Pemex says contracts getting easier

Russell McCulley
Thursday, September 1, 2011

Despite a reputation for ‘cumbersome’ contract processes, recent oil & gas sector reforms have created a more favorable investment climate at Mexican state oil company Petróleos Mexicanos, a Pemex official told the 2011 Petroleum Exposition & Conference of Mexico in Villahermosa. Russell McCulley listened in.

Mexico’s 2008 legislative reforms backed by president Felipe Calderón included provisions that made the oil & gas contracting process fairer and more transparent for potential vendors, said Vinicio Suro Pérez, sub-director of the southern region for Pemex Exploration & Production.

While there is a widespread perception that ‘the process of selling goods and services to Pemex can be cumbersome’, the new laws have helped streamline and clarify the company’s contracting practices, Suro told an audience at July’s Petroleum Exposition & Conference of Mexico in Villahermosa.

Pemex’s needs are ‘no different from any other company in the world’, Suro said, including seismic data acquisition, pipeline services and oilfield equipment.

‘These are the things that all industry needs, and Pemex is no exception,’ he said. The company is battling a steep oil production decline and rising domestic demand that some analysts have warned could turn Mexico from a major exporter to a net importer of oil in coming years. The oil reforms stopped short of allowing IOCs to enter into production sharing contracts with Pemex, something that many believe necessary for Mexico to successfully exploit its deepwater Gulf of Mexico reserves.

Nevertheless, ‘after three years of approval we begin to see results of the new legal framework’, Suro said.

Among the most important changes to the contracting process, he said, is a pre-qualification program for vendors that allows Pemex to review applications and alert companies if more information is required. The new process is ‘more transparent’ and offers a more level playing field for potential contractors, he said.

In 2010, Pemex awarded US$23 billion in contracts, with much of the investment going to enhanced recovery efforts in mature fields. Suro, whose territory covers 392km2 of mostly onshore assets, said the company is seeking investment that could bolster production in the Sánchez Magallanes, Santuario and Carrizo fields. So far, 17 companies have expressed interest in Sánchez Magallanes, which currently produces about 12,000b/d, and 14 companies have inquired about Santuario, where production is roughly 6000b/d. Another eight are interested in the non-producing Carrizo field, he said.

Pemex is reviewing prequalification documents submitted by the interested parties and expects to complete the process in the next few weeks, he said. While Pemex ‘offers very attractive opportunities’, particularly in refining, enhanced oil recovery and emerging deepwater E&P, companies must understand not just the legal aspects of doing business in Mexico but also the country’s ‘cultural idiosyncrasies’, said Maria Elizabeth Lizardo, manager of Latin America operations for the US-based management and consulting firm Pathfinder.

Compared with other companies, Lizardo said, ‘[Pemex’] bids are governed by internal, tedious regulation, but achievable’.

Would-be contractors must be familiar with the contracting and bidding process, register with Pemex online, recognize the company’s budget cycles, keep current on Pemex’s needs, and submit complete proposals when seeking work.

Contractors must also surmount a number of ‘cultural barriers’, Lizardo said, including a more relaxed pace of business, long approval processes, and the fact that most Pemex employees, save for top management, are not fluent in English.

It is crucial for bidders to maintain an office in Mexico and to pay frequent visits to company officials, offer training sessions for project teams and roadshows for Pemex executives, Lizardo said.

‘People like to have that face-to-face relationship,’ she said. OE

Vinicio Suro Pérez (center), sub-director of the southern region for Pemex Exploration & Production and Tabasco governor Andrés Granier Melo, in yellow, tour the Pecom 2011 exhibition floor.

Categories: North America Gulf of Mexico Regulations

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