Mexico Pt.5: New times, new opportunities

Text and research: Jeroen Posma Project coordination: Anna Jonca
After the Spanish conquest of Ciudad del Carmen in 1518, the island was occupied by pirates for two centuries before it became one of Mexico’s most important fishing ports in the middle of the 20th century. However, its most important transformation occurred in the early 1980s, when the city became the capital of the Mexican offshore industry following the discovery of the Cantarell field. Today, it serves as a perfect market–sentiment barometer for the Mexican offshore industry.

Staying on the production plateau

“We must preserve the inalienable and imprescriptible right of the Mexican State to directly control the nation’s petroleum resources, while also incorporating elements that would enable the maximizing of the utilization of the oil wealth and promote the long–term supply of energy required by the economy, in a sustainable manner, at competitive prices and at international quality standards.” This is one of the opening statements that create the framework of the Energy Sector Program 2007 – 2012, which was revealed on November 28, 2007.

This program is the energy sector’s point of departure for President Calderon’s Vision Mexico 2030. Three primary objectives were outlined in the Energy Sector Program, the execution of which is in the hands Mexico’s Minister of Energy, Georgina Kessel. First, guaranteeing Mexico’s energy security in the hydrocarbons area. Second, foster the oil industry’s ability and commitment to operating at international standards for efficiency, transparency and accountability. And third, increase exploration, production and transformation of hydrocarbons in a sustainable manner.

In addition, this framework for the development of the Mexican energy sector also provides an operational target, albeit with rather large target ranges. According to the Energy Sector Program, PEMEX should raise its reserves replacement rate from 41% in 2006 to a minimum of 51% by 2012, while the upper target is 100%. The targeted crude oil production in 2012 ranges from 2.5 to 3.2 million bbl/day, setting an upper margin that only marginally exceeds current production of 3.113 million bbl/day over the first ten months of 2008. On the other hand, natural gas production, 6.35 MMcfd, in October 2007, should range between 5.0 and 7.0 MMcfd in 2012. The PEMEX leadership has set more precise performance targets for 2012, including achieving a 100% reserves replacement rate, and crude production at 3.1 million bbl/day.

According to official PEMEX statements, the company requires resources in the order of US$22 billion per year in capital expenditure between 2008 and 2012, a vast increase from last year’s US$14.5 billion, in order to meet its ambitious objectives. However, over the course of 2007, PEMEX officials have mentioned capital expenditure requirements of up to US$33 billion a year to ensure that crude production remains above 3.1 million bbl/day. PEMEX’s forecasts are largely in line with a U.S. government report forecasting that Mexico’s oil production would decline to 3 million bbl/day by 2012 before gradually bouncing back to a level of 3.5 million bbl/day by 2030.

Offshore production continues to dominate

To achieve its performance targets, PEMEX displayed a strong focus on its exploration and production activities throughout 2007, dedicating 86% of its CAPEX to this vital area. Mexico’s national oil company has made gradual progress in key activities of the E&P process through investments in 3D seismic acquisition, contracting drilling rigs and seismic vessels, increasing drilling activity, accelerating and optimizing the process of turning discoveries into producing fields, investing in the optimization of production from active wells, and evaluating the potential of increasing recovery rates in marginal and mature fields.

PEMEX estimates that approximately 54% of the prospective resources are found in the deep waters of the Gulf of Mexico, while approximately 34% of the prospective resources are located in southeast Mexico. Moreover, with 88.2% of current crude oil production coming from Mexico’s marine area, the country’s oil industry continues to be concentrated offshore.

Undeniably, the future of the Mexican oil and gas industry will be dominated by deepwater production over the next 30 years, as Carlos Morales, Director of PEMEX Exploration & Production (PEP), stated last summer. PEMEX estimates there could be up to 29 billion barrels of oil in the deepwater of the Gulf of Mexico. However, becoming a successful operator in deepwater will take effort, time, commitment, and firm determination, since PEMEX will not be able to enter into risk sharing agreements with NOCs or IOCs that possess the required deepwater technology and experience. PEP expect to start producing oil in deepwater wells in 2012, 2013 or 2014 from confirmed deepwater oil deposits including Noxal, Lakach and Tabscob. Also, according to Carlos Morales, PEMEX aims to drill 50 to 60 more exploratory wells in deepwater until 2012. In order to overcome the numerous challenges in deepwater exploration and production, as well as future developments in shallow waters, PEMEX is turning to the numerous Mexican and international service providers that have established a presence in the country or are preparing their market entry.

These service providers, particularly those dedicated to offshore activities, have played an important role in turning Ciudad del Carmen, nicknamed “The Pearl of the Gulf”, into a booming oil city. Founded in the pre–Hispanic era, Ciudad del Carmen subsequently served as a maritime centre connecting the Aztec and Mayan civilizations, was a trade hub between Spain and Mexico, and became a safe haven for pirates attacking the Spanish. In the mid 1970s, when the supergiant Cantarell field was discovered in the region, Ciudad del Carmen was transformed from a fishing and shrimping city into a oil hub for the offshore industry. In addition to still being known as one of the best locations to find seafood in Mexico, the city has become the home of the country’s leading offshore service providers and the centre of PEMEX’s deepwater activities.

Ciudad del Carmen, located in the southwest of the state of Campeche, has over 200,000 inhabitants who refer to themselves as Carmelitas. In July 2006, they voted Jose Ignacio Seara into the mayor’s office, a position that he will hold until 2009. “Needless to say, the oil industry is one of the main drivers of the Mexican economy, but Carmen is much more than just an oil town,” stressed Mr Seara. “Carmen’s uniqueness goes beyond the oil industry, the beautiful landscapes and nature; the people from Carmen are making the difference.” People generally assume that oil and gas activities in the Gulf of Mexico are concentrated offshore, but much of its impact is felt onshore in Ciudad del Carmen. According to the city’s mayor, the outcome of a cost–benefit analysis shows that the advantages of Ciudad del Carmen’s economic development have outweighed the negative externalities. The spin–off effect of economic growth driven by the oil and gas industry has been significant. “Despite the decline of Cantarell, the impulse of deepwater activities is creating enormous opportunities to develop and improve the infrastructure in our beautiful city. We know what needs to be done,” he concluded.

Dedicated partner from cradle to grave

As one of the world’s leading providers of geotechnical, survey, and geoscience services, Fugro has been among the frontrunners in riding the wave of opportunities created by PEMEX’s rapidly growing E&P investment. Founded in 1962, Fugro has approximately 11,000 employees working in over fifty countries. The oil and gas industry accounts for 71% of Fugro’s global turnover, and the company’s strategic focus in this industry is twofold: exploration for and development of new fields, and the optimisation of the production of oil and gas from existing fields. As a “cradle to grave” service provider, Fugro can be involved at different times and with different services throughout virtually the entire lifecycle of gas and oil fields over a period of 20 to 30 years. Overall, Fugro is a geoscience service company, offering field services that range from early exploration, including satellite imagery, basin technology studies and 2D and 3D seismic studies onto exploration drilling services including positioning and engineering services. Then, moving to platform installations, Fugro conducts seismicity studies including earthquake analysis studies and dynamic analysis of platforms. As well, the company provides reservoir software that allows its clients to better understand the processes ongoing during the life of the field.

While the company has experienced enormous international growth in recent years, the Mexican activities become a very important element in Fugro’s global business portfolio. Its decentralised and market–oriented organisational structure has been at the core of the decision to manage its Mexican operations from Ciudad del Carmen, the undisputed centre of the Mexican offshore industry, as opposed to Mexico City which historically has acted as a headquarter magnet.

