The following is the fourth entry in a series of brief pieces focused on the speakers that will be participating in the Mexican Oil and Gas Summit on July 1st in the Sheraton Maria Isabel in Mexico City. To see the full list of speakers, click here. To register to attend, click here.
Ernesto Iniesta has been working extensively to promote deepwater technological development in Mexico through his position as Commercial Director of Subsea Technologies in Latin America for FMC Technologies. He has also participated as a legal and technical adviser in the design of contractual models for oil and gas projects in shallow waters and deepwater in both Mexico and Latin America.
Iniesta will be participating in our panel on deepwater opportunities during Mexico Oil & Gas Summit. The following segment is part of our interview with Iniesta for Mexico Oil & Gas Review 2014; you can find this excerpt on page 186 of our publication.
Risk, Protection, and Technology after the Energy Reform
Q: Which role does FMC Technologies aspire to play in the Mexican oil and gas industry as it undergoes a transformation following the Energy Reform?
A: With the increasing production at Ku-Maloob-Zaap and the development of fields such as Tsimin-Xux and Ayatsil- Tekel, PEMEX is on target to reach its goal of stabilizing production at 2.5 million b/d, before increasing it to 3 million b/d in the coming years. The goal of FMC Technologies has always been to support the development of onshore, offshore, and deepwater projects in Mexico, and we believe that the Energy Reform will help to grow the opportunities in those areas in the coming ten to 30 years. While many countries have already gained deepwater experience by developing projects, Mexico is starting from zero. It has to learn how to develop such projects with the right solutions through optimal execution, how to attract the necessary investment to make the projects profitable, and how to manage the accompanying risk. Brazil is a good example of how to develop deepwater activities, since Petrobras started from zero as well. It did not move directly from shallow waters to working at a depth of 2,500m, where the conditions are most challenging. Brazil developed this experience by taking on progressively more challenging projects over the years. The technology necessary to develop fields in ultra-deepwater is also not widely available. It must be adapted to field size and characteristics, and needs to be approved, tested, and evaluated in order to develop the right solution for each particular field, especially given the vast investments needed. Large oil and gas operators generally form consortiums to spread the risk associated with developing deepwater projects. Based on the technology requirements, the risk involved, and the investment required, a consortium is a proven method of finding the optimal operator.
Q: Could PEMEX ever win and execute a deepwater contract without being a part of a consortium including experienced deepwater operators?
A: PEMEX will have to prove that it possesses experience in the execution of these types of projects, a reliable source of financing, and a general strategy to deal with risk management. It will need to comply with the requirements of the new law and be as qualified as anybody else participating in the bidding rounds. Right now, PEMEX does not possess the experience to do this. PEMEX and the government will need to be smart about how PEMEX pursues participation in these projects. It should begin developing the necessary experience by contributing around 20% to 30% of the investment in appropriate projects, so that it could then incorporate its people into these projects so that it starts to gain experience in all the development phases of said projects, from design to execution. This will help PEMEX understand the parameters necessary so it can participate as an operator in the future.
Q: What will be the role of the new National Agency of Industrial Security and Environmental Protection for the Hydrocarbon Sector (ANSIPA) in changing the conversation around risk management in Mexico?
A: We expect that ANSIPA will have to develop a specific law related to how to deal with pollutants from oil and gas activities. To be successful in this endeavor, it must look into the previous experience from operators and legislators in the US side of the Gulf of Mexico. The Mexican government established the proper rules with the Integrated Service Contracts as these ISCs put up rules with suppliers depending on the size of the companies and of the suppliers. They have already negotiated liability, because they know how to handle that aspect. The IOCs already have proper insurance, which helps clarify the situation. If an incident is caused by the IOCs and the suppliers, they are responsible to the government for being fully transparent about the information involved. That is why the government must establish a perfect set of rules, which are not vastly different from what is currently in place.