Mexico Oil & Gas Review’s interview of the week belongs to Julio Loreto, Country Manager Mexico of Weatherford, which delivers innovate technologies and services designed to meet the world’s current and future energy needs in a safe, ethical and sustainable manner. Across his interview, Loreto highlighted the importance of restructuring Mexico’s oil and gas value chain to achieve affordability. In addition to his perspective on the local value chain, Loreto outlined Weatherford’s strategy to meet its current and future goals in Mexico.
Q: Has the restructuring of Weatherford changed Mexico’s role in the company’s strategy?
A: Under our new structure we are more agile in understanding potential customers’ needs and executing plans. In fact, I see parallels between where the country is today in terms of progress after the reform and Weatherford’s transformation. By removing layers and moving decision making and resources closer to the point of delivery, we can bring solutions to the table a much faster pace with a greater understanding of the customers’ needs.
Now, we can more easily take advantage of all the expertise we have in Mexico. For example, our new processes enable more opportunities for us to analyze the historical data we have and to approach customers with proactive solutions. This sort of analysis and decision making can now be made in Weatherford at the country level, which greatly accelerates the speed at which we can execute contracts and deliver services. I believe that is going to be the impact of the new Weatherford structure in the Mexican market.
Q: How has Weatherford dealt with the slump over the past couple of years?
A: The problem we have been dealing with is that some fields cannot be profitably produced in the current oil-price environment. Over the past three years this evolved into a situation in which service providers had to continually lower their pricing, and that in turn impacts the whole chain. We finally reached a point where everyone agreed this way of working was not healthy for anyone.
Now, we are approaching things in a different way and working with our customers to find a new business model that is healthy for everyone. This model starts with two factors: firstly, using data and analysis to understand our customers’ challenges and goals and secondly, presenting integrated solutions that help them achieve these goals.
Q: What project from 2017 best reflects Weatherford’s capabilities in Mexico?
A: One of the things we are very proud of is our participation in the shallow water market starting around 2Q17. At the beginning of this project we put an integrated offer on the table that combined all our products. With the assignation of the wells there was an expectation with regard to the historical performance of other wells. As of the end of 2017, we have drilled four wells and in all of them, we have bettered the historical performance. In one well in particular we reduced the overall well construction time by 31 days. These numbers truly reflect the technical abilities we are offering in the Mexican offshore market.
Since 2008, our participation with PEMEX onshore has been massive, with projects in Chicontepec as well as the Burgos basin where we have drilled over 3,000 wells. We have proven our technical capabilities on land, drilling wells seven days a week. But in 2017 we have moved into the offshore market, bringing the same level of performance that PEMEX needs. The faster these wells are drilled the more dramatically the cost goes down. If the drilling is planned for 180 days and is completed in 160, those are 20 days of savings. In 2017, we demonstrated what we are capable of.
Q: What lessons have you learned from Weatherford’s seven-year experience in Chicontepec?
A: In the case of Chicontepec we can divide the results into two categories. In the first, we can discuss issues of technical performance such as field execution. From an external perspective, considering how Mexico was able to move into a massive field development and go from zero to 80 rigs in around six months, it demonstrates how capable the country is in undertaking such massive projects. Our high level of participation, in turn, shows that Weatherford can manage a large project; we can mobilize, we can deliver and we can execute these wells.
Then there is the other side: helping our customer to achieve higher financial performance and increased production. There I believe we have a good opportunity to go back and consider lessons learned, see what worked and what did not. We can then take these lessons with us the next time we undertake a project of this scale.
In 2011, there was a great idea for what PEMEX called laboratorios where companies were given a field with a certain level of productivity and then were responsible for implementing the technological solutions to raise the production to the level that PEMEX wanted. The concept was great, but over the course of the project many of the participants lost focus on the goal of increasing productivity and thereby extending the life of these fields. We might have been able to sustain this work for years until the last drop of oil was drained, but that vision was lost.
There are still positive factors present in Chicontepec that will enable new business models, allowing us to go back and take a different approach to make Chicontepec commercially viable in the current price environment. We want to work together with the national oil company to create a scenario in which they can profitably produce and we can sustain our activity.
Inefficiencies kill businesses. On the service company side, we need to be enablers of efficiency and we have to deliver cost-effective solutions. Being cost-effective does not mean lowering pricing. It means thinking about what it takes to make a project highly productive.
We are committed to helping our customers achieve higher production at a lower cost. That is what we are focused on.