“We are not a top down company,” confirmed P.J. Ruckman, Director General of Fugro Mexico. After having worked in the North Atlantic, North Sea, Mediterranean Sea, and off the coasts of China, Alaska, Africa and South America, P.J. Ruckman settled down on the Gulf of Mexico no less than thirteen years ago. The business culture in Ciudad del Carmen – where a select number of companies play a vital role in the success of PEMEX’s exploration and production activities – seems to be a perfect match for the outgoing Ruckman and Fugro business philosophy. “The various companies operating under the Fugro umbrella work independently and are allowed to operate in their areas of expertise,” noted Mr Ruckman. “One of the reasons I love working at Fugro is that the company gives autonomy to its local companies. This enabled us to concentrate on our core strengths: positioning, geophysical, geotechnical and seismic studies. It has worked out quite well.”

Certainly, the decentralization strategy has paid off handsomely for Fugro Mexico, which won two major contracts in 2007. In April 2007, Fugro was awarded a contract to perform geophysical and geotechnical surveys in the Bay of Campeche. This contract, valued at US$21.9 million, will be performed in partnership with Constructora Subacuatica Diavaz. In addition, Fugro started undertaking Mexico’s second largest 3D campaign, off the coast of Veracruz, under a US$82 million awarded by PEMEX last June. The company will acquire and process 3D seismic data of an area that covers approximately 7,200 square kilometres in the Anegada – Labay area of the Gulf of Mexico. For this flagship project, Fugro is bringing its newest vessel – the “Geo–Celtic’, which is currently the largest purpose built seismic vessel in the world – to Mexico. In combination with the study that is being conducted by Western Geophysical in the Temoa area, it is the largest study PEMEX has ever ventured into 3D and deepwater areas.

“PEMEX is being very aggressive in fast tracking these projects,” explained P.J. Ruckman. “Your typical exploration company would start with a 2D study, follow up with a 3D study and then proceed with drilling. In this case, PEMEX wants to fast–track the process, as a result of which our 3D studies will be finished completely by the middle of next year. PEMEX is going to be picking sites as quickly as possible, then it is a matter of going into the next phase of the exploration process by launching high–resolution geophysical studies, and we expect to do that next spring. If PEMEX finds sites of interest and can access the right number of drilling platforms, which is difficult, then you will see deepwater drilling in at least a dozen sites over the next couple of years.” Deepwater drilling is interesting in Mexico because both the Cantarell and Ku Maloob Zaap fields are located at less than 100 meter of water depth. “PEMEX is taking a great leap by jumping into 1000+ meter water,” analyzed Mr Ruckman. It is a very aggressive step and PEMEX is moving very quickly.”

“The Cantarell Field, the second largest oilfield in the world, has been a wonderful gem in the Mexican crown but it is becoming tarnished, so its time to start moving into deeper water,” assessed Ruckman.

In the next twenty years, he sees Fugro working with PEMEX as it moves into deepwater, using the experience that Fugro gained in the last fifteen to twenty years by working in deepwater areas of the Gulf of Mexico, West Africa, and North Sea. “Worldwide, in deepwater, we are the leader in geophysics, deepwater geotechnical and deepwater oceanographic work and are bringing that into Mexico in order to support PEMEX in the new deepwater markets,” boasted Mr Ruckman. “There is no need to reinvent the wheel and this is where Fugro sees a bright future.”

PEMEX is pressured for time in its exploration activities since oil production has declined in recent years, while its reserves replacement rate has not reached 50%. On the other hand there is a worldwide shortage of exploration seismic vessels, which creates a strain on Fugro’s ability to allocate vessels at will to the Mexican market. “Unfortunately, PEMEX has the obligation to contract all services and supplies in accordance with the Ley de Adquisiciones y Obras Públicas, which makes the process highly complicated,” explained P.J. Ruckman. Basically, there is a delay of about 140 days between the time of publication of a tender and the moment PEMEX can legally contract a company. “Obviously, this makes it extremely hard for contractors to schedule vessels. But as of right now, supply and demand are pretty well balanced.”

Currently, Fugro is trying to build a sufficient number of vessels for the 2D and 3D markets, with the objective of positioning them in various regions and leaving them there. This is destined to save a lot of time and money in mobilization and allows the company to plan ahead. “In the coming year, we will have three vessels working in the Northern Gulf of Mexico and we will do everything in our power to make these vessels available to PEMEX as they become available. The plan is to leave these three vessels in the area,” emphasized P.J. Ruckman. In its ambition to bring all the Fugro business lines solidly into Mexico, Fugro’s internal competition for vessels and equipment might prove to be as challenging as the contest for mayor contracts in the Mexican market.

It requires focus to take on Goliath

With 450 employees worldwide, C & C Technologies is a niche player in the surveying business that has found innovative ways to compete with industry Goliaths like Fugro. Formed by Thomas and Jimmy Chance, it was not until two years ago that C & C Technologies began operations in Ciudad del Carmen. With high resolution geophysical surveying and positioning services as its core business, C & C Technologies found a strong competitor in Fugro, which was the leader in providing these services in the Mexican market. “We entered a closed market, the cake was already divided very clearly,” remembered Josè Aguilar. As the Director General of C & C Technologies’ Mexican operations, he had to identify new opportunities in niche areas of the market where his company could fill the gap between the established companies.

Since C & C Technologies does not have the same financial resources as the largest players, it has to compete on technology. “We are developing new technologies to survive, and we have been pretty good at it,” confirmed Mr Aguilar. “We realized a 35% growth of the business last year and we are planning to continue growing at this rate.”

Two internally developed technologies have been the basis of C & C Technologies’ success. “In the positioning market we are providing highly accurate position services to PEMEX, at precision levels that cannot be matched by our competitors. Our GPS equipment services, which is now applied on 80% of the vessels in Ciudad del Carmen, offer ten centimetre accuracy anywhere in the world, while our next competitor offers one meter accuracy,” boasted Mr Aguilar.

C & C Technologies’ star of the show is the AUV, the Autonomous Underwater Vehicle. “This is a submarine that does not require any cable connections to the vessels on the surface and can autonomously collect all kinds of data. Collected AUV data is processed on–board and charts are transferred via satellite to a secure website for the fastest possible turnaround of client data. This is critical for the construction of oil rigs and service infrastructure in deepwater ranging from 1,000 to 4,000 meters,” clarified Mr Aguilar. “This is our most successful technology and positions us a step ahead of Fugro, which is developing the same technology, but we are 50,000 kilometres of survey experience ahead of them. You can’t just go to the supermarket and shop for this technology.”

C & C Technologies is looking to apply its AUV technology to deepwater opportunities in Mexico as it is already doing in Angola and Brazil. Together, these three countries make up what Mr Aguilar calls the ‘golden triangle’. “Three of the exploration projects we were involved in last year turned out to be the deepest wells in the Bay of Campeche,” noted Josè Aguilar. “We have definitely been in the right place at the right time. Now, our main goal in Mexico is to capture 90% to 100% of the deepwater market. PEMEX cannot go through a trial and error process in deepwater, which will cost fifty times more than in shallow water. We will be there to help PEMEX in deepwater and save them big bucks.”

