s goal to develop 22 new fields have put pressure on service providers to increase competitiveness in their operations. However, the cyclical nature of the oil and gas industry has provided companies with the necessary expertise to face these challenging conditions, said Luis Ocejo, Senior Managing Director Maritime Business of Grupo TMM and participant in the Drivers of Supply Chain Competitiveness panel at Mexico Oil & Gas Summit held on Thursday at the Sheraton Maria Isabel hotel in Mexico City. “After the crisis of 2014, many projects were abandoned and close to 30,000 people lost their jobs. At some point, 60 percent of the Mexican ship fleet was docked,”

DAVID ENRÍQUEZ

Ocejo said. This forced companies like Grupo TMM to implement cost-reduction

Senior Energy Partner at Goodrich,

strategies to ensure continued maintenance and secure employment for workers,

Riquelme y Asociados

albeit with lower salaries. “If we had eliminated those jobs, we would not have been

David Enríquez joined Goodrich,

able to face the industry’s recovery when the time came,” he said.

Riquelme y Asociados in 2000. He holds two Master’s in maritime law,

Although the industry has somewhat bounced back from this crisis, there are still

one from the European Institute of

many issues that need to be addressed, especially to cover the energy demand

Maritime Studies in Spain and another

in the country. “Energy is the main driver for social and economic growth and its

from Southampton University in the

development is the responsibility of both the public and private sectors,” said Juan

UK. He also has a Ph.D. in juridical

Acra, President of COMENER. Electricity challenges, he said, include unbalanced

sciences from Panamerican University

distribution and a generation gap of 57GW that must be covered in the next 15 years.

in Mexico. Enríquez is the author of

“Even though solar and wind power are gaining ground, fossil fuels are expected

a number of articles and books on

to keep growing in importance, at least until 2050.” Specifically for oil and gas,

maritime and energy law. He was

Acra highlighted that production keeps plummeting, while most of the 77 storage

Director of the Mexican delegation

terminals have a zero-days inventory.

before IMO, UNCISTRAL and other international maritime organizations

David Enríquez, Senior Partner at Goodrich, Riquelme y Asociados and moderator of the panel, highlighted the importance of national content development strategies to face these issues, particularly as new exploratory efforts herald increased operations. According to Acra, there are five key elements that must be considered to strengthen national content strategies: establishing proper limits for national content requirements based on a delimited value chain that can offer the necessary quality, providing enough resources to the National Content Unit at the Ministry of Economy to develop SMEs, creating a National Supplier Registry, developing a road map that

from 2002 to 2005.


incentivizes the proper use of human and monetary resources and eliminating trade barriers that work against the federal government’s priorities. Promoting synergies and economies of scale is also a good strategy to boost competitiveness, according to Enríquez, including the use of common infrastructure solutions for neighboring fields and projects. However,

“Tariffs are too low and they cannot be maintained at that level. There will be no service providers that can work under those conditions, which will weaken maintenance and eventually put contracts at risk” David Enríquez, Senior Energy Partner at Goodrich, Riquelme y Asociados

companies must be mindful of the state of the infrastructure, said Sergio Charles, Director of Strategic and Institutional Relations at Grupo Protexa. “Mexico is among the biggest owners of marine infrastructure, particularly for shallow-water operations, but companies must follow strict inspections to ensure the infrastructure is up to the necessary standards.” Cesar Vera, Chief Commercial Officer of Naviera Integral, said companies have for a long time focused on competition but what is needed now is interaction to establish proper due-diligence and elevate operations to the proper standards. “Competition is fine, as long as it is based on added value and not on price,” he said. Enríquez brought PEMEX into the discussion, as well, and

posed the question of how service providers can help the NOC increase production while preserving field sustainability. Ocejo said Mexican shipping companies are ready to serve the needs of PEMEX and any other company but under the right tariffs. “Tariffs are too low and they cannot be maintained at that level. There will be no service providers that can work under those conditions, which will weaken maintenance and eventually put contracts at risk,” he said. Charles, meanwhile, highlighted that what the industry needs now is to understand PEMEX’s needs and how it wants to do things. “PEMEX wants accelerated development and it will now receive public funds to do so. We need to know how those resources will be used and how we can best align our interests as service providers with the true goals of President López Obrador’s administration,” he said.


