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Interview

with Oscar Vasquez Senties, CEO, Grupo Diavaz

09.09.2011 / Energyboardroom

We last interviewed Grupo Diavaz 5 years ago. I would like to start this interview by looking at the major events that occurred over the course of these last years. How different is the company today from what it was then and how its different divisions contributing to the growth and development of the company?

We have grown a lot over the past five years. We have been reforming our service contracts with our prime dealers, and have experienced great success in doing so.

We have also been changing our objectives to align them with the 2008 Energy law and as a consequence, Grupo Diavaz now functions in a more integral context.

The expected changes in the sector have come at a very slow pace in some cases but if we are facing what perhaps is the end of our NOC acting as a monopoly, then the Grupo Diavaz is ready to jump on this new opportunity.

We are already participating in three new dynamic areas.

Sir can you please mention what are this three areas.
We are helping our client, Pemex to produce gas in Burgos Basin in the North Region, also in this Region we are helping them to produce oil and in the Marine Region we are operating for them underwater pipelines.
We provide these services using the new type of contracts that Pemex has designed during the last years.

Diavaz has always been prompt to seize opportunities. For instance, in 2006, you jumped into MSC (Multiple Service Contract) and won the first tender to work in the mature fields of Veracruz (o Ébano – Pánuco – Cacalilao, del Activo Integral Poza Rica Altamira) and partner with Sinopec. Now you have expressed your interest to bid for the incentive contracts that Pemex published one month ago. Why do you think that this type of contracts will give much more opportunities than the MSC?

The previous type of contracts were limited in that companies like Grupo Diavaz were only providing what our customer asked for, and were not including new ideas or new technologies and also the services were not oriented to produce more, they were oriented just to provide more services.

In the new contracts we are able to include all of our capabilities and we believe these new contracts will mean higher productivity as they will create a win-win situation between our customers and the services that we provide, they induce the contractor to produce more using better technologies.

One of the key strengths of Diavaz over the years has been its ability to create and strengthen very strong partnerships with international players. The latest one could be the partnership that you tied with Fugro for the deep water development and exploration. How advanced is the collaboration?

We have been working together in the offshore market for over twenty years, and now Fugro is a company that has a lot of experience in the deep water fields. Due that the services that we provide to the deepwater fields; geotechnical and geophysical studies are the very first step to develop them, now we are working on it, but we are still working also in shallow waters.

One of the fundamental points that will go along with Deep water (especially after the deepwater horizon catastrophe) are safety procedures and technologies. How is Grupo Diavaz adjusting and keeping up to date with this?

For Grupo Diavaz always has been a very important issues the safety and environmental protection and we work every day taking care of those aspects we have developed procedures to work with and choosing international partners we look very carefully in these aspects of their operations. International Partners always we insist this important issues.

To be able to participate in such partnerships, one has to be fully up to date with safety standards and technological advances. Through these alliances, Grupo Diavaz has been able to absorb all the necessary technology, and a culture of safety.

We therefore set very high safety and environmental standards using the latest technologies from around the world. We do a high quantity of multi-service activities and we are now in the process of working with over 400 sub-contractors and Mexican companies with whom we share our culture of safety and environmental protection.

How are the different divisions of Grupo Diavaz contributing to the growth and development of the company?

Grupo Diavaz is divided into three divisions. Our oldest and most important one is “Marine Operations,” and works off-shore. This operation is based out of Ciudad del Carmen, Campeche, and Paraiso, Tabasco.

The second division is “Gas Distribution”. This division is responsible for the natural gas distribution service in Monterrey, Nuevo Leon.
The third division is “Exploration and Production”. This is the division that is somehow going through a transition process as it has been servicing the new contracts that Pemex has required. What we foresee is a shift to multi-service companies that become general contractors that subcontract specific services to various specialists.

Of these three divisions which one is currently conducting the growth of the company?

Just this week we received our last month results. Marine Operations is still our largest entity. We are leaders in this area because our company has successfully followed the most stringent safety procedures and managed to build a name equalling the highest standard and in the offshore sector, safety is of upmost importance.

Despite the dominance of Diavaz Marine Operations, all three of our divisions contribute at high levels. Each one of them provide a lot in their particular area, for example, thanks to advanced marketing and sales techniques, the Gas Distribution division is the leader when it comes to working with the general public and counting over 100,000 customers in Monterrey.

The third operation, Exploration and Production, is the leader in analyzing these new contracts that we have discussed. This detailed analysis is shared with partners in order to form strong alliances. Representing a complete chain in the energy sector is one of the reasons for which we have been successful.