At the core of the E&P process

The key to PEMEX’s short term success is a heavy investment in optimizing production in currently producing fields. But eventually, long term success can only come from heavy investment in exploration. One of the companies that have capitalized on the opportunities created as PEMEX is acting on this reality is ResLab. Officially called ResLab Geos Mèxico, the company was created on 19th August 2005, when ResLab acquired a 51% controlling interest in the Mexican laboratory service company Geos. Nowadays, the company is part of the Weatherford group.

Operating from its well established laboratory base in Villahermosa, the company has become Mexico’s market leader in core analysis and geo–science. “There still are two competitors in the Mexican market, but we have the greater portion of the PEMEX work,” confirmed John Lawrence, who came in as Director General following the acquisition. “The opportunity that I saw in terms of this position in ResLab was a niche market for the provision of petrophysical and geological data from core analysis which was only previously covered by one other service company. The data obtained by this service is rapidly growing in importance for PEMEX as it accelerates E&P investment. “It is the only measurement of rock properties made directly on the rock itself. All other measurements are made by remote sensing, such as well logs, geophysics or seismic surveys. These measurements are required to calculate oil and gas reserves and production rates, as well as to enable the proper calibration of the remote sensing methods against real direct data. Clearly the accuracy of those calculations and calibrations is dependent on the accuracy of the data obtained, and core data is the most accurate data obtainable,” explained John Lawrence. “We saw an enormous opportunity to grow the service, so we attacked that area of the market and have done very well over the past two years.”

The financial and technologic resources provided by Norway’s ResLab enabled the company to overcome its main obstacle to growth: the lack of equipment. Prior to ResLab’s market entry, the majority of the work was sent to established labs outside of Mexico, which meant the in–country profit margin was very low, limiting growth potential. “ResLab supported its Mexican operations through the provision of new equipment through an ambitious investment program. Whereas Mexico was previously seen as a generator of sales for international labs, ResLab turned it into a business in itself. “We are building an entirely independent profit centre that is focussing on becoming the major lab in Mexico, and we hope that this lab will start to serve other countries in the near future,” assured Mr Lawrence.

Business growth should predominantly be driven by increasing volume from PEMEX. “There is much talk of vastly increasing the number of exploration wells that are going to be drilled,” noted John Lawrence. “Typically, an exploration well will cut three cores. However, due to the growing awareness within PEMEX as to the importance of the data that can be obtained from cores, demand for the service may well increase faster than the rate of increase in exploration.

Riding the wave of E&P investment

Pride International entered the Mexican market in late 2000 with one rig, when PEMEX came out with its first international tender for jackup rigs, which turned out to be a successful strategic decision since within one year activity slowed down in the US Gulf of Mexico. As one of the world’s largest drilling contractors, Pride International operates a fleet of 68 rigs, ranging from platform and jackup rigs to semisubmersibles and ultra–deepwater drillships. Over the past years, Pride International rapidly expanded its Mexico–based fleet as activity continued to increase and PEMEX has been paying a premium compared to the US Gulf of Mexico.

“Mexico accounts for a significant portion of Pride’s revenue globally, and PEMEX is probably the biggest customer we have,” recognized Alan Porter, Director General of Pride International Mexico. “We currently have thirteen jackups and two platform rigs in Mexico contracted to PEMEX.” While major players such as Diamond Offshore, Noble Drilling, Todco and Nabors Offshore have entered the Mexican market over the past years, Pride International has been the most successful contractor, operating the largest offshore fleet working for PEMEX.

Over the last several years, Louis Raspino, President and CEO of Pride International, has significantly changed Pride’s strategic direction to position the company as a pure play offshore drilling company, focusing its growth on deepwater and other high specifications assets. In the Q3 2007 Earnings Conference Call, which Pride’s CEO called “one of the most significant quarters in the history of Pride”, the company reported major accomplishments toward its strategic objectives. Both the recent US$1 billion sale of the company’s Latin American land–based drilling and workover business and its E&P services business to São Paulo–based GP Investments, and the success in capitalizing on the opportunities in Mexico featured prominently on Mr Raspino’s strategic agenda. While the US Gulf of Mexico market remained soft, Mexico continued its rise as an increasingly important contributor to the company’s financial and operating performance. With average daily revenue for its mat jackup and platform rig fleet in Mexico increasing as contracts are repriced, and the mobilization of the Pride Oklahoma and Pride Mississippi to Mexico from the US Gulf, PEMEX is an increasingly important customer for Pride International.

In the same November 1st conference call, Kevin Robert, Pride’s Senior Vice President for Marketing & Business Development, predicted that a lot of growth is still to come in the Mexican market. Based on his understanding that PEMEX is seeking approval for a $27 billion budget for exploration and production, Mr. Roberts assessed that during 2008 that PEMEX will maintain its existing fleet of 35 jackups while also increasing its jackup fleet by 6 to 12 rigs. “Some of the new requirements could be satisfied with mat rigs, so in addition to renewing the nine Pride jackups that will roll over in 2008, we are also hoping to move a couple of more of our US Gulf jackups to Mexico”, he noted. Louis Raspino added that when looking at the rig supply and demand, the obvious place for PEMEX to get jackups is out of the US Gulf of Mexico.

Going forward, Pride’s strategy to become a pure offshore player will be closely linked with its growth in deepwater, which also is the next frontier for PEMEX. However, Alan Porter emphasized that there is a lot work still to be done in shallow water areas, both in terms of boosting the production of Cantarell and pursuing the numerous new opportunities. “PEMEX is moving into deeper waters but for the moment our rigs are located in the Canterell field, and on other development and exploratory areas,” he stated.

Nevertheless, deepwater opportunities with PEMEX are gradually gaining prominence on Pride’s radar. “We are already the largest offshore drilling contractor in Mexico with regard to the number of rigs in operation, however, I would personally welcome the opportunity to enter into deepwater work here,” recognized Mr Porter. “PEMEX has awarded work for deepwater semi–submersibles to three or four different companies and they will arrive in Mexican waters in the next couple of years. We hope to see additional opportunities coming next year, though this will depend to a great extent on PEMEX’s approved budget for 2008.”

“Personally, I would love to have a different mix of rigs, have a presence in the deepwater market, and have an increasing number of Mexican nationals working with us,” continued Alan Porter. “Also, PEMEX is making a significant effort to improve its safety standards and working methods, and one of our main goals is to ensure that nobody gets hurt on any of our rigs. Most importantly, I would like our operations here to be recognised for our safety performance and operational abilities,” he concluded.

Getting modelling into fashion

As drilling activities are intensifying, PEMEX has launched numerous tenders for platform construction in recent years, while many more are in the pipeline for the coming years. The bidding process for platform construction contracts is highly competitive, attracting companies such as ICA Fluor Daniel, Swecomex, J Ray McDermott, Dragados, Grupo Protexa, Bay–Inelectra and Bosnor. “Most of the times, proposals are subject to interpretation. “But if PEMEX would require all proposals to include a 3D model, they are no longer subject to any interpretation; you are already seeing the platform,” assessed Luis Garcia. “I wish things would work that way.” As Director General of Ecomecatronica, a Mexican company specialized in 3D electronic modelling, he might not be running the only company that has started applying this technology in Mexico, but his company is a frontrunner in promoting it.

“Presenting a model before the constructing contract is awarded would enable PEMEX to revise and analyze a platform fabrication proposal in detail. The question is why PEMEX is only asking for an electronic model after the contract has been awarded. I surely think that the logic policy would be to include the model as a part of the proposal,” noted Mr Garcia. “This would help PEMEX to identify the best proposal, and will result in cost and time savings while offering increased safety and security performance.” However, Mr Garcia recognizes that the problem is that the companies participating in the bid would then have to invest in those models.