H I GH L I GH TS 2 02 0 ONSHORE POTENTIAL MUST NOT REMAIN UNTAPPED

KEY SPEAKER

As offshore development continues to occupy more of the spotlight with Tuesday’s publication of PEMEX’s business plan that shows the NOC focused almost exclusively on shallow waters, it becomes increasingly necessary to highlight the successes and potential of Mexico’s onshore fields, particularly those developed though previous bidding rounds, as highlighted by panelists on Thursday in Mexico City during Day 2 of Mexico Oil & Gas Summit 2019. Gaspar Franco, former CNH commissioner and current UNAM professor, moderated the panel Onshore E&P Developments. He began by asking about the general experience that operators have had developing onshore blocks awarded through the

GASPAR FRANCO

bidding rounds. All panelists agreed on the experimental and evolutive nature of their

Professor at UNAM

initial operations, but were also quick to highlight the admirably quick adaptation

In 2010, Gaspar Franco joined CNH as

process that they witnessed from regulators and suppliers.

Deputy Director General of Opinion for Production Projects. He then held

Director of Tonalli Energía and President and CEO of International Frontier Resources

various positions at the Commission

Steve Hanson put this adaptation in concrete terms. “Lawyers and the government

until being elected by the Mexican

were learning with us; our first drilling permit took 16 months to get. The second

Senate as Commissioner in May

one took under 90 days; now we are selling crude on a daily basis.” However, he

2016. He has been a member of the

did compare Mexico’s regulatory environment to Canada’s in order to identify areas

Engineering Faculty at UNAM since

of opportunity in the former. “In Canada, I get a simple, five-page document that

2011 and has published various papers

explains regulatory requirements and expectations. But it is issued by a firm regulator

related to Mexico’s oil industry. He is

that does not accept negotiations on these standards. Mexico needs that: a tougher

a member of the Mexican Association

but also much more streamlined regulator. That will help address the chief criticism

of Petroleum Engineers (AIPMAC).

from the current government of the private operator model, which is that is does

Before joining CNH, Franco worked for

not appear to be increasing production as much as promised.”

14 years and held several engineering positions at PEMEX.

Vice President of the Board of Directors Administration at Jaguar E&P Ángel Casán underlined the degree to which Jaguar’s commitment and vision in Mexico was enough to pull it through its initial failures; as he put it, “Jaguar’s successes in Round 2 are usually highlighted, but the truth is we lost all 12 blocks that we bid on in Round 1, and we used what we learned to show up again for Round 2, because our belief in Mexico goes beyond any one bidding round.”


HIG HL I G HTS 202 0 As Franco steered the discussion toward present and future challenges, the community engagement issues that can notoriously generate downtime at onshore oil and gas worksites did get mentioned, although all operators were quick to portray their relationships with local communities as positive and supportive. Chief Business Development Officer of Perseus Yann Kirsch characterized the Macuspana area where Perseus operates a number of its awarded blocks as “very demanding in terms of community engagement,” but he also made it clear that Perseus was committed to addressing any issue in this area promptly. Added Hanson: “We treat the local community as an important partner. We are proactive in social efforts and in involving the community and landowners. This has

“PEMEX is more than technologically capable on delivering results, it simply suffers from internal issues regarding the delegation of authority and the alignment of goals and objectives” Robert Pérez, President Mexico & Central America of Baker Hughes

been very central to our success. We are here to be a good corporate citizen; we have created many jobs and we pay our royalties. We want to continue to grow and benefit Mexico and its people.” Operators agreed that the more pressing issue for them was technological and infrastructural development. President for Mexico and Central America of Baker Hughes Robert Pérez listed the numerous infrastructural elements yet to be built as part of the development of Baker Hughes’ Soledad block, while also commending authorities for the ongoing finalization of infrastructural requirements. “PEMEX is more than technologically capable on delivering results, it simply suffers from internal issues regarding the delegation

of authority and the alignment of goals and objectives,” he said. Kirsch doubled down on the structural issue at hand. “Leaving infrastructure in the hands of PEMEX was the Achilles’ heel of the Energy Reform,” he said. “PEMEX tends to see us as contractors, but we are their partners and they are our medium to commercialization. For example, right now we cannot move production out of one of our fields because a compression station remains to be built. This distribution of economic and logistics responsibilities must be addressed going forward.”

CLARITY NEEDED TO BOOST NATIONAL CONTENT In 2013 and 2014, industry players were worried about how the Energy Reform would impact the national industry. Now, investor worries are focused on the new administration’s plans for the industry, the cancellation of rounds and farmouts and the impact all this will have on the supply chain, said Francisco Vargas, Finance and Legal Committees Adviser at AMEXHI and moderator of the Procurement Strategy and Supply Chain Interaction panel of Mexico Oil & Gas Summit 2019 at the Sheraton Maria Isabel hotel in Mexico City. According to Marcos Ávalos, Head of the National Content and Productive Chain and Investment Promotion Unit in the Energy Sector at the Ministry of Economy, one of the biggest challenges in the determination of proper national content strategies is the lack of verifiable information available in the current national supplier registry. “Nothing is verified, which can lead to overestimations in certain supply areas,” he said.


