Shell, founded in 1907, looks to satisfy society’s energy needs in an economic, social and environmentally responsible way. Present in Mexico since 1954, the company has a strong participation in every Mexican oil and gas segment, from upstream to retail. Mexico Oil & Gas Review 2018 sat down with Director General Alberto de la Fuente to ask about the IOC’s deepwater ambitions in Mexico.
Q: Now that Mexico’s market has opened, how important will the country become for Shell’s global activities?
A: Shell will celebrate its 65th anniversary in Mexico in 2019, which illustrates our long commitment to the country. Furthermore, what the country has seen in the past year is just a reflection of what is yet to come in the long term.
Mexico fits well into our global portfolio and thanks to the Energy Reform we can become more active participants in the Mexican oil and gas industry. In upstream, an area where we think of ourselves as extremely competitive, we focus mainly on deepwater operations and that is precisely what we are after in Mexico. By 2020, we expect to produce 900,000 boe/d from deepwater projects worldwide, so it is definitely an area of growth for the company. We do not make commitments for production because we want to prioritize value. Still, we are producing close to 3.8 million boe/d from all our operations, which means that by 2020, 25 percent of our portfolio could come from deepwater. We have participated in deepwater projects for the last 40 years; we have always been pioneers and have led the industry forward.
Regarding downstream operations, we think Mexico has an important role to play given the size of the country and the growth it is experiencing. The country has over 120 million inhabitants and is the fifth-largest fuel retail market in the world, so it is imperative for Shell to be present. We are growing in retail operations, lubricants, aviation applications and the whole downstream value chain.
Q: How is Shell planning to bring the highest added value to Mexico’s deepwater operations?
A: We will take advantage of our extensive experience, bringing first-class operations to the country. We want Mexico to operate in line with the best standards in the group, taking advantage of what we have learned over the years. This involves technology but it also has to do with the way we operate and how we remain cost-efficient. We are building the best team together with the best practices and the best technology available in Shell.
Q: How ready is the local supply chain to participate in new deepwater projects and face the challenges of a global industry?
A: Just like other global players, Shell has made the development of local suppliers a priority in its localization strategy. This makes sense from a business and a community perspective. We opened a sourcing office in Mexico in 2011, long before the Energy Reform, and for seven years we have worked with local suppliers to build their capabilities and allow them to compete in international tenders. Our team certifies local suppliers to make sure they comply with HSE standards, as well as quality, ethics and compliance. We have contracts with Mexican fabrication yards that are producing modules for projects in Pennsylvania.
Mexico has gradually built a name for itself in the international market and we have discovered that the national talent has much to offer after a long tradition in the oil and gas industry. Having said that, specifically in deepwater applications and because of their technology-driven nature, Mexico still lacks the capabilities to compete on a global scale. However, Shell and other players will introduce more technology for local players to do more for the country’s development. This is a long-term process but we believe it is the right approach instead of just imposing a local content rule to condition foreign investment, as happens in the automotive and aerospace industries.
Q: Although the company’s focus has been on deepwater, would Shell be interested in participating in the onshore rounds?
A: One of the advantages we have is that we can participate in many sectors. We already have a few blocks in shallow-water regions and we are evaluating our participation in other projects. It is true that the bids for onshore mature fields are less attractive to a company like Shell, just as they are less attractive to PEMEX these days. Economies of scale are not there but there are still unconventional oil production projects to be bid, and those could also be an area that we could explore.