Unlike some years ago, nowadays every platform construction contract requires the preparation of an electronic model that provides a preview of potential risks and events that might take place. “The electronic modelling is a step in the process of finding the perfect design while assuring drastic cost reductions. Before a platform is constructed physically, an electronic model can be applied to develop an optimal construction and maintenance strategy right from your desk. Also, after construction, electronic models facilitate discussion between engineers without the need to interrupt the platform operations,” explained Mr Garcia. “An interruption of a couple of hours on a production platform results in lost profit that exceeds the cost of three electronic models.”

Economecatronica has developed ten models between 2003 and today, which has supported the organization’s growth from 20 people to 130 people. Currently, the company is developing electronic models of PEMEX’s two largest platforms in the Bay of Campeche. Even though there are numerous challenges and opportunities ahead in the domestic market, Ecomecatronica has initiated its entry into the Anglo–Saxon and European markets. In addition to its traditional services, Ecomecatronica also sees opportunities for the application of its modelling technology in the field of design engineering. “For this purpose, we aim to visit companies abroad and here in Mexico,” stated Mr Garcia “we would like to model the biggest plants or platforms in the world.”

Ecomecatronica’s ambitions are based on a firm belief that modelling technologies will become a constant in PEMEX‘s future projects and tenders, as well as worldwide. “There is amazing potential in applying the software world to the oil industry. All great ideas begin with a dream, and whoever has the information and the way to interpret it, will always be ahead,” concluded Luis Garcia.

Growth partnering in the drilling process

The drilling fluids component of the complex drilling process is often a key success factor impacting overall process cost. Adding value to the customer’s drilling process through innovation and technology has been the core of the Q’Max business model since the company’s inception in 1993. Q’Max now operates in seven countries including Mexico. The company innovated a concept referred to as “Growth Partnering”. In essence this involved pursuing a win–win method of engaging with customers and creating a network of technical resource capacity through relationships with key disciplines, R&D facilities and chemical manufacturers. Q’Max develops solutions specific to the challenges presented in each of the geographical areas through R&D conducted in local laboratory facilities supported by the corporate R&D team.

Six years ago, after a previous experience in the Mexican oil and gas industry between 1989 to 1996, and several years working with Q’Max in Canada, Garrett Browne was selected to run the Mexican Operations and grow the company through offering innovative solutions to local challenges. His first priority as Director General of Q’Max Mexico was gaining an assessment of the opportunities available in Mexico for an innovative Canadian drilling fluids management company. “With PEMEX increasing it’s investment in exploration and production there were more challenges and along with it more opportunities,” Mr Browne stated. “For oil and gas operators, such as PEMEX, the drilling process is a key success factor.”

Q’Max’s challenge is to be the best at creating customer value, which can come in the form of reduced total process costs or increased revenue from reservoirs. “We create value by being the best at applying technology, product, and service to the customers’ drilling process through the components of drilling fluids, solids control and waste management,” he emphasized. “The challenges that operators have in consistently performing an effective and efficient drilling process become our challenges.”

Trusting in teamwork

Garrett Browne was quick to recognize that Mexico has an immense supply of talented, skilled and knowledgeable people and that the Q’Max asset was people. “Therefore it was an exciting challenge to find and acquire these skilled people, and create an organization with a unique blend of Mexican and Canadian culture and business philosophy,” he reflected. “Our people have proven to be technically innovative, advancing the science of drilling fluids and helping us to lead in bringing solutions to the industry.” For Q’Max to continue to grow its people need to grow, therefore learning and training are key elements. We operate a school in Mexico to train our field supervisors and to–date 60 Mexicans have graduated from this program, with another 20 attending school now. Each class of 20 students is selected from approximately 200 applicants who are generally qualified chemical, industrial, mechanical or electrical engineers.

Drilling in Mexico can be difficult. Challenges include deep wells, high pressures, high temperatures, and unstable well bores. To meet these challenges Q’Max has invested in a network of facilities covering all of Mexico’s oil and gas centers including total liquid storage capacity of over 10,000m3, mixing plants warehouses, offices, and laboratories. Employing over 350 highly skilled people in Mexico, Q’Max provides technical capability and capacity.

Always looking for problems to solve

Q’Max presently supplies both water–based and oil–based muds with densities ranging from 0.7 to 2.3 S.G. The company has a stable low density water–based system, which can negate the use of expensive liquid nitrogen, and/or avoid the huge losses of diesel when the Direct Emulsion systems presently used have too high a density, or there are massive losses because of drilling certain formations. “Also, we have an oil–based system that can be weighted to 2.7 S.G. using only barite, so we have more potential capacity than anyone else in the industry,” noted Mr Browne. “If Pemex ever has a really severe pressure problem, we can treat it, without requiring hematite. We are bringing real innovation to the market.”

Examples of new technologies being introduced into Mexico include a patented thermal desorption process for cleaning oil contaminated drill cuttings. The first model is designed for onshore application, however there is a potential for developing a model that can be installed on offshore platforms significantly decreasing the risk of spills while transporting contaminated cuttings to shore for disposal. The oil is captured for reuse and the clean cuttings can be used in land reclamation or other uses, which creates both economic and environmental advantages. We expect this technology could become the standard for managing oil contaminated waste.

Recently, PEMEX was introduced to a new technology referred to as the “Q’Clear” system that Q’Max is using in the Barnett Shale drilling area of Texas. This solids–free technology has resulted in reducing drilling times and costs significantly. We are working with PEMEX to determine the application potential in Mexico. Possibly it will help in making marginal wells profitable.

“The true measure of success is the customers’ willingness to continue to use you as a supplier. At the end of the day we see ourselves as an investment for the client. He invests in us, choosing us over our competitors, and we give him a better return on his investment,” Garrett Browne concluded.

Carmelita competitiveness

When Rudesindo Cantarell, a fisherman from Ciudad del Carmen, discovered oil seeps in the shallow waters of the Gulf of Mexico in 1971, he did not yet know that he found the world’s largest offshore oil field. The first well drilled in the Cantarell field, named after its discoverer, produced 36,000 bbl/day. However, by 1980, PEMEX had drilled over 200 wells, and the Cantarell field was producing more than 1 million bbl/day. Representing the majority of Mexico’s oil production, Cantarell’s production peaked at 2.13 million bbl/day in 2004 before starting its decline to 1.35 million bbl/day in October 2007, a production figure that was negatively impacted by a series of storms that shut production. Over the past decades, oil production at the Cantarell field transformed Ciudad del Carmen from a fishing town into the centre of the Mexican offshore industry, changing the lives of the generation that followed Rudesino Cantarell.

The grandson of the legendary fisherman, Josè Jesús Hernández Cantarell, started working in Ciudad del Carmen as a welder in 1970. Around 1978, his welding expertise and professionalism attracted the attention of private companies offering services to PEMEX in the offshore maintenance sector. While working on offshore platforms, he began to realize the potential opportunities in serving the needs of PEMEX. In 1987, he became an independent contractor for PEMEX, initially offering anticorrosion maintenance systems and applications for a diverse set of structures for PEMEX and other companies in the oil industry. “His innovative skills, experience, professionalism, honesty and responsibility to provide the best service got him the recognition of PEMEX and it was then, when he decided to risk it all and pursue his dream, which he named Construcciones Integrales del Carmen SA de CV,” noted Ing. Luis León Suárez, the Director General of CICSA, who is running the company with Lic. Rodrigo Santos, the legal representative of Mr Hernández.

