hbr septemer'15 - mexican energy reform

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www.winne.comWE CONNECT BUSINESS PEOPLE

COUNTRY STUDY

DAVID PENCHINA Senator & President of the Energy Comission

Less than a year after signing the sec-ondary legislation of the game changing Energy Reform Bill into law and well into its famous “Round One” Oil and Gas auction, Mexico is finally in a posi-tion to begin reaping the benefits of its most drastic constitutional change to date. Round One, beginning in January 2015, saw the defining of bidding terms and awarding of exploration and exploi-tation contracts. A total of 169 blocks are being auctioned off, with nearly all contracts to be assigned by September of this year.

The international community has kept a close eye on Mexico since the dra-matic restructuring of its energy sector.

José Rinkenbach, Founder of the Mexi-can consulting firm Ainda Consultores, believes this international attention stems from the fact that the country “has enormous petroleum potential and a low cost of production, which amount to a strong competitive advantage.” In response to concerns about the unex-pected drop in oil prices, Mexican Sena-tor David Penchyna, the mastermind behind the Energy Reform, says that in-vesting wisely and reaching higher levels of production are the true deciding fac-tors in the energy reform debate.

Mexico has, indeed, suffered a long-streak of less than satisfying production rates due to its dwindling oil reserves

First Glimpse into the Reform

KEY FACTS

Mexican Energy Reform

Petroleros Mexicanos (PEMEX) and Comisión Federal de Energia (CFE): 77 year statal monopoly on the energy sector comes to an end.

“Round One” Oil and Gas Auction: initiated on 1 January 2015 and set to finish by the end of the year.

Exxon Mobil, BHP, and Statoil: 3 of the 26 approved companies to participate in “Round One”

Moving Forward

Mexicans must realize that it is not our responsibility to worry about oil prices. Production will ultimately determine our success…we must invest wisely so our production may be stable.

MEXICO-4pages.indd 1 13/07/15 18:53

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One company showing great promise following implementation of the Mexi-can energy reform bill is Schlumberger, the leading international provider of oil and gas industry services. Sch-lumberger’s presence in Mexico dates back to the 1930s, when the world’s first well logging company introduced its services to the Mexican market. The first electric log was run in a well in the giant Poza Rica field, and as the com-pany’s international services began to grow, so did its offerings available in Mexico. Now, with more than 5,000 employees in Mexico, Schlumberger’s contribution to the exploration and de-velopment of Mexican oil and gas fields is unparalleled.

Through experience, a passion for ex-cellence, technological prowess, and world-class infrastructure, Schlumberg-er has established itself as the premiere oil and gas services provider in Mexico. With 14 different product lines related to the oilfield services industry, Sch-lumberger’s President of Mexico and Central America, Arindam Bhattacharya, affirms that the company has the ca-pacity to plan and execute oil and gas projects “from A to Z.” This integrated approach to providing services is one of Schlumberger’s four key performance drivers: excellence in technology, reli-ability, efficiency, and integration.

Schlumberger also has a long history of business growth through mergers and acquisitions, such as its 2010 merger with another leading provider of oil-field services, Smith International. This strategy helps Schlumberger continue to provide the highest quality and wid-est scope of service integration that deploys the most advanced technol-ogy in the industry. While the Mexican national oil company, Pemex, is one of Schlumberger’s largest customers on a worldwide level, Mexico’s energy re-forms bring exciting prospects for work-ing with new customers interested in participating in the attractive Mexican oil and gas industry.

Technology, Integration, Oil and Gas www.slb.com

Our attitude makes the difference

Distributing some of Mexico’s most exclusive brands, ProOil is Mexico’s undisputed automation and industrial

services leader specifically organized to meet its clients’ needs through its

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and inability to explore and exploit new areas thought to be rich in oil and gas reserves. That being said, Senator Pen-chyna is quick to remind investors that “Mexico is rich in energy resources–not just in hydrocarbons. Mexico has natu-ral gas, carbon, great solar energy poten-tial, and two extremely large coastlines, which contribute to its huge wind power potential.” While neither PEMEX nor the CFE had the technical and economic capabilities to take full advantage of its resources in the past, it is clear that the energy reform, its subsequent rounds of auctions, and expected increase in FDI will now give Mexico the power to be-come a world-class competitor in all ar-eas of the energy sector.

ADRIANA MACOUZET President & General Manager, PPG

Tel: +52 0181 8376 9032 / Fax: +52 0181 8352 3133 Email: [email protected]

TURBINE SPECIALTIES

100% MexicanFounded in 2002, this Nuevo Leon-based company is the first and only company in Mexico dedicated to the creation and engineering of turbine blades and gas turbine parts.

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The price of oil will eventually rise–it cannot stay so low forever. Therefore, I

believe that investment will not stop in Mexico.




A win-win for all players involved

BHP Billiton and Exxon Mobil, com-panies previously not permitted in the Mexican market, are sure to add special diversity to the country’s energy sector. There are, however, a number of preexist-ing, outlying players ranging from Oil and Gas product distributors to construction companies set to experience profound transformations as the shock wave of the reform finally reaches their grasp.

New business opportunities are abun-

dant for a number of companies dedicat-ed to providing offshore-related services. Transportes Aéreos Pegaso, the country’s leading air transportation company and long-time client of PEMEX, is currently in the process of reevaluating its business plan. “We are prepared to offer onshore and offshore, load-bearing, and even per-sonal transportation services,” affirms Enrique Zepeda, CEO of Pegaso. Simi-larly, the offshore logistics and general naval services provider, Marítima Inter-national, is prepared to continue helping oil companies meet their specific logistic needs in the market. “When we intro-duce ourselves to oil companies,” affirms Marítima’s President, Roberto Maury, “they often breath a sigh of relief. They truly appreciate our integrated services

Mexican energy subsectors prepare for life after the re-form. How they react and adapt to the new market landscape will greatly predict their continued success.

