Mexico – Arindam Bhattacharya, President for Mexico & Central America
Following close to 80 years of unwavering commitment to supporting Pemex’s E&P ambitions, Mexico has for long been of significant strategic importance to Schlumberger’s global portfolio that is only set to intensify with the liberalization of the energy sector. On the back of decades of experience in the local market, Arindam Bhattacharya highlights some of the most interesting investment opportunities in Mexico’s oil and gas sector.
Could you introduce Schlumberger in Mexico while highlighting key milestones in its recent history?
Schlumberger enjoys a long and successful history in Mexico. Having established a presence here in 1936, only a decade after the company was founded in France, we have in many ways grown together with Pemex.
Mexico’s strategic importance to Schlumberger is further amplified by its proximity to the US, where a significant amount of our technology is developed. The diversity of the country’s fields and operating environments makes Mexico an ideal place for testing and deploying our latest technologies.
Over the past few years, Mexico has also become a key market for our integrated project management (IPM) business. Being among the first oilfield service companies to offer IPM solutions, for over two decades now, Mexico was one of the countries where we started managing some of the largest projects; starting with the development of the Burgos basin in the north of the country, down to Chicontepec and further south to Villahermosa’s basins which are well known for their complexity. From an IPM perspective, Mexico is an important part of Schlumberger’s portfolio and will continue to be so, particularly as deepwater projects gain momentum in the country.
As a testament to the importance of Mexico as a source of know-how for Schlumberger, it is interesting to point out that many of our global practices and process have been developed based on the successes we enjoyed in Mexico. By offering highly creative and innovative solutions, we have been committed to enabling Pemex to benefit from efficiency improvements associated with our new technologies or integrated solutions. The successes we have enjoyed with Pemex have served as an important pillar to the development of our IPM business, with many best practices we apply globally having emerged from our collaboration with Pemex in Mexico
Schlumberger is a truly global company that employs over 126,000 people and works in more than 85 countries. What is the relative importance of Mexico (and Central America) in the context of Schlumberger’s global (or regional) operations and performance?
Mexico is among the most important markets for Schlumberger worldwide. Globally, Pemex is also one of our largest customers, and we pride ourselves on the strategic relationship we’ve developed with them over the years; a relationship we intend to continue strengthening.
What are the specific challenges to exploiting Mexico’s conventional and unconventional resources and to what extent do the reforms address these now that they are finalized?
Mexico’s energy reform is a move in the right direction. With a resource base that spans a diverse range of environments, from inland shale plays to the deepwaters of the Gulf of Mexico, the country offers a great deal of opportunities for both E&P and oilfield services companies.
As easily accessible resources are progressively depleted across the globe, the industry finds itself operating in increasingly challenging environments. Deepwater and unconventional plays are examples of resources that require reliable and efficient technology as well as integration to ensure successful and efficient development.
As Mexico seeks to develop its deepwater and shale resources, technology will undoubtedly play an integral role in their development. In addition to this, a large part of the country’s resources are heavy oil and this too represents an opportunity to leverage existing enhanced oil recovery (EOR) technologies and processes to boost productivity.
Mexico also possesses a highly attractive unconventional resource base. Although the industry now has access to technologies from Schlumberger, which address the subsurface challenges associated with shale resources efficiently and cost-effectively, there are still numerous above-ground obstacles that need to be addressed. These may be related to resource availability and utilization, infrastructure, security, and so on. This is a momentous challenge that can only be addressed by the industry as a whole to ensure that the entire process for the development of unconventional resources, from above and below the ground, advance simultaneously.
As exploration moves towards increasingly complex and costly environments, it has become commonplace for operators to form partnerships in a move to minimize the operational and financial risks involved. Mexico’s energy reform addresses that issue by allowing Pemex to effectively share the risks and responsibilities in developing the country’s most challenging resources by forming alliances with other companies.
On the other hand, looking at the nation’s existing conventional portfolio, we are likely to have an increased focus on boosting productivity and efficiency in the short term. Overall, we are optimistic that with the liberalization of its energy industry, Mexico will be in a stronger position.