CICSA, established in 1995 as a 100% “Carmelita” company – a company owned and operated 100% by people from Ciudad del Carmen – as kept its original activities but added a range of new services for PEMEX. In the years that followed, the company became more aggressive and competitive. From its strategically positioned base in Ciudad del Carmen’s Puerto Pesquero, CICSA started developing its activities directly with PEMEX by winning public multi–purpose contracts for the maintenance of drilling equipment located on the platforms in Cantarell, Abkatun, Pol Chuc and Ku–Maloob–Zaap, the repair of monobuoys and the maintenance of platforms.

At that time, Mexico’s marine platforms started presenting signs of structural deterioration caused by salt water induced corrosion, which inclined PEMEX to initiate a campaign to counteract the increasing impact of corrosion on its offshore structures. In 1998, having obtained broad experience in these areas, CICSA decided to participate in the bidding process and obtained its first contract to provide corrosion protection services with the Olgui One, the first vessel in Mexico to be specially designed to offer sand blasting and painting services. Until the end of 2005, the company consistently provided anti–corrosion protection services to PEMEX through three vessels, the Far Swift, Far Scotia and Ang Tide.

Nowadays, CICSA is opening itself to new opportunities that complement its anticorrosion services, and has entered areas such as supply design, engineering, construction, maintenance and rehabilitation, logistics, accommodation services, ROV, surface and saturation diving, cable laying and consulting. “These developments illustrate our vision and ambition, noted Luis Suárez. “Therefore, we are currently 2008, 2009, 2010 and 2011 model vessels that will be arriving in Campeche starting April 2008. In anticipation of its clients’ future need, CICSA has invested in the first 500t crane in the Gulf of Mexico, aboard one of its vessels, and the first 18–man integrated saturation diving equipment on another of its vessels, while all of CICSA’s vessels have at least 199 beds accommodation and over 400 square meters of covered space for workshops and storage. “Our challenge is to combine high technology and low costs,” recognized Mr Suarez. “Prices are set by PEMEX and intense competition makes Mexico a challenging market. CICSA understands that and is ready to demonstrate PEMEX that we can meet and exceed their requirements and are ready to provide these services at lower costs.”

Its founder was once a well trained, experienced and hard working offshore welder who relied on his vision and commitment to transform a dream into what CICSA is today, one of the leading players in the Mexican market for offshore support services. Nowadays, the company’s ambitious management is looking for opportunities beyond Mexico’s borders. “We are investing in new alliances to keep CICSA competitive, and recently opened a new branch called CICSAMarine in order to develop our international presence, our international alliances and most important our international contracts. With this objective in mind, CICSA has signed long term contracts with companies such as OCEANTEAM Power & Umbilical ASA, Sealion Shipping LTD and REM Offshore ASA that will enable us to provide our services to PEMEX in the Gulf of Mexico and to other important clients in the US Gulf, Africa, South America and the North Sea,” confirmed Luis Suárez. Despite the international ambitions, CICSA’s Managing Director realizes that CICSA is destined to grow hand in hand with PEMEX. “Our development is intertwined with the development of PEMEX, and as Mexicans we strongly believe that PEMEX will succeed in its ambition to continue producing over 3 million bbl/day. Our responsibility is to the future of our client, and today, our client is PEMEX and therefore all the Mexican people”.

BW Offshore is one of the world’s leading FPSO contractors. From its operational head office in Oslo, Norway, Svein Moxnes Harfjeld oversees its operations in with assets operating in Mexico, Nigeria, Mauritania and Russia. BW Offshore’s CEO gives his vision on the future of FPSOs in Mexican waters.

What is the competitive edge of an FPSO over traditional solutions in the current environment?

The competitive edge of an FPSO relates to numerous aspects of that application. If we take a step back and look at the characteristics of the areas in which new oil is being found, we can conclude that easy oil is history. All the new oil that is being developed is either in deepwater, remote areas, and harsh environments, while the product itself is typically heavy crude or complex gas components. In general, it is much more complex to develop new oil. In particular, when it comes to deepwater fields that are far from shore, the FPSO is a truly independent solution. It does not rely on extensive subsea infrastructure connected to shore such as other applications. FPSOs have storage and offloading capacity, full accommodation, all the production facilities, and can connect to the production wells at the seabed. Also, once a field is depleted it is relatively easy to remove the equipment and sail away from the area. FPSOs are really a turnkey solution, in particular for deepwater and remote areas.

How would you compare the safety of an FPSO with the safety of platforms and pipeline infrastructure?

This is directly related to the aspect of weather, and we have seen an increasing number of hurricanes in recent years. An FPSO with our own patented technology, a disconnectable mooring system, is superior in rough weather. The flexibility of an FPSO to disconnect when bad weather approaches and reconnect quickly offers various advantages. First, you have minimum disruption to production. Second, you have no damage to the equipment, which also reduces the cost for insurance underwriter. Finally, FPSOs are also superior on safety issues related to spillage and people. The FPSO Yùum K’ak’Náab, which is working for PEMEX, is the first FPSO in the Gulf of Mexico. This September, hurricane Dean passed straight over the FPSO during a period when PEMEX had to evacuate close to 20,000 people from its oilfield operations. The FPSO had no damage. This technology is new for the geographical region for the Gulf of Mexico, but it is well proven in a large variety of geographical areas, particularly in the North Sea, which is known for its extreme weather. We happen to own this technology that has an unparalleled track record in these types of conditions.

Who do you believe to be the main users of FPSOs in the future, the NOCs or IOCs?

Three years back, we made the strategic decision to increase the focus on NOCs and move towards NOCs representing the predominant part of our portfolio. This is driven by the fact that the NOCs today control close to 80% of the world’s oil reserves. Because of the high earnings of the NOCs, resulting from the high oil price. We are seeing an increasing tendency by the NOCs to contract technology directly from the service industry and use their own funding. Our strategy of focussing on NOCs has been quite successful. We have contracts with PEMEX, Petrobras, Petrobras, CNOOC, Rosneft and Statoil.

As you indicated, BW Offshore operates around the world. What are the specific challenges and opportunities that you have identified in Mexico since BW Offshore decided to enter this market?

The first challenge is that this is new technology for the Mexican shelf. A new contractual and regulatory framework had to be developed together with PEMEX. Putting this into place created a great workload for both us and PEMEX, which is a highly competent organization. I believe that PEMEX has been very brave in being willing to pursue this new technology which is very competitive for the needs that PEMEX has in the Ku–Maloob–Zaap field. As you know, the Ku–Maloob–Zaap consists of some very heavy crude oils. The unique feature of the Yùum K’ak’Náab is its ability to blend the heavy crude down to 13 API with a lighter product, so that we can create the commercially viable Maya crude. Alternatively, PEMEX would have to build substantial infrastructure onshore to blend these products. That would be much more expensive than the cost of an FPSO. Going forward, if the current reports are even only correct on a margin, PEMEX will have substantial reserves in much deeper waters. We believe that the FPSO will provide a highly attractive proposition for PEMEX once they move into deeper waters. The infrastructure that is currently available on the seabed in the Cantarell and Ku–Maluub–Zaap field will not be available when PEMEX moves out to 7000, 8000, 9000 and 10000 feet water depth.