The ministry calculates that approximately 30 percent of the companies registered in its portal as oil and gas suppliers could be fake. To tackle this issue, the Ministry of Economy is redesigning its national content policy and building a new registry to properly assess the country’s capabilities. “National content is crucial because of the cashflow and economic development it can generate in oil-intensive regions,” said Ávalos. The ministry is in the process of developing a technological platform that will allow not only registration of new suppliers, but also the verification of all companies’ capabilities to participate in the industry. “It will be the first platform of its kind in Latin America. It will be georeferenced and will foster interaction between SMEs and large national and international IOCs,” he said. Methodologies and percentages in national content requirements will also be revised, according to Ávalos. Although contracts already established based on the original

KEY SPEAKER

percentages will be respected, the ministry believes this update is necessary to truly consider the needs of the industry and better include factors such as technological transfer and training of human capital. Antonio Juárez, Director General of AMESPAC, said participation of the private sector in the definition of these new standards was key to ensure proper compliance. “Service providers can represent up to 50 percent of the expenditure in an E&P project, which makes these players key in the definition of industry policies.” AMESPAC participated in the definition of the original percentages for national content and already has experience working with PEMEX, which will come in handy

FRANCISCO VARGAS

due to the new government’s strategy to make the NOC the leading force in Mexico’s

Finance and Legal Committees

oil and gas industrial growth. However, Juárez said private companies will also

Advisor at AMEXHI

have a role to play in this new scheme. “These players will soon have a significant

Francisco Vargas was appointed

contribution to the national industry,” he said. The association is already capitalizing

Finance and Legal Committees

on its members’ experience in international best practices to help medium-sized

Advisor at AMEXHI in March 2019.

players incorporate to the industry. At the moment, the focus is on exploration

Vargas previously served at the

activities, said Juárez, but as operations evolve, drilling services, well determination

Ministry of Economy for over three

and infrastructure development will gain importance.

years, during which he held a Deputy Director General position focusing

As new companies start to participate in the industry, new opportunities will appear

on SME supply chain development

and Ávalos sees greener pastures in manufacturing activities. “The ministry is working

strategies in the country’s energy

on studies to understand the opportunities to locally manufacture components,” he

sector. He brings 15 years of financial

said. However, Juárez warned players to keep a cool head when analyzing potential

and business expertise to his current

areas of development. “The market must develop enough for companies to delve

role and holds a degree in financial

into manufacturing,” he said.

administration from ITESM.


KEY SPEAKER

NATURAL GAS DRIVES DOWN ENERGY COSTS, HELPS ENVIRONMENT: PANEL As energy prices rise and Mexico’s pollution problems worsen, natural gas offers the most affordable and realistic solution to cost and environmental concerns, according to the final panel at Mexico Oil & Gas Summit 2019 on Thursday in Mexico City, moderated by Ángel Sánchez, Business Director Performance Chemicals at BAS. David Madero, Director of Energy Solutions at Acclaim, began the proceedings by highlighting the growing demand for natural gas as an energy source in Mexican homes. Although current residential use is low, homeowners are making substantial

ÁNGEL SÁNCHEZ

savings by switching to natural gas, he said. “Savings of 40 and 50 percent are

Business Director Performance

common,” said Madero.

Chemicals of BASF Ángel Sánchez is currently responsible

Residential energy is not the only area in which natual gas presents savings for

for the performance chemicals

users. Luis Felipe Echavarría, Director General of natural gas station company Enco

division at BASF in Mexico, Central

GNV, said that drivers can save 50 percent on every kilometer driven by switching

America and the Caribbean. His focus

to natural gas. However, he emphasized that the penetration of natural gas into the

is on business development through

Mexican market is still very small, with only 38,000 of the 43.7 million vehicles on

innovative products and solutions

Mexico’s roads running on natural gas. Additionally, there are only 38 natural gas

that allow customers to increase their

stations in the country. But, said Echavarría, the time for expanding natural gas use

market competitiveness. Sánchez has

is now. “Natural gas use is growing across Latin America. Natural gas could foster

been working in BASF since 1997 and

the renovation of the national vehicle park and could reduce CO2 emissions from

has ample international experience

cars by 70 percent,” he said.

having participated in specialized projects in Italy, Germany and the

While critics of natural gas point to electric cars as a more environmentally-friendly