Having enjoyed a monopoly position for three quarters of a century, to what extent can Pemex reinvent and adapt its organizational and operational culture to suit the newly created competitive environment?
Pemex are conveying a message of transformation that is consistent with the principles of the energy reform. Indeed, international partners looking to take advantage of the opportunities in Mexico should listen to these messages carefully. Pemex, and the E&P industry as a whole, is communicating its desire for international participation and investment. Instead of being apprehensive of international competition, Mexico welcomes it.
In round zero, Pemex was allowed to keep 83 percent of the country’s proven and probable reserves, and only a fifth (21 percent) of prospective resources (when it in fact asked for a third) – what is your interpretation of Pemex’s round-zero selection and what does it mean for Schlumberger?
As a service company, Schlumberger will support both Pemex as well as new E&P customers entering the Mexican market, irrespective of the plays. We have worked with most of the players looking to capitalize on the country’s opportunities and we will be sure to follow their investment plans here. We will make sure that we have the right infrastructure and resources to support their efforts.
Schlumberger has a solid knowledge and experience base across Mexico’s entire range of conventional and unconventional environments. All of our technology product lines are strongly represented in Mexico, thus giving us the capacity to support our customers in any of the projects that they participate in.
Having said that, deepwater plays represent a key area of interest for us in Mexico. Worldwide, Schlumberger is a clear leader in the deepwater markets in terms of technology and the capacity for complex project execution. Schlumberger maintains a strong focus on operational efficiency, reliability and integration in order to deliver value to its customers. In the unconventional plays, we have a number of exciting technologies that we have developed, specifically focused on specific reservoir challenges. For example, Mangrove stimulation design software and Broadband Sequence* fracturing service are designed to significantly improve the economics of shale wells, by carefully placing and completing the well to maximize productivity with optimized utilization of resources. The technology solutions and engineering workflows developed to overcome the technical challenges in shale plays positions Schlumberger as a leading services provider in Mexico and abroad.
Local content criteria is a key topic in Mexico with requirements for E&P companies rising from 25 percent to 35 percent by 2025. What initiatives and activities are you pursuing to develop Mexican capabilities across the value chain, from local R&D activities, to domestic suppliers and local talents?
Schlumberger is committed to building on the capacity and capability of local people and businesses to support the long-term development of the industry.
Starting with our people, Schlumberger employs a workforce of approximately 5,000 people in Mexico, of which as many as 97% are locals. Additionally, in developing future leadership for the organization, we have assigned in excess of 600 Mexicans in international assignments in order to improve their technical and leadership skills. Furthermore, we are heavily involved with a number of Mexican universities and academic institutions to ensure that future generations of petroleum engineers, for example, have a firm understanding of the industry and its challenges so that when they complete their training, they can hit the ground running.
Schlumberger has also invested in Mexico’s solid manufacturing base with a facility in Monterrey supplying parts for well completions to domestic and international markets. We are also building the capability for a regional distribution center for artificial lift products. Previously, these activities were based in the United States, but now they will be relocated to Mexico and will serve the entire western hemisphere.
In terms of research and engineering, we are registered in the Energy Sustainability Fund (Fondo Sectorial CONACyT-Secretaría de Energía-Sustentabilidad Energética) for investment, and are working on a number of research projects jointly with other Mexican institutions. These include the Universidad Nacional Autónoma de México (UNAM), Instituto Mexicano del Petróleo (IMP) and Pemex, among others. These efforts have led to tangible results with a number of technologies developed in Mexico.
We also have a dedicated regional technology center that focuses on examining production and reservoir related challenges specific to Mexico. Again, we work in collaboration with Pemex and IMP on addressing those challenges.
Schlumberger’s local flavor is further enhanced through the community initiatives we pursue locally, most of which are related to education. Schlumberger Excellence in Education Development (SEED), for instance, is a global non-profit educational outreach organization within the company which, in Mexico, helps schools set up computer labs and engage youth in science and technology. In doing so, SEED aims to build learning communities and knowledge-sharing environments in which students, educators and volunteers collaborate on projects.
To read more articles and interviews from Mexico, and to download the latest free report on the country, click here.