Which opportunities do you see for the use of FPSOs in mature and marginal fields, and would BW Offshore be interested in participating in that area?
We believe that smaller, dynamically positioned FPSOs could be very useful for PEMEX in that respect. We have equipment like that, and we have been in dialogue with PEMEX on how to potentially employ these equipments in Mexico. We believe there is a market, and yes, we would be interested in participating in that.

Putting heart and soul in chasing a dream

While being a frontrunner in FPSO technology, BW Offshore has not been one of the driving forces behind the introduction of smaller, dynamically positioned FPSOs in the Mexican market. The development of this niche commenced in 1997, when the Cora – a well testing vessel and the first vessel of this category – was converted and began working for PEMEX. At the time, Gabriel Delgado was the project manager for the conversion the vessel, which was referred to as the ecological vessel.

Following this initial project, he came with the idea to place production equipment on a dynamically positioned vessel, to address problems in oil exploration and production, and try to provide a solution.

The main idea of the service to be provided in this niche came from the observation of the pollution problems that occur in exploration and production activities. “Basically, when you are completing, repairing of stimulating wells, all the petroleum products that are released are flared. Maritima de Ecologia (Marecsa) provides a service to process and dispose of these products in an environmentally friendly way, thereby avoiding the flaring of products as much as possible,” explained its Director General, Mr Delgado.

Marecsa’s vessels approach platforms to receive the products on board that would otherwise have been sent to the flare boom. This process has three main effects. One is the obvious environmental benefit. The second effect is commercial, because you are not flaring a commercially valuable product. The third impact is related to public image, which is increasingly important. Even though the concept sounds very simplistic, it took Marecsa almost five years, from 1997 until 2002, to get the first contract.

Gabriel Delgado’s ambition started to gain momentum after he attended a conference in 2000, where Antonio Ceballos, currently General Director of PEMEX Refining, overheard him talking about the mini–FPSOs with dynamic positioning. He called Mr Delgado aside and said, “I think you have a wonderful idea. Why don’t you develop it?”

At the time, he potential of this technology was underestimated, which Mr Delgado explained when comparing Marecsa’s solution, with what he calls “the way of the future”, with “the traditional way”. The traditional way has two options. One traditional option is flaring, which Gabriel Delgado describes as a disaster that really does not have a price, even though flaring is just like burning money. The environmental impact of the emission of millions of tonnes of carbon dioxide is really hard to measure in monetary terms, but if PEMEX flares 2,000 barrels of crude, it could have saved over US$ 100,000.

The other option is bringing a barge with three or four tug boats, and using a big hose to dump all the product into the barge before transporting it back to shore. If you compare the traditional way with what we are doing, our cost is about 25% of the traditional way. Also, there is also a clear time advantage. “We can run one test, one fluid reception stimulation every three days, while the traditional way takes about 15 to 20 days at least, if not more,” boasted Mr Delgado. “Giving rough numbers, a traditional test would cost maybe US$1,000,000. Our vessels, including personnel, costs about US$200,000 to US$250,000 per test; not including the cost saving in terms of crude and environmental impact. The direct cost savings are about 75%, while the cost saving on environmental impact is immeasurable. Sixty percent of the charter of our vessels is already paid by the crude oil that is recovered. It is already a success by numbers.”

Outflanking the competition on price – Marecsa does the job at 25% of the cost of the traditional way – the company was awarded the first contract in 2002. Subsequently, it took the Marecsa a year to convert the first vessel, and get her in operations in March 2004.

How large is the market in Mexico?

Marecsa started with the assumption that there would be a market for one or two vessels. However, PEMEX began determining that these vessels could also be used to support maintenance and repair work. For example, Marecsa’s vessels can be used to repair pipelines without disrupting production by connecting one valve to another valve through the vessel, close the loop, and produce through your vessel while the repairing the pipeline. “Recently, one of PEMEX’s pipelines was clogged, so we connected a vessel to each side of the clogged part of the pipeline and then pumped water through the system. We collected all the dirt and grit that was clogging the line and restored production of 8,000 bbl/day in about 24 hours. By providing this service there was no need to send one other specialized vessel and use pig launchers,” illustrated Mr Delgado. Similarly, separators on platforms can be repaired without disrupting production by diverting all production to a vessel. “The decision between closing down a well that produces 10,000 bbl/day for repair activities and using one of our vessels to maintain production during the repair work is not a tough decision,” noted Marecsa’s Director General. As a result, his company is providing and average of 120 services per year, per vessel.

Marecsa is currently operating two vessels, has won a third contract with PEMEX and is working on introducing a fourth vessel to the Mexican market. This fleet will enable the company to offer between 400 and 500 services per year. In the future, Mr Delgado believes that there is going to be a need for at least six of these vessels for well repair, well intervention, well stimulation, and exploration activities in the country. He also foresees a big future for mini–FPSOs with dynamic positioning in remote, marginal and mature fields. “Let’s picture a marginal field that has 3 million barrels in the reservoir, which at the current oil price has a value of over US$200 million. At this moment, many oil producers do not care about these small fields, but the oil industry will not stay like this forever. After drilling a well in that location, are you going to install a platform? Are you going to install a US$100 million dollar pipeline to produce US$200–300 million of crude? That is when I say that these mini–FPSOs with dynamic positioning are going to be ideal. If you are just going to install a riser and the adequate hoses, you can bringing in a mini FPSO, drain the well in three to four months, close the well and go to the next location. That is how I see the future of marginal fields,” stated Delgado. In addition, Mexico is on the verge of entering deepwater, where these vessels could be used to eliminate the need for pipelines to receive the crude. “Initially PEMEX can use our vessels and later on determine to use an FPSO or an alternative solution for each particular location. When I say that the Mexican market can have six vessels, this is only for the services that we are currently offering. However, my theory is that the mini–FPSO market is going to increase for the deepwater, marginal fields, remote fields and declining fields. You can have a fleet of mini–FPSOs with dynamic positioning working at the wells, and have shuttle tankers collecting the crude. Why have all these very expensive subsea pipelines that run for many kilometres to shore and create a potential risk? Have a vessel there, install the riser and receive all the crude onboard. Our technology is one of the most important new tools for this industry worldwide, and PEMEX is the first one to adopt this technology.”

These new applications for dynamically positioned mini–FPSOs are destined to impose new technological and volume characteristics, and PEMEX is already looking for more storage capacity. Marecsa’s first vessel, the “Toisa Pisces”, can hold about 36,000 barrels, while the “Bourbon Opale”, its second vessel, has only about 18,000 barrels storage capacity. The third vessel that the company will bring into service mid–2008 will have 60,000 barrels storage capacity. For the fourth vessel, PEMEX is asking only for 40,000 barrels, but Mr Delgado is sure that his client would love to have a vessel with 60,000 or 70,000 barrel capacity.

Mr Delgado has been advocating the idea of FPSOs with dynamic positioning, but he recognizes that there is going to be a limit on the size of the vessel. The Yuum K’ak’ Naab, Mexico’s first FPSO, has 2,000,000 barrels storage capacity, but she has to be turret moored. The size limit is not related to the storage capacity but to the length of a vessel. “Moving a 100,000 barrel mini–FPSO, which might be 150 to 160 meters long, with dynamic positioning among so many platforms is a true challenge. Our vessels are tremendously safe, no accidents and no collisions, but a lot of people get nervous when very large vessels are approaching platforms, so that could be a limitation for the service that we are presently providing. However, for deepwater and marginal fields you can easily operate a 250,000 to 300,000 barrel FPSO,” analyzed Gabriel Delgado.

