This week’s interview of the week is with Philip Souyris, Senior Vice President for Mexico and Caribbean Region of Seadrill. We discussed the company’s involvement in Mexico’s deepwater drilling operations and its local content strategy. Seadrill is a leading offshore drilling company that manages a fleet of 68 rigs, including jack-ups, semi-submersibles and tender rigs.
Q: How is Seadrill paving the way toward deepwater drilling operations in Mexico?
A: Seadrill is a pioneer in Mexico’s deepwater operations. In 2011, we became the first international company to provide drilling services to PEMEX. As a pioneer, we had to lead by example, showing how to manage the different risks associated with the operation as well as how to implement international best-practices and standards. In 2013 and 2014, we won five more contracts with PEMEX and in 2016, we agreed to provide ENI with a jack-up. Due to market conditions, growth has been slower than we would like but nonetheless, we are developing our client portfolio at a good pace. Our clients have recognized that our standards are high and they understand that our emphasis on safety operations is an investment, not a waste. Seadrill places huge importance on the training of its personnel. We train them not only in-country but also in important O&G hubs, such as Dubai, Norway, the UK and the US, so they can acquire international experience and international best practices. When we say we lead on safety by example, we mean it. Seadrill has a safety baseline and if the operator refuses to comply, we do not work with them. Of course, any additions to that safety baseline are welcomed.
Q: How do you rate CNH and ASEA’s regulatory framework when applied to real operations?
A: CNH and ASEA have compiled a good set of rules based on input from the industry, as well as information from other countries that have gone through a similar market-opening process. Nevertheless, operators are still complaining about the bureaucracy and how it delays their activities, with several months often required to receive approval for drilling. Considering that IOCs have delivered a time plan for operations, and that they are already deploying human and financial resources to comply with that time frame, a delay due to bureaucracy means capital losses.
We have not yet seen great involvement from ASEA but we expect that as operations increase, it will become more involved and interact more closely with companies.
Q: How can Seadrill help its customers to reach their local content requirements in a highly competitive market?
A: One good example of Mexico’s push to foster growth in the industry is the lower local content requirement compared to Brazil. In Brazil, the government did not do a good job when it required companies that were just exploring to have a high rate of local content. These companies were not even sure whether their projects would be economically feasible and yet they were asked to include a lot of local content in a country that did not have the required market to provide for it, greatly boosting prices. Mexico’s incremental approach to local content requirements reflects the reality of the market and although there is work left to do, it was a very good start. I am confident that the required changes will happen in Mexico, and that these will take place at a faster pace than in Brazil because of the Mexican culture and the real push that the Energy Reform is providing.
An important added value Seadrill offers for operators entering Mexico is, in fact, its local content. We have more than 80 percent of local content in our fleet, from the vessels we own to our supply chain, 70 percent of which comes through Mexico. This is not only an added value in the sense of local content requirements, but also for Seadrill’s ability to get any needed service, product or tool faster than its competitors. The licensing rounds have been harsh, and companies must lower their baseline costs as much as possible to ensure their financial sustainability. We are already doing this with our local supply chain, as well as with strategies such as delaying fleet delivery times. Another strategy was to consolidate purchases from several suppliers into only one vendor, therefore increasing purchasing volume for that vendor and decreasing the unitary costs of the purchased components through economies of scale.
Q: What milestones is Seadrill working toward in Mexico’s oil and gas industry?
A: We have already become the biggest drilling operator in the country, with an emphasis on efficiency and safety first in all our operations. We want to maintain that position, as well as to become the preferred provider for the industry. Seadrill has 52 rigs deployed, and by 2022 we expect to have 75. To achieve this, we will retain our focus on safety and maintain our high standards. In that sense, we are ready to provide any IOC coming into Mexico with the needed experience and local content to successfully perform operations in the country.
This is an excerpt from the 2018 edition of Mexico Oil and Gas Review. If you want to get all the information, plus other relevant insights regarding this industry, pre-order your copy Mexico Oil and Gas Review or access our digital copy.
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