After conducting in-depth interviews with 183 key stakeholders in the Mexican oil and gas industry, and a careful process of transforming their perspectives, ideas and ambitions into a 381 page comprehensive overview of the latest developments in the sector, the 2013 edition of Mexico Oil & Gas Review is currently done and at the printer.
We look forward to officially presenting Mexico Oil & Gas Review 2013, and its unparalleled content, to the industry at the Mexican Petroleum Congress that will be held from June 5-8 in Cancun. If you are a speaker at the conference, you will be among the lucky recipients of a copy of our publication, which is the official present for all participating speakers. Alternatively, visit us at our stand (#255) and leave your business card to participate in the hourly raffle to win a free copy of Mexico Oil & Gas Review 2013. Of course, you can also visit our website to order your copy: www.mexicooilandgasreview.com/printedition.
In the meantime, it is our pleasure to present a shortened version of the interview with Pemex CEO Emilio Lozoya that is featured in this year’s edition. We hope you will enjoy this preview!
Q: In what ways can increased budgetary and administrative autonomy enable Pemex to optimize its profitability and success in creating economic value?
A: One way to measure the value of an oil company is through its sales, and the benefits that these sales generate. Pemex, compared with other oil companies, makes a high profit before taxes and operates at relatively low production costs. For this reason, Pemex should have management autonomy and be subjected to a fiscal regime that allows it to invest more in order to produce more, and thus pay more taxes. While other oil companies pay around 35% of their revenue in taxes, Pemex pays over 70%. Management and budgetary autonomy would allow Pemex to operate with far greater efficiency by reducing bureaucracy, and to respond to changing market circumstances with more agility. Pemex should be seen as an engine of economic growth, through which Mexico can attract investment and technological development while strengthening the domestic supply chain.
Q: What are the main pillars of Pemex’s strategy to increase oil production to between 2.7 and 3 million b/d by 2017, and what is your approach to help Pemex to reach that goal?
A: Unlike in recent history, Pemex now has a broader portfolio of exploration and production activities. We are currently working on 20 new projects, both offshore and onshore, to increase production. However, it is imperative for Pemex to have partners with whom we can share risks, because Mexico’s energy future lies in deepwater exploration and production, where projects require larger investments. Oil companies around the world, including state-owned oil companies, diversify risks without losing the ownership of the hydrocarbons. Mexico has 30 years of oil production guaranteed at the current production rate, but if you want to exploit unconventional resources it is necessary to drill thousands of wells, and partners are required to do that, not only from a budget and technological perspective but also to meet the organizational and logistical requirements of such an undertaking. Also, by working with partners Pemex will be stimulating the development of the oil services industry by bringing new players into Mexico.
Q: The energy reform envisions the participation of the private sector in non-essential activities of Pemex. Which activities of Pemex do you consider to be essential?
A: The aim of the reform is to exploit Mexico’s hydrocarbon wealth in a way that enables Pemex to stop being a source of foreign currency and start becoming a company that produces more hydrocarbons in a cheaper and cleaner way, while creating high quality jobs and generating more tax revenue. All of Pemex’s activities are important because they are part of a production chain that starts with exploration and finishes with the delivery of the end product to the client. However, the priority for Pemex at this moment is exploration and production of hydrocarbons in order to advance the entire production chain of the company.
As emphasized in the Pact for Mexico, we will be looking for the participation of new players in the oil and gas industry, both individualy and in partnership with Pemex, in many of these areas. Pemex is seeking to attract resources from other players to accelerate the development and exploitation of Mexico’s hydrocarbon resources.
Q: What is your perspective on the success of the first two rounds of Integrated Services Contracts (ISC), and what are your expectations for the upcoming third round in Chicontepec and a future round in deepwater?
A: In early March, we held an informative workshop about the third round of integrated service contracts, during which it became evident that there was great interest among the companies participating in the Chicontepec bidding round, despite the fields’ complexity and the degree of specialization required for their successful exploitation. Based on our experience from the last two rounds of ISCs we are looking for honest and open dialogue with organizations that are interested in bidding in the third round. The fields in Chicontepec will be awarded in July 2013. We still have not established the correct scheme for deepwater, but it will be completely in line with the current regulatory framework. The integrated service contracts have allowed us to invest resources in fields that were previously inactive. In addition to the nine integrated service contracts that were tendered in the first two rounds.