Dominique Géhant, Mexico Geomarket Director, CGG
The Geomarket Director of a leading provider of seismic services envisions increased appetite for imports of state-of-the-art technology and investments in R&D as a direct outcome of the national energy reforms. He foresees new opportunities for sub-salt targets in deep offshore and talks of balancing fleet capabilities to suit a market in the midst of transformation.
What is your interpretation of Mexico‘s energy reforms? What are you most excited about and what are you most apprehensive about?
Since the promulgation of the reform, there has been a lot of excitement generated throughout the industry because this restructuring goes well beyond initial expectations. The changes will have the effect of placing Mexico at the same level as many other countries in terms of opening up the sector to private investment and putting PEMEX on a level playing field with other international operators. This is obviously an exciting time for everyone and, like everybody else, we are very much looking forward to the next few years.
Everything now depends on the outcomes of the Secondary Legislation. There are some uncertainties, and we will have to wait for the final approval before we can see the legal set-up. Personally, I remain optimistic and envision more opportunities than threats.
In 2014 – 2016, CGG is implementing a ‘profitability & cash’ initiative as part of a wider strategic plan started in 2010. How does Mexico fit within this plan? What is the relative strategic importance of the country to your regional operations?
The main element in that initiative is the right-sizing of our marine fleet towards high-end vessels in order to offer our clients the right technology and capabilities they need to explore complex areas – such as sub-salt targets in deep offshore – or to develop their fields with high-density and high-resolution techniques. Mexico will remain a strategic country for our company. In our opinion, Mexico will benefit eventually because we anticipate heightened activity in deep water offshore plays resulting from the forthcoming market opening. We forecast that there will be high demand for advanced technology and we expect to be well placed and fully prepared to bring high-end vessels to Mexico’s waters.
As a result of the energy reforms, industry experts predict a wealth of opportunities to be unlocked across the value chain. In your field of geophysical and geoscience services, what opportunities have you identified? When do you expect these to materialize and how are you positioning yourself to capitalize on these?
In the short term, meaning 2014 and most of 2015, we will see a transition period. We expect Pemex to continue to be the main player for many years to come, but this year they have few plans for large-scale marine seismic projects. Looking at the Pemex timetable, Pemex has already presented the selection of the areas they want to keep for Exploration and Production – the so-called “Round Zero” – and then SENER (the Ministry of Energy) has 180 days to validate and amend it . We also expect the Secondary Legislation to be approved in the coming weeks that will detail the new legal, tax and procurement framework for Pemex as well as the rules of the game for private investors. We are already putting together our mid- to long-term strategy that takes into account the fact that a range of critical sectors will open up including deep offshore, shale gas and shale oil. Further opportunities should materialize though they cannot yet be identified. Much depends on the energy landscape over the next 18 months.
How will the seismic survey business in Mexico change with Pemex no longer exercising monopoly control? After almost eight decades of operating as a state monopoly, how will Pemex transform itself into a productive state entity?
Despite Pemex’s commitment to the integration of new technology, Mexico’s current contractual framework limits somewhat the scope companies have to valorize the latest-generation technical advances. Over the next couple of years, Pemex will be transformed into a competitive state enterprise and there will be a greater appetite for importing new technology and investing in R&D. If we draw parallels with the Northern zone of the Gulf of Mexico we can definitely foresee the extensive use of high-tech products. International players intent on developing complex deep water prospects will also be reliant on state-of-the-art technology. Indeed PEMEX will be competing with international companies in harnessing the latest technology and there is a lot of room for new technologies from our international portfolio to be brought to the Mexican market.
As a foreign company with a leading market position in seismic services in Mexico, what importance would you place on developing local content in the country? What initiatives are you following there?
The Secondary Laws have not yet been approved, but there will be a whole new chapter regarding local content within it though it is still unknown how this will be implemented. Nevertheless, our company is well prepared as we have been striving for many years now to balance local content with international labor. At the heart of our company are our people and their “Passion for Geoscience” and inside the company we promote the culture of learning. Through our world-class geophysical training center we offer the best development opportunities that encourage performance and Innovation. We have established CGG University centers in Paris, London, Houston, Singapore and locally in Villahermosa where state-of-the-art facilities are available to deliver personalized training. Our courses are designed to also serve the wider oil and gas industry globally and this is something we will develop in the future because Mexico will see the need for trained geoscientists. Their topics cover the full spectrum of techniques, software and equipment required for data acquisition, processing and subsurface imaging to interpretation and reservoir characterization as well as QHSE. In Villahermosa we have a large processing and imaging center, so just by our sheer presence in the country we are one of the leading market players. We are also working closely with our Houston center to bring more technology to Mexico which puts us at the same level or very close to what we offer globally.
For the past 2-3 years, Mexico has been an important marketplace for our company and Pemex has been one of CGG’s main clients. We obviously want in the future to maintain our position and be the main player in the geoscience sector. That means continuing to bring new technology to the country. Mexico is going to face a couple of years of transition and, as I mentioned before, we are pursuing a medium- to long-term strategy to be a major player in that sector for both Pemex and new players.
What is your personal advice for those who plan to open a business in Mexico?
If the reform lives up to industry expectations , there will be enough opportunities for all kind of companies ranging from the development of major fields to deep offshore and shale gas. In my opinion, the secret of success in Mexico is first to move here and set up a strong presence. With time, it is important to adapt to the Mexican way and to understand how Mexico works – in other words, to think Mexican. What we can guarantee new operators is that by working with CGG they have the right partners as we are very well integrated in the Mexican landscape. We see a lot of opportunities across the sector, and everyone is welcome to join us.