To come back to Diavaz’s capacity to tie partnerships, I think that you have really proven your capacity to innovate and become a particular partner through the DS JV you established with Sinopec in late 2006. This is even more striking since this was one of the first overseas partnerships ever established by Sinopec. What is the aim and what has been the outcome of this joint venture?

We have been partners with Sinopec for over 3 years now and despite the cultural differences and difficulties this has implied, particularly at the beginning, we are very pleased with our Chinese partners. Sinopec is one of the largest companies in the world and we have gained a strong mutual respect between us.
Petrobras is another very large entity with whom we have formed a strong alliance. In this partnership, they act as operators. What is interesting in our cooperation with Sinopec is that we are the operators. This has been an incredibly enriching experience for Diavaz. Being a partner with such a company as Petrobras has been great, but the opportunity to be the operator has been even better.
Both of these partnerships have rhymed with success and we look forward to our future with both of our partners.

With Chinese energy companies making a strong bid on global resources, I guess many are curious to know how it is to collaborate with them. Were there any particular challenges in this collaboration?

It has been very challenging. Our level of focus has had to be very high in order to understand the communication differences. In some circumstances we have had to wait for a response longer than anticipated. This is because they have an established way of doing business. However, they are very respectful and proper partners. The JV has been very helpful to Grupo Diavaz and the level of trust we have gained is unprecedented.

One of the questions that we have to raise is why Mexican companies such as Diavaz – that have been so successful at home – not able to replicate this success on the international scene? Why has Mexico never managed to create a hub that became a jumping board for the companies and a showcase window. I know you like to say we were born with Pemex, we grew with Pemex and we developed with Pemex, but isn’t there a risk that this sector dies with Pemex and the recurrent incapacity of the government to find the right model?

Well, we have a Spanish director that asked us, “How many customers does your company have?” Our answer was “only one”. This was possibly the worst answer we could have given him. His face turned “grey”.
It is true that putting all your eggs in one basket can be a risky strategy but the way we see this is that all of Mexico is our customer! Doing business in Mexico can be more difficult than in China for example. We have, however, maintained our focus, and in the last 38 years we have learned how to do business successfully in Mexico, in the United States and in Europe.
We have not had time to develop new technologies or exploit new markets since our primary focus has been the Mexican energy sector. However, we understand that we might die if we don’t think global. Hence our partnerships have enabled us to have global presence indirectly. We are bringing products, services, associates and technologies from abroad through these alliances.
Mexico has been producing oil for some time now and is one of the first countries that started in the industry. Today we find ourselves in a time of transition that I had never seen before in my professional life.

Sir, your company has always worked closely to Pemex. Today under the 2008 energy reform Pemex is trying to go into a deep transformation to be a more transparent and efficient company. In your perspective how have things improved in the Mexican monopoly and how will these changes impact the service providers such as yourself?

They are trying to implement a new law that requires Mexican companies to no longer sign “single service” entities or contracts. Today, Pemex requires “multi-services” companies and the Mexican private sector needs to analyze these new opportunities. We must learn a new way to do business with Pemex where basically only a few “multi-service” companies are able to sign the new contracts.

From a diving company in the 70s to one of the most integrated service provider companies in the country, what is next for you, what is the next field of diversification?

We are focusing on integrating our services instead of depending on other companies as suppliers; for example, renting equipment from an outside entity. In other words, we are concentrating on becoming more self-sufficient.

After nearly 40 years what keeps you going?

What keeps me so motivated is seeing other professionals develop in a highly skilful way within our organization. The social, technological and economical advances are things that I am also proud to witness.
Did you ever think that you would be this successful?

No! This has really been a dream come true. One of the most important elements that have made us successful is the implementation of highly trained teams around the country. We have teams in Reynosa, Tampico, Monterrey, Paraíso, Poza Rica, Villahermosa, and Ciudad del Carmen. Our headquarters in Mexico City direct and supervise this people. We are a company that adopts people, for example; we have divers and other types of technicians that have been with Diavaz for over 30 years!

Do you have any final ideas or messages you would like to get across?

I strongly believe that it is of the upmost importance that the public understands the efforts that our government and Pemex are putting in place for our country and sector. Pemex is a very interesting and sophisticated company that has been with us for over 70 years, and that has played a very important role in the development of Mexico. Recently, it has come under attack, never the less the company remains as a solid enterprise that is able to provide oil and gas in its various forms to the general public.

Furthermore, we welcome the new law that Pemex has implemented, and welcome international companies to do business with Mexican entities like us!

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