As a new technology provider in a developing country, Delgado is asking himself an interesting question: “Is Chevron, Petrobras, Total or Shell ready to be open to an innovated service provided by a Mexican company?” While he believes that the use of mini–FPSOs with dynamic positioning is the future for marginal fields, declining fields, well testing, and also deep water, Gabriel Delgado recognizes that it will not be easy to bring about a complete change in the mindset of the international oil and gas industry. Fortunately, the industry is becoming very open to implementing environmentally friendly technologies, and Marecsa’s progressive environmental solutions are starting to instil excitement in minds of reporesentatives from Petrobras, Total and Anadarko who have visited its vessels.

Technology to meet the challenge

While the debate on the optimal mix of FPSOs, pipelines infrastructure, subsea solutions and other innovative technologies is destined to continue into the foreseeable future, PEMEX is betting on many horses in the short term. As its production challenge intensifies, the company is opening the door more widely for international leaders in technological solutions for the oil and gas industry.

“PEMEX is growing the hydrocarbons industry and we are trying to help them do that,” started Mike Malone, FMC Technologies’ General Manager for Latin America. “As the leader in subsea completions and technology around the world, FMC Technologies tends to grow in line with the market expansion in the forty countries where is operates, and the position of Mexico at this point is an important for all of FMC Technologies’ product lines ranging from surface to subsea equipment”. For example, FMC Technologies is providing subsea completion services for the Cantarell project in the Bay of Campeche, where it supplies 10 shallow water trees, including umbilicals and surface control systems.

FMC Technologies has the ambition to work closely with PEMEX to assist the company in developing its expertise in subsea technology. According to Mr Malone, the decline of Canterell, which is one of the key drivers of the rising E&P investment Mexico, is a good development for companies such as FMC Technologies. “It is forcing PEMEX to move into unchartered areas to overcome that decline. With that, since we are moving into deeper waters, PEMEX requires technology that has previously not been present in the country. We possess that technology and we have a proven trajectory in the most important areas worldwide, such as the North Sea, South East Asia, West Africa and the Gulf of Mexico, serving the biggest oil companies around the world. Our ambition is to bring that technology to Mexico.”

“PEMEX is not different from any other customer and Mexico is not different from any other part of the world, we need to show them what we do, where we have done it, how successful we have been at it. PEMEX is moving into deeper water. That is our core business, that is where we can help the best by providing engineering and subsea systems, enabling PEMEX to develop fields in 1000 meters or more of water.”

While Mike Malone characterizes Mexico as an emerging market, FMC Technologies is not a newcomer to this market. In the past, the company has been focused on the surface business and is now moving to deeper waters. This requires different technologies and adjustment. “The very nature of the subsea systems, which are vastly more expensive than surface wellhead systems, means that our top line can grow exponentially,” Malone anticipated. “It is a different business. We see stable growth in Mexico.”

However, it remains hard for companies such as FMC Technologies to position themselves before the actual deepwater activity takes off. “As we go forward we hope to participate in the deepwater development, noted Mike Malone. “We perceive that given our experience, willingness and commitment to this market, we will be able to grow with it. I think that managing rapid growth will be one of the challenges that we have, not only in Mexico but around the world.” Certainly, when you have got something to prove, there’s nothing greater than a challenge such as the one FMC Technologies will be facing.

A Norwegian touch in Ciudad del Carmen

Straight from university, where he studied Civil Engineering, Javier Leon–Orantes started working for Grupo Diavaz, one of Mexico’s most successful service providers to the oil and gas industry. In 2005, Grupo Diavaz proposed him to join the merger process between Diavaz Oceanteam – a joint venture between Grupo Diavaz and Oceanteam with activities in UK, the Netherlands and Mexico – and DeepOcean. After the merger, Javier Leon–Orantes stayed in DeepOcean as part of the integration team, and moved with his family to Norway in September 2005. Two years later, he returned to Mexico to run DeepOcean operation in the country, while also looking for opportunities expand the Brazilian market where DeepOcean recently won its first contract.

When it was created in 1999 by a group of managers with the support of two shipping companies, Solstad and Ostensjo – both form the Haugesund region in Norway – DeepOcean started as a very small company offering subsea services. “Being a small company, its competitive advantage was in delivering high–end services in a competitive market,” put Mr Leon–Orantes. “From the very begining, DeepOcean started competing with big players in the market, and was committed to making an excellent first impression.”

A few years ago, DeepOcean was very focussed on the Norwegian market, but after the merger the company started developing its international scope adding offices in UK, Netherlands and Mexico while opening new regions in the international market. “Mexico is very important for DeepOcean. It is a fantastic opportunity, and very challenging,” stated Javier Leon–Orantes regarding his recent transfer to Ciudad del Carmen.

Besides high–end services, high quality, state of the art equipment and well trained people, the other key success factor in Mexico is DeepOcean’s relationship with Grupo Diavaz and the fact that the companies relies on Mexican people to run its local operation. “When we started with the ROV inspection services the entire marine crew of the vessels consisted of foreigners,” elaborated Joaquin Romero Licona, who preceded Javier Leon–Orantes as Regional Director. “Right now, 85–90% our office staff and crew members in the ROV services division are Mexicans.” However, he described the culture of DeepOcean Mexico as a mix between Norwegian and Mexican. “We have the values of the Norwegians and the creativity and ability to improvise of the Mexicans.”

When Javier Leon–Orantes left Mexico in 2005, the market was not particularly strong, but over the last six months, DeepOcean has identified about fifteen potential tenders where it could offer at least part of our services. “One of the most important developments in Mexico is that PEMEX is starting to install its first subsea wells,” analyzed Leon–Orantes. “At the moment these are being installed in shallow water, not common in the industry, subsea technology is normally used for deeper water. At the moment, we are in discussion to bring our subsea technology, which we use in the North Sea, to Mexico and start developing the synergies what will result in greater efficiencies for PEMEX in the future. The expansion of the work is amazing, PEMEX is preparing for deepwater so there is only good news in Mexico.”

Right now, DeepOcean has four vessels and one ROV in Mexico but the company is looking to expand its fleet by 50%. “We want to have the infrastructure to cope with growth while controlling our risk exposure,” noted Leon–Orantes. Therefore, DeepOcean is expanding its Marine Operations Division in Norway to give better support to all our regions and our expanding fleet of new built vessels. “We know the market is coming, and we can develop very interesting things with our customers here in Mexico. Mexico recently welcomed its first FPSO, and we can start developing more and more projects that are similar to our North Sea projects.”

By sharing its Norwegian culture and values with its colleagues in Mexico, DeepOcean wants to raise the bar in the level of service, in the reliability of contracts, and in the reliability of the end product that it is offering in the Mexican market. “We want to bring international deepwater technology to Mexico,” concluded Leon–Orantes. “Deepwater will bring new challenges and we want to assist PEMEX in becoming a better company.”

One’s challenge is another’s opportunity

The currently declining Cantarell oil field historically made a dominant contribution to PEMEX’s overall production volume. It entered into production in 1979, but falling reservoir pressure urged PEMEX to develop a strategy aimed at boosting its production rate. At the core of this strategy was the injection of nitrogen into the reservoir to maintain its pressure, which had been declining in the years leading up to 1997. The success of this strategy has been illustrated by the fact that production at Cantarell doubled between 1995 and 2004, the year in which production at the world’s largest offshore field peaked.

