In an excerpt from his exclusive interview with Mexico Oil & Gas Review 2016, Peter Armstrong, VP of Business Development at HB Rentals reveals details of change in the company, discusses logistics and sourcing concerns, and explains what opportunities Mexico holds for the company.
Q: How has the company evolved in the last year, and what major projects have you undertaken in Mexico?
A: Mexico remains just as much of a priority for HB Rentals as last time we spoke. We believe the country is going to be a long-term growth market for both the onshore and offshore oil and gas industry. The latter has long been one of our traditional, consistent markets in Mexico. Recently, we undertook a project with the Norwegian vessel company Farstad, which has been historically active in the Mexican offshore market. After approaching Farstad in Norway from our Ciudad del Carmen operation, the vessel company reinvigorated its focus on the market and successfully bid on a subsea construction contract, which required temporary living quarters on its vessel, the Far Sentinel, to support the inspection, maintenance and repair work. We are in the middle of a global digital marketing campaign, consisting of ten white papers, tracking the Far Sentinel project from inception all the way through to ongoing service support outside of our Ciudad del Carmen service facility, something that has never been created before in this industry. We believe the Farstad project in Mexico is an excellent example of how HB Rentals operates globally. We have also undertaken our first onshore project in Mexico with the American drilling company Horizontal Well Drillers. It is this company’s first project in-country, and as the market opens up, we expect more and more international players to bring their technology and expertise. That is where we see our primary market in terms of initially expanding into the land market, and we already have all of the necessary resources locally in order to support oil field housing for such projects.
Q: What are the changes you are making to logistics to ensure that you have a sufficient number of units in-country to respond to new contracts?
A: We have several offshore accommodation units in Mexico, where we intend to keep them, although we will move them around the Gulf according to demand. We can also build new accommodation units in-country if a particular opportunity warrants the investment. As a rental company, we maintain a rental base of assets and we work toward maintaining a certain level of utilization. When utilization rates start becoming high, this is a signal that we should consider investing more capital in rental assets. There will always be times when demand peaks rather suddenly, and we cannot always meet short term needs as our business strategy is to maximize utilization rates of our fleet over time. If we have too many assets in any one country, we risk decreasing our utilization rate and return on investment. So, it is always a careful calibration of the requirement of assets to meet the expected level of demand.
Q: To what extent do you find yourself sourcing a lot of the mobilization equipment and operations from Mexican providers, or supplying them in-house?
A: We have always had a mix in terms of utilizing our own assets and those sourced locally. This is a conscious choice, because owning many assets can result in tying up significant capital that may not be ideally utilized. We try to find the sweet spot between self-owned and third party assets, and this varies according to regions and service yards. For the offshore industry, we tend to perform everything in-house because the engineering and project execution is much more complex. From this perspective, the onshore market is much simpler, but the fact that we have to be constantly moving is another challenge. It is important for us to understand all of the resources a region can offer for this undertaking, be they directly in our control or in our supply chain.
Q: What could your expertise bring to the deepwater segment, which is expected to open in regions such as Tamaulipas?
A: Although there are only a handful of competitors in the offshore accommodation industry, the deepwater sector has an even more limited number of temporary accommodation providers, given the strictness of the regulations and the more challenging risk factors. We believe HB Rentals is one of the strongest, if not the strongest, when it comes to deepwater support capability. One of the aspects that makes the offshore market easier to support is there are only a finite number of companies that have the expertise to service it, regardless of the specific geographic region. As new regions and basins open up with the various rounds in Mexico, our clients tend to pull us into these markets. Especially with our global relationships, the large international vessel and oil field service companies will incorporate us into projects as part of their strategic supply chain. Our long-standing commitment to our Mexican clients will also ensure that we enter new deepwater basins as the Mexican market continues to expand.
Exclusive interview with Peter Armstrong, VP of Business Development at HB Rentals.
This is an exclusive preview of the 2016 edition of Mexico Oil & Gas Review. If you want to get all the information, plus other relevant insights regarding this industry, pre-order your copy of Mexico Oil & Gas Review 2016.