Last week, as you probably figured out from your multiple visits to our stand and the activity from our Twitter account, we were at the Congreso Mexicano del Petróleo 2012. In what was the biggest petroleum congress ever in Mexico, according to the organizer committee and its President, Dr. Guillermo Domínguez, companies from all over the world (Switzerland, Japan, United Kingdom, United States, Netherlands, Canada, Venezuela, etc.) got to coexist, do business together, and even got to know professionals within different services in the oil and gas industry. There, at a strategic spot, with the L-100 brand in the location map, stood Mexico Oil and Gas Review 2013.
The first thing to say about the Congress this year is that it was impressive: the size, the organizing capacity, the variety of services done in the industry and of countries represented by different companies made us feel as if we were hosting the Oil World Cup 2012. The difference was the environment of camaraderie that was felt within all the professionals in the industry: competing forces joined together, happy to see each other, different services accompanying each other, as complementary as they actually are in the field, and everyone enjoying of the great organization by Dr. Guillermo Domínguez, his organizing committee, and Grupo Alba.
The second thing that comes to mind when talking about the Congress is the seriousness of the event. Even as the general ambience of fellowship dominated, there was business going all over the place: whether it was developing business contacts, scheduling meetings, presenting new projects, or even closing out verbal agreements, CEO’s from all over the world got their hands full in an event where they could meet with almost every major player involved in the world. From smaller to bigger companies, the Congress felt like a win-win for everyone in the business side of things.
The thing that caught me the most, though, was one of the first events we attended to: the Opening Lecture. In this conference, the main speakers were the Pemex CEO, Dr. Juan José Suárez Coppel, the Director of Pemex Exploration and Production, Ing. Carlos Morales Gil, and the President of Society of Petroleum Engineers (SPE) Chapter Mexico, Dr. Pedro Silva. As Dr. Suárez Coppel approached the stage, the environment was calm and unresponsive: people were expecting the same lecture they’ve heard from Pemex CEO in last July at ExpoForo. And, at first, people were right. The economist from ITAM and Brown University, Head of Pemex, was again proclaiming the way Pemex needs to have more investment in exploration to be successful, but that, nevertheless, Pemex had done a great job with the invested resources. The main steps to achieve this success resided, according to him, “in the ability to be the only company and country to have such a capacity to turn 3P reserves” – which he compared to deals with different providers to acquire cars for future sales as a car selling agency –“ to 1P reserves” – which he likened to cars ready to sell. Dr. Suárez Coppel talked about keeping these reserve levels to “be one of the countries with the biggest proven reserve replacement rate in the world” and developing deepwater fields at a bigger rate next year, since “Mexico was this year the second country rated in amount of deepwater drillings in the world”. He continued to praise the way Pemex has evolved in the last years, and how, due to its people, they are becoming a better company every day, with the results to prove it. Suddenly, when nobody saw it coming, he took out a slide from nowhere.
“In Pemex, we have to push the pedal to the bottom, but we have the handbrake on.” Dr. Suárez Coppel started to talk on the tax limitations that the government imposes on the company. “Pemex generates utilities of around 200 billion pesos, when you don’t take away expenses on subsidies and taxes. In the end, Pemex comes out with a loss, and 94% of their utilities are paid in taxes and rights paid. Pemex’s contribution to the Federal Budget doesn’t let us plan ahead long-term or invest.” The constraints that the government holds right now on Pemex have limited their operation. Today, Pemex is not as efficient as it could be, and Dr. Suárez Coppel is finally voicing his concerns about it. “We need to open the industry: create shared contracts… stop being a state-owned entity and have our own government. There is no crisis with Pemex, there’s profitability and what we need to do is to handle ourselves as a company.” The next slide was a cliffhanger: “we should follow three different models to achieve this: Banxico model, Saudi-Aramco model, and Petrobras model.”
Why should these be the three models to follow? Well, Banxico is right now managed as a private company, which would allow Pemex to have a clean reorganization of their finances, a corporate government, the utilization of citizen bonds to help with financing, and, overall, a Pemex entity outside of the Federal Budget. This is more or less what Juan Carlos Zepeda Molina, the Pressident Commissioner of CNH has been pushing in the last months. The Saudi-Aramco model would help Pemex to escape the state-owned regime, through amendments done to the 28th Constitutional Article, and also have complete autonomy in terms of control and remuneration, the possibility of establishing alliances with private companies and emitting stock. Finally, the Petrobras model would serve as an example for the industry: with amendments to the 27th Constitutional Article, the oil industry in Mexico would be open to celebrate concessionary contracts with other private companies and have an open market for the end product. Interestingly enough, Enrique Peña Nieto just asked to get more detailed information on the way Petrobras propelled the energy reform in Brazil to use it as a guideline for Pemex.
At the end, Ing. Morales Gil also gave a support message to what his CEO just said: “We’re not in 1938 anymore, and we have to evolve with the global industry for Pemex to continue excelling as a company.”
So, what is your opinion on this controversy of the privatization?
Note: Once more, we would want to thank everyone that visited us during the Congress, and even got interviewed behind our cameras! A big thank you also to Dr. Guillermo Domínguez, the organizing committee and Grupo Alba for their courtesy!