o&g mexico 2008 part 5

MexicoEnergy reportJanuary 2008

January 2008 Oil & Gas Financial Journal • www.ogfj.com www.focusreports.net 1

MexicoNew times, new opportunities

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.

Pt.5

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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 sus-

tainable 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 objec-

tives 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 Mexi-

can energy sector also provides an operational target, albeit

with rather large target ranges. According to the Energy Sec-

tor 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 expen-

diture between 2008 and 2012, a vast increase from last year’s

US$14.5 billion, in order to meet its ambitious objectives. How-

ever, 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 dominateTo 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 drill-

ing 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

With 88.2% of current crude oil production coming from Mexico’s marine area, the country’s oil industry continues to be concentrated offshore.


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 off-

shore 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 sub-

sequently 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 fish-

ing 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 indus-

try is one of the main drivers of the Mexi-

can 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

José Ignacio Seara Sierra, Presidente Municipal (Mayor) of Ciudad del Carmen

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 infrastruc-

ture in our beautiful city. We know what needs to be done,” he

concluded.

CandC_OGFJ_0801 1 12/27/07 4:20:39 PM


Dedicated partner from cradle to graveAs 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 employ-

ees 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 technol-

ogy 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 includ-

ing earthquake analysis studies and

dynamic analysis of platforms. As

well, the company provides reser-

voir software that allows its clients

to better understand the processes

ongoing during the life of the field.

While the company has expe-

rienced 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 Car-

men, 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, Direc-

tor 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 busi-

ness 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, geophysi-

cal, 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 geotechni-

cal 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 proj-

ect, Fugro is bringing its newest vessel – the “Geo-Celtic’, which is cur-

rently 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 geo-

physical studies, and we expect

to do that next spring. If PEMEX

finds sites of interest and can

access the right number of drill-

ing 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 interest-

ing 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 aggres-

sive 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 deep-

water, 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 pro-

duction 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 abil-

ity to allocate vessels at will to the Mexican market. “Unfortunately,

PEMEX has the obligation to contract all services and supplies in accor-

P.J. Ruckman, Director General of FUGRO Mexico

D E E P WAT E R At Pride International, we’ve always gone to great lengths to provide innovative drilling solu-tions. Now we’re going to great depths. Building on our broad and successful experience in deepwater operations, we’re changing – from a diversified drilling contractor to a premier offshore driller. With a clear focus on deepwater and other high-specification assets, we offer a global fleet of sophisticated floaters and jack-up rigs backed by the industry’s top talent. We’re changing our focus, but not our commitment – to safe operations, exceptional perfor-mance and unsurpassed customer satisfaction.

A C L E A R F O C U S

Pride_OGFJ_0801 1 12/27/07 11:31:07 AM


dance 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 GoliathWith 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 Technolo-

gies began operations in Ciudad del Carmen. With high resolution

geophysical surveying and positioning services as its core business,

C & C Technolo-

gies 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 José

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 devel-

oping 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 pro-

viding 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 autono-

mously 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 José 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.”

Reslab_OGFJ_0801 1 12/27/07 11:47:32 AM

Jose A. Aguilar, Director General of C & C Technologies

Helise_OGFJ_0801 1 12/27/07 11:05:06 AM


At the core of the E&P processThe key to PEMEX’s short term success is a heavy investment in optimiz-

ing 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 México,

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 competi-

tors in the Mexican

market, but we have

the greater portion

of the PEMEX work,”

confirmed John Law-

rence, who came in

as Director General

following the acquisi-

tion. “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 measure-

ments are required to calculate oil and gas reserves and produc-

tion 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 obtain-

able,” 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 vol-

ume 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 investmentPride 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 cur-

rently 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, focus-

ing 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

John Lawrence, Director General of ResLab Geos Mexico

Alan Porter, Director General of Pride International Mexico

Fugro_OGFJ_0801 1 12/27/07 11:03:52 AM


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 look-

ing 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 opportuni-

ties. “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 off-

shore 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 com-

ing 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.

Duncan_OGFJ_0801 1 12/31/07 2:22:47 PM


Getting modelling into fashionAs 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 elec-

tronic 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 pro-

posal, 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 con-

tract 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, elec-

tronic 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 initi-

ated its entry into the Anglo-Saxon and Euro-

pean markets. In addition to its traditional

services, Ecomecatronica also sees oppor-

tunities for the application of its modelling

technology in the field of design engineering.

“For this purpose, we aim to visit companies

Luis Garcia, Director General of Ecomecatronica

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 model-

ling technologies will become a constant in PEMEX`s future projects

and tenders, as well as worldwide. “There is amazing potential in apply-

ing 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.

Ecomec_OGFJ_0801 1 1/3/08 11:21:58 AM


Growth partnering in the drilling processThe 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 Partner-

ing”. 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 previ-

ous 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 assess-

ment of the opportunities avail-

able in Mexico for an innovative

Canadian drilling fluids manage-

ment company. “With PEMEX increasing it’s investment in explora-

tion 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 con-

trol 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 supervi-

sors 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 chemi-

cal, 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 cover-

ing 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 solveQ’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, choos-

ing us over our competitors, and we give him a better return on his

investment,” Garrett Browne concluded.