US. He has a degree in chemical

alternative, the panel said that these vehicles are too expensive, and the infrastructure

engineering from UNAM and an MBA

too poor, to be a pragmatic choice at present. Natural gas, via the national pipeline

from EGADE Business School.

system, provides the best way to move cleaner fuels around the country, they said. Vernon Murray, President Latin America of Emerson Automation Solutions, agreed. “Natural gas is today’s fuel to help us arrive to tomorrow,” he said. Murray underlined that the advances in technology in the last 20 years, including the arrival of ERP packages and wireless technology, have helped dramatically improve pipeline security and maintenance techniques. “Today these packets have the capabilities


H I GH L I GH TS 2 02 0 to manage most processes within a pipeline. Security has been dramatically improved and we can now visualize where leaks are occurring,” he said. Jan Frowijn, Vice President USA, Mexico and Central America of ROSEN Group Mexico, added that safety was another positive factor. “Pipelines are the most practical way of transporting fuels over a long distance, and in general, an incredibly safe transport method,” he said. Frowijn also suggested that it is vital that Mexico makes use of its experienced workforce and those coming through the ranks, who bring technological expertise, like data analytics.

“Natural gas use is growing across Latin America. Natural gas could foster the renovation of the national vehicle park and could reduce CO2 emissions from cars by 70 percent” Luis Felipe Echavarría, Director General of natural gas station company Enco GNV

While he agreed with Murray’s suggestion that preventative maintenance was critical for keeping Mexico’s legacy network functioning, he said that the application of technologies would provide the country with “predictive solutions” that would further drive maintenance costs down. According to José García Sanleandro, Vice President of the Mexican Natural Gas Association, concerns that some natural gas critics have of the potential reliance on importing from the US were unfounded. Rather, the country’s proximity to its northern neighbor is beneficial. “Mexico must take advantage of the opportunity of being neighbor to the market with the cheapest natural gas in the world,” he said.

PRIVATE OPERATORS EAGER TO STEP IN

KEY SPEAKER

The new administration has made it clear that fulfilling ambitious production goals is its top priority, with PEMEX leading the charge. But production from private operators must play a decisive part in reaching these milestones as well, Director General of AMEXHI Merlin Cochran said Thursday at the Mexico Oil & Gas Summit 2019 in Mexico City. As part of his presentation Priorities of Mexico’s Private Operators, Cochran began by narrating the origin of the association, now composed of 45 members that Cochran admitted was an “eclectic mix” of NOCs such as PEMEX and Petrobras, large recognizable entities such as Shell, Chevron and other flagship IOCs and also

MERLIN COCHRAN

much more independent Mexican and American operators and investors, such as

Director General of AMEXHI

Talos and Jaguar, that have taken outsized advantage of the blocks awarded in the

Previously, Merlin Cochran worked

bidding rounds.

at Mexico’s Ministry of Energy where he was Deputy General Director

Founded in 2015, AMEXHI has always understood itself to be aligned with the

of the upstream division. Before

interests and goals of the state. “Changes in administration do not change our status

working in the Ministry, Cochran was

or the status of our members as partners of the state; we share their goals,” Cochran

managing drilling rigs both onshore

said. The integration of PEMEX into its ranks means that AMEXHI seeks to create a

and offshore. He started in Brunei

collaborative space with the state through which the entire industry can grow and

as a trainee in Schlumberger and

develop according to the highest ethical standards at an international level.

worked in countries like Venezuela, Iraq and Saudi Arabia working as a

After going over AMEXHI’s internal structure, Cochran shared its analysis of the EIA’s

drilling contractor for clients such as

2040 forecast for Mexican production, which predicts 3.4MMb/d through rising new

Shell, BP and ENI. Cochran is a civil

fields offsetting declines from existing fields. In Cochran’s estimation, this is evidence

engineering graduate of ITESM and

that private operators have a strategic role to play in Mexico’s production future;

holds an Executive MBA from both

“In this sense, EIA’s 2040 forecast really became AMEXHI’s 2040 agenda,” he said.

London Business School and Columbia Business School.

While Cochran did admit that AMEXHI has a vested interest in the bidding rounds being reinstated, he was clear that its plans went significantly beyond this one


structure of industry stimulation. “What AMEXHI really has to offer and wants to help enact is a comprehensive development plan not only for the Mexican economy but of Mexico’s infrastructure, of which many elements benefit our members directly, such as the building of ports.” Cochran concluded his presentation by presenting AMEXHI’s “Five-Year Plan,” which through ambitious investment targets has the explicit goal of reaching 280Mb/d by 2024 so as to reach AMEXHI’s current calculation of 500Mb/d of potential national production coming from private operators.