With years of experience working in the Mexican market, Marítima Internacional is the unequivocal industry expert in providing port-to-port services to accommodate all its clients’ maritime needs. / Email: [email protected]

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International gasoline vendors permitted in Mexican market

Production of petroleum to reach 3.5 million barrels of oil

End of fixed liquid petroleum gas, petroleum, and diesel prices

2016 2017-2018 2025




CCIPSA a Construction-oriented Consortium on the Rise

The energy reform bill will surely benefit those companies who are able to form strategic partnerships to provide the best services and manage the most demand-ing projects in their associated sectors. When it comes to the construction sec-tor, no one does this better than CCIP-SA, a company dedicated to general civil engineering and construction projects. As its CEO, Mr. Cetino Grepo, affirms,

“We are not merely a construction company; but rather, we are a consortium offering a wide portfolio of business divisions, which are fully-integrated through their focus on tourism, the individual services available to our clients, and the engineering and construction of specialized projects.”

CCIPSA already has experience align-ing itself with such international play-ers as the Sacyr Group, which has both financially and logistically aided them in the development of several large mari-time projects in Oaxaca as awarded by PEMEX and the Secretary of Energy. What’s more, this company has been charged with heading a number of ex-citing projects throughout the country. They are building the new Hilton Gar-den Inn in Coatzalcoalcos, and they have already begun constructing the Nanchital Industrial Park in Veracruz. This park is the result of an integration of 80 companies and will be dedicated to producing polyethylene-derived fin-ished products.

Such extensive experience working as a consortium leaves little room for doubt that CCIPSA will continue to thrive un-der the new and dynamic economic cli-mate now experienced in Mexico.

This Promotional Case Study was produced by World Investment News for September 2015 edition of HBR. Publisher: pascalbelda; Executive Director: Manuel Sáinz; Project Director: Sara Tendero; Project Developers: Marina García, Jose Ignacio Bernad; Editor-in-Chief & Project Developer: Aaron Scherer; Creative Director: Luisa Tronea; Special thanks to: Dr. César Camacho, Senator David Penchyna (President of the Energy Commission), Mr. Ángel Junquera (www.junquerayforcada.com.mx), Mr. Juan Acra (Comisión Energía at Coparmex Nacional), Mr. Raymundo Platas (LAOGA), Hotel Holiday Inn Express (Veracruz & Villahermosa), Holiday Inn Ciudad del Carmen and Hotel Quinta Inn & Suites (Monterrey) / World Investment News worldinvestmentnews winnenews Direct Q&A +34 608 69 41 94ininin

that help relieve the stress associated with their day-to-day operations.”

It is not just companies with a foot in the offshore market that are beginning to see the effects of the reform. One of Mexico’s most noteworthy construction companies, Empresas ICA, has much ex-perience transforming to meet the needs of the ever-evolving markets it serves. According to its CEO, Alonso Quintana, over time, the company “has transformed into a solutions provider, which means diving deeper into the engineering part of these sorts of products.” Quintana is confident the company’s 70 years of ex-perience with some of the country’s most complex and innovative projects will pay off as new construction contracts emerge. “We are not merely builders,” he declares, “…we are project managers with immense engineering and financial capabilities.”

Companies, like ICA, who not only rely on past experience, but also adapt to market fluctuations are certainly the ones who will faire the best when all is said and done. In fact, many such com-panies are now considering strategically aligning themselves with outside com-panies as a means of adaptation. José Cedano, General Manager of ProOil, an Oil and Gas product distributor, affirms, “Until now, CFE and PEMEX have been our primary clients; however, we hope to also work with companies coming here as a result of the reform.”

Establishing new partnerships may seem like a mere survival technique em-ployed by local companies; however, such international relationships can best be described as mutually beneficial. With-out a doubt, Mexican-based compa-nies can learn from those coming from abroad, but it is important to note that foreign companies have much to gain from learning the ins and outs of the country’s unique market structure from those already immersed in the market.

A prime example of a company al-ready making such partnerships is Tur-bine Specialties, a turbine blade distribu-tor, that has recently aligned itself with a US-based company in an effort to better offer turbine maintenance services. This, according to José Núñez, the company’s founder and General Manager, will bet-ter prepare them for future projects with CFE and PEMEX.

Two more companies who clearly understand the mutual benefits behind knowledge and resource collaboration are the Oil & Gas experts, Schlumberger and DTK Group.

Both companies have long, illustri-ous histories in Mexico and a breadth of knowledge in the energy sector. They are confident this will be more than enough to sway undecided companies to team up with them in the coming years of the re-form. According to DTK Group’s Presi-dent in Mexico, John Lawrence, DTK Group “has the capability to provide all industry services to its clients; however, [the company] also depends on its key partners in order to provide its clients with the highest quality product pos-sible.”

As investors continue to pour in to take advantage of the reform, one thing is clear for the companies affected by the reform: change is welcome and adapta-tion is necessary.

Ideally, [we] will be working side-by-side with the new companies entering Mexico,

as well as continuing to build our portfolio with Pemex.

ARINDAM BHATTACHARYA President, Schlumberger Mexico


hbr septemer'15 - mexican energy reform

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