Garrett E. Browne, Director General Mexico for QMax

Q’Max’s plant in Villahermosa has 3000m3 of liquid storage, which equals 18,000 barrels, making it the company’s

largest facility in the country.

We are dedicated to reducing costs and

increasing revenues for our oil and gas industry customers.

Suite 1700, 407 2nd Street SWCalgary, Alberta Canada T2P 2Y3Tel: 403-269-2242Fax: 403-269-2251

Carretera Circuito Del GolfoVillahermosa – Cardenas km 155+500

Rancheria Gonzalez 3a. SeccionCentro. C.P. 86260

Villahermosa, Tabasco, MexicoTel: (52)-993-310-0290

Committed Peopleapplying

Innovative Technology

Contact us today to learn more.

www.qmaxsolutions.com

Qmax_OGFJ_0801 1 12/28/07 9:21:21 AM


Carmelita competitivenessWhen Rudesindo Cantarell, a fisherman from Ciudad del Carmen, dis-

covered 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, Cantar-

ell’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, José Jesús Hernández

Cantarell, started working in Ciudad del

Carmen as a welder in 1970. Around

1978, his welding expertise and profes-

sionalism 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 mainte-

nance systems and applications for a

diverse set of structures for PEMEX and

other companies in the oil industry. “His

innovative skills, experience, profes-

sionalism, 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 Construc-

ciones 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 Car-

men – 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 protec-

tion services to PEMEX through three vessels, the Far Swift, Far Scotia

and Ang Tide.

Nowadays, CICSA is opening itself to new opportunities that com-

plement 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 technol-

ogy and low costs,” recognized Mr

Suarez. “Prices are set by PEMEX and

intense competition makes Mexico

a challenging market. CICSA under-

stands 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 lead-

ing 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 pres-

ence, 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”.

Ing. Luis León Suárez, Director General of CICSA

CICSA_OGFJ_0801 1 1/3/08 11:24:18 AM


BW Offshore is one of the world’s

leading FPSO contractors. From its

operational head office in Oslo, Nor-

way, 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 deepwa-

ter, 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 inde-

pendent 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, hurri-

cane 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 geographi-

cal 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 Off-shore 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 partici-pating 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.

Svein Moxnes Harfjeld, CEO of BW Offshore

BW Offshore is one of the world’s leading FPSO contractors, with a solid track record that includes 12 successful projects.


Putting heart and soul in chasing a dreamWhile 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 posi-

tioning. 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 technol-

ogy was underestimated, which Mr Delgado explained when comparing

Marecsa’s solution, with what he calls “the way of the future”, with “the tra-

ditional 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 environ-

mental 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 transport-

ing 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 stimula-

tion every three days, while the traditional way takes about 15 to 20 days

Turning Your Challenges into Success

FMC Technologies is the worldwide leader in the supply of subsea and surface production systems for the energy sector. Our equipment and systems are presently installed in water depths exceeding 2,800 meters. With our extensive experience, FMC is present in Mexico to make subsea production a reality.

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Our Focus is Our Customer

FMC_OGFJ_0801 1 12/27/07 11:38:20 AM

Gabriel Delgado, Director General of Maritima de Ecologia


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 pro-

duction 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 ves-

sel 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 provid-

ing 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 position-

ing 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 offer-

ing. 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 capac-

ity. 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 ask-

ing 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 advocat-

ing 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 provid-

ing. 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 imple-

menting environmentally friendly technologies, and Marecsa’s progressive

environmental solutions are starting to instil excitement in minds of repore-

sentatives from Petrobras, Total and Anadarko who have visited its vessels.

FPSO DP-II Vessel &die;Bourbon Opale&die;, connected to receive the well fluids from a platform in the Bay of Campeche

Mariti_OGFJ_0801 1 12/27/07 11:07:01 AM


Technology to meet the challengeWhile the debate on the optimal mix of FPSOs, pipelines infrastruc-

ture, 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 try-

ing to help them do that,” started Mike Malone, FMC Technolo-

gies’ 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 coun-

tries 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, includ-

ing 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 technol-

ogy. 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, serv-

ing 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 engineer-

ing 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

Semate_OGFJ_0801 1 12/27/07 11:29:11 AM

Mike Malone (right) and Ernesto Iniesta, General Man-ager Latin America and Business Development Manager Mexico of FMC Technologies


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 Technolo-

gies to position themselves before the actual deepwater activity

takes off. “As we go forward we hope to participate in the deepwa-

ter 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 CarmenStraight 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 Septem-

ber 2005. Two years later, he returned to Mexico to run DeepOcean

operation in the country,

while also looking for oppor-

tunities expand the Brazilian

market where DeepOcean

recently won its first contract.