KEY SPEAKER

PEMEX NEED NOT BE ALONE It has been six years since the implementation of the Energy Reform and for Sergio Pimentel, Commissioner at CNH, it is time to stop talking about it. “A reform implies something new, which is not the case for this legal framework anymore,” he said during the closing speech of Mexico Oil & Gas Summit 2019 at the Sheraton Maria Isabel hotel in Mexico City on Thursday. The Energy Reform granted CNH, CRE and ASEA the same level of authority as any other ministry in the country, which avoided having a single dependency that centralized enough power to be influenced by corruption and have a negative impact on the national industry. According to Pimentel, this was decided to ensure that

SERGIO PIMENTEL

the hydrocarbons under the Earth remained the property of the nation, but would

Commissioner at CNH

also serve the purpose stated in the Constitution of ensuring Mexico’s long-term

Sergio Pimentel was appointed

development through effective exploration and extraction activities. This was also

Commissioner at CNH in 2014. Before

the reason why commissioners for CNH and CRE were no longer designated by the

this, Pimentel held a number of high-

president but by at least two-thirds of Congress.

ranking positions within Mexico’s energy sector, including Deputy

However, Pimentel highlighted a contradiction in CNH’s calling and the country’s

Director General of Legal Regulation

reality. “Governments have a short-term vision. Campaigns are built on a social and

and Director General of Legal Affairs at

economic plan that seeks to keep people in the government, but exploration and

CRE. Pimentel was also Deputy Advisor

extraction activities require long-term planning,” he said.

for Consultation and Constitutional Studies and was in charge of drafting

Pimentel also referred to CNH’s responsibilities, which he narrowed to five: develop

the energy constitutional reforms. His

information and knowledge regarding the Mexican subsoil, regulate and supervise

vast experience in the energy sector is

exploratory activities, tender and grant contracts, manage those contracts and all

backed by a law degree from Escuela

of PEMEX’s assignations and be SENER’s technical adviser. Based on these, it is

Libre de Derecho in Mexico City.

incorrect to assume that CNH’s obligations stopped just because the bidding rounds


H I GH L I GH TS 2 02 0 were canceled and it is because of this that CNH is in the best position to share the results brought by the contracts and assignations following the Energy Reform. According to Pimentel, all these schemes have translated to production of 73.7Mb/d as of May 2019 between private companies and PEMEX as a contractor. “This is 4 percent of the national production and represents US$3.4 billion in revenue for the state,” he said. It should be considered, Pimentel warned, that these results have been obtained while most of the 111 awarded contracts have been in exploratory and evaluation phases. As projects

end of President López Obrador’s term. The first considers

“Governments have a shortterm vision. Campaigns are built on a social and economic plan that seeks to keep people in the government, but exploration and extraction activities require long-term planning”

no budgetary restrictions for PEMEX, which could result in

Sergio Pimentel, Commissioner at CNH

advance, estimations show the country could receive US$12.1 billion between 2019 and 2024. “Because of bidding round cancellations, though, the country has stopped generating more of these resources that cost nothing for the government or PEMEX,” he said. Based on the approved exploration, evaluation, provisional and development plans and the reactivation of bidding rounds starting in June 2020, CNH has already made two estimates of how the national industry could develop by the

2.3MMb/d of production by 2024 and an average annual investment in PEMEX of US$25.7 million. “However, considering this year’s budget of US$13.5 billion, this seems a bit unrealistic,” said Pimentel. As an alternative, the commission built another scenario with a budget constraint for PEMEX, which resulted in production of 2.08MMb/d by the end of 2024 with an average investment in PEMEX of US$18.3 billion. Pimentel does see an opportunity to reach President López Obrador’s goal of 2.6MMb/d but only by 2028. Furthermore, the only way for this to happen is to reactivate the bidding rounds and sharing the risk of exploration activities with private third parties, he said. “Asking PEMEX to do everything and to do it alone is a mistake. The legal framework allows PEMEX to ally with third parties, participate in tenders and use tools that were not accessible to the company five years ago. There is no longer a political cost for the reform. Talking about it right now is no longer of use; it is already the legal reality in the country. Why not use it?”


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2019 TA B L E O F C O N T E N T S

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Release date OCTOBER 2019 The Energy Reform has welcomed new players to tap into

STATE OF THE INDUSTRY

Mexico’s hydrocarbon reserves and as they race to first oil, the oil and gas industry’s supply chain is also regaining

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