The doubling of production at Cantarell also created boom times in Ciudad del Carmen and opportunities for Mexican service providers to successfully enter into the oil and gas industry. While the industry in Ciudad del Carmen continues to be dominated by international players, Mexican companies such as Servicios Marinos y Terrestres and Proyectos Peninsulares have successfully jumped on the bandwagon.

More than the power of one

After working for many companies operating in the Mexican oil and gas industry, Raúl Garcí;a Castañeda created Servicios Marinos y Terrestres in 1996. Having interacted with many of the companies that operated in Ciudad del Carmen, he understood there was an evident need for new diving and general inspection services along of the entire chain of oil extraction process.

Establishing a position in the competitive market for support services in Ciudad del Carmen was relatively difficult because companies such as Servicios Marinos y Terrestres do not have access to large scale financial support, but the business opportunity was right there. “Friends from other companies helped us, and as we started working we could manage to develop our business step by step,” remembered Raúl Garcí;a Castañeda.

The critical growth opportunity for Servicios Marinos y Terrestres was created by the change in PEMEX‘s maintenance philosophy, shifting from corrective maintenance to preventative maintenance. “This increasing focus on maintenance activities has created important opportunities for companies such as ours,” confirmed Raúl Garcí;a Castañeda.

Nowadays, one of the most important areas for PEMEX, besides exploration and production, is the inspection field. Basically, the main activity of Raúl Garcí;a’s company is offering diving and inspecting services for platforms, pipelines and vessel both in the submarine and surface areas. In order to be competitive and offer the latest technologies, Servicios Marinos y Terrestres has established business alliances with new technology development groups, which has ensured its access to the latest technologies. Its zero accident track record has been an important driver of its success to attract international companies that are looking for opportunities to enter into alliances with Mexican partners. Raúl Garcí;a believes that the presence of international companies in the Mexican market is an opportunity rather than a threat. “Through the introduction of new technologies we will have opportunities to combine our expertise and mutually contribute to solve problems such as the decline of the oil production.”

Since Servicios Marinos y Terrestres‘ most important activity is diving, the company is now preparing to move into deepwater diving. “We plan to position ourselves in the deepwater diving services market by acquiring and using equipment such as ROVs,” noted Mr Garcí;a. “We are looking forward to establish some alliances in that regards.” Raúl Garcí;a Castañeda has two main priorities for Servicios Marinos y Terrestres‘ future. Continue offering world class inspection services based on the latest technologies, and definitely offering deepwater services and equipment. “We want to project our company as a leading company in the field of inspection services for the next 5 years.”

“Mexico is a country blessed with countless opportunities in the oil and gas industry. There are many opportunities for both local and international companies and we all can work together based on mutual respect and healthy competition. On this basis our cooperation will lead to increasing knowledge, new technologies and professionalism that will benefit the development of the Mexican oil and gas industry,” he concluded.

It is like climbing a mountain

As many Mexican entrepreneurs, also Abelardo Rivera Lechuga had to rely on his persistence until PEMEX’s contract system stopped favouring foreign companies. When he began working for PEMEX, 24 years ago, he was in charge of the SCADA systems. “At the time, I was wondering why only foreigners could manage high technology. I realized that we could do the same things here in Mexico, and began to work on this idea,” reflected Abelardo Rivera, who is now running his fourth company. Randomly, he got in touch with Rockwell Automation, which gave him the opportunity to develop Proyectos Peninsulares, operating as a partner of Rockwell Automation representing its Allen–Bradley trademark. “Most of the control systems on the offshore platforms are Allen–Bradley systems, and we have developed great intellectual capital to work with these systems,” explained Abelardo Rivera. “I have come a long way, a step by step process of searching the best opportunity.”

As the partner of Rockwell Automation, Proyectos Peninsulares can often avoid the highly price competitive public tenders, because as the owner of the trademark Rockwell Automation can work based on directly assigned contracts. “If we would have to work through the public bidding process then the quality would be killed due to the competition on price,” realized Mr Rivera.

To advance his company’s progress, Proyectos Peninsulares’ Director General is emphasizing the developments of its intellectual capital. “The first thing is training, therefore we have invested heavily in training and equipment families of Allen–Bradley technology, such as ControLogix, PLC 5, SLC 500, Flex IO, Entek vibration system and Panelview.”

“Twenty five years ago it was not common to see a Mexican programming a PLC, because people believed that Mexicans could not operate American high technology,” stated Mr Rivera. “We have broken these ideas, which was a hard process.” Since Proyectos Peninsulares has become an accepted service provider for PEMEX it finds itself having a competitive edge over international companies, which have to overcome a language barrier and have difficulty competing with Proyectos Peninsulares’ low prices. “However, other Mexican companies are trying to compete with us by offering exactly the same service. The competition is hard, very hard,” noted Abelardo Rivera. To gain a competitive edge over the local competition, Proyectos Peninsulares embarked on a strategy of working with international companies that use Allen–Bradley products to complement their products, such as FMC Technologies and Endress+Hauser. “We are looking for strategic alliances with companies that complement the Allan–Bradley product range,” confirmed Abelardo Rivera.

Proyectos Peninsulares’ Metal Mechanics division, which complements the Electronics and Automation, Electric Maintenance divisions, aims to work with the international drilling contractors, which has been very hard because of the reputation disadvantage of Mexican companies. Nevertheless, Abelardo Rivera anticipates strong future opportunities for high technology solutions aimed at predictive maintenance. “My experience in Mexico shows that most of the maintenance has been corrective maintenance, while the international standards are developing towards predictive maintenance. This is the strength of our company, so we have great opportunities to develop as a predictive maintenance company,” stated Mr Rivera. “It is not easy, but in the end PEMEX will have to go this way because predictive maintenance significant reduces the maintenance costs. We are very excited to be promoting the use of predictive maintenance in the Mexican oil and gas industry.”

After 24 years as a contractor, Abelardo Rivera Lechuga still likes to grow step by step. “It is like climbing a mountain – I am from Puebla where I climbed Popocatepetl and Iztaccihuatl – you go step by step. We are climbing a very big mountain and our goal is infinite,” he concluded.

New opportunities in Ciudad del Carmen

Transportes Aereos Pegaso, operating a fleet of fifteen helicopters and one Lear jet, is the successfully competing with the larger air transportation service providers in the Mexican market based on a balanced strategy of cost competitiveness and innovation. While counting Toluca, Dos Bocas and Mexico City among its home bases, Pegaso recently made significant investments new facilities in Ciudad del Carmen for two purposes.

“First, the utilization rate of the fleet is very high with PEMEX. This is positive but very challenging, particularly in terms of maintenance. Ciudad del Carmen will stay the centre of high volume offshore operations, and therefore the maintenance hub for Pegaso’s fleet, regardless of where exploration and production activity is moving in the coming years. That is why we decided to expand our base of operations here,” explained Enrique Zepeda, Pegaso’s Managing Director.

Second, in addition to the new 1800m² hanger, Pegaso constructed new offices and a passenger waiting room with the aim to attract a different market, the corporate jets that are arriving in Ciudad del Carmen. “Previously, passengers of private jets and their crew had no place to stay at the airport. Our facilities include a special resting area for the pilots of the two or three private jets arriving in Ciudad del Carmen per day, while Pegaso is also offering refuelling and cleaning services as well as the facility to station planes,” added Zepeda. Time will tell if the assertive pursuit of this new niche market will prove to be another example of small but dynamic companies outmanoeuvring the industry leaders.

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