When it was created in

1999 by a group of manag-

ers 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 com-

petitive market,” put Mr

Leon-Orantes. “From the

very begining, DeepOcean

started competing with big players in the market, and was commit-

ted to making an excellent first impression.”

A few years ago, DeepOcean was very focussed on the Norwe-

gian 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 equip-

ment 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,” elabo-

rated 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 Nor-

wegian 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 look-

ing 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 interna-

tional deepwater technology to Mexico,” concluded Leon-Orantes.

“Deepwater will bring new challenges and we want to assist PEMEX

in becoming a better company.”

Javier Leon-Orantes, Regional Manager of DeepOcean de Mexico


One’s challenge is another’s opportunityThe 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 produc-

tion 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 Proyec-

tos Peninsulares have successfully jumped on the bandwagon.

More than the power of oneAfter working for many companies operating in the Mexican oil and

gas industry, Raúl García 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 com-

panies 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 García Castañeda.

The critical growth opportunity for Servicios Marinos y Terrestres

was created by the change in PEMEX`s maintenance philosophy, shift-

ing from corrective maintenance to preventative maintenance. “This

increasing focus on maintenance activities has created important oppor-

tunities for companies such as ours,” confirmed Raúl García Castañeda.

Nowadays, one of the most important areas for PEMEX, besides

exploration and production, is the inspection field. Basically, the main

activity of Raúl García’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 technolo-

gies, 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 part-

ners. Raúl García 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 García. “We

are looking forward to establish some alliances in that regards.” Raúl

García Castañeda has two main priorities for Servicios Marinos y Ter-

restres` 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 com-

pany 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 coopera-

tion will lead to increasing knowledge, new technologies and profes-

sionalism that will benefit the development of the Mexican oil and

gas industry,” he concluded.

Proyec_OGFJ_0801 1 12/27/07 11:46:13 AM

Raúl García Castañeda, Director General of Servicios Marinos y Terrestres

T H E D E E P W A T E R S U B S E A S E R V I C E S

P R O V I D E R

DeepOcean`s business is IRM,Survey and Construction SupportUsing modern DP2 vessels, state of the art ROV’s and subsea equipment and apersonnel resource group of very experienced people, DeepOcean has moved fast to beone of the growing international subsea service providers assisting both oil companiesand the major contractors worldwide.

Seabed mapping /Survey and PositioningDeepOcean operates complete spreads for Hydrographic Mapping Surveys, GeotechnicalSurveys, Route and Site Surveys including vessel and ROV–mounted multibeam echo-sounders for various depths and data quality. Our expertise and experience enables us toperform high quality surveys in all water depths worldwide.

Pipeline InspectionsDeepOcean operates a modern fleet of Survey ROV’s and equipment especially developedfor safe and cost-effective pipeline inspection work. Furthermore, DeepOcean has a largenumber of employees with long experience in the branch and have tailor-made procedu-res and software systems for work of this type.

Subsea Construction SupportDeepOcean’s portfolio of highly specialized vessels, dedicated equipment and skilled per-sonnel makes the company an attractive partner for sub sea construction support. Thisniche of the industry is important to us. We see ourselves as a global provider of speciali-zed services to major construction contractors.

TrenchingThrough its subsidiary CTC Marine Projects, DeepOcean is the world’s leading indepen-dent marine trenching contractor, operating in the subsea oil & gas, telecommunications,military and utilities sectors of the offshore construction industry. CTC owns and operatesthe largest, most comprehensive and technically advanced fleet of trenching equipment inthe world and provides a key component of the international subsea construction market.

DeepOcean ASA - Stoltenberggaten 1 - Postboks 2144 Postterminalen - N-5504 Haugesund NORWAYTelephone: (+47) 52 70 04 00 - Telefax: (+47) 52 70 04 01 - E-mail: [email protected] - www.deepocean.no

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Deepoc_OGFJ_0801 1 12/27/07 11:02:11 AM


It is like climbing a mountainAs 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 technol-

ogy. 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 Automa-

tion 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 sys-

tems,” 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 intellec-

tual capital. “The first thing is training, therefore we have invested

heavily in training and equipment families of Allen-Bradley technol-

ogy, 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 Pen-

insulares 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 compa-

nies 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 comple-

ments 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 Popocate-

petl 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 CarmenTransportes 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 Ciu-

dad 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 opera-

tions, 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 con-

structed 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 spe-

cial resting area for the pilots of the two or three private jets arriving

in Ciudad del Carmen per day, while Pegaso is also offering refuel-

ling 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 com-

panies outmanoeuvring the industry leaders.

Abelardo Rivera Lechuga, Director General of Proyectos Peninsulares

Pegaso’s new facilities at the international airport of Ciudad del Carmen

Pegaso_OGFJ_0801 1 12/27/07 11:28:49 AM

email: [email protected]

o&g mexico 2008 part 5

Documents

energy sector program

energy sectors

mexicos energy security

crude production

targeted crude oil production

production plateauwe

current production

energy sector program