Pemex CEO sees future in oil production partnerships
Pemex, Mexico’s state-owned energy company, is in the throes of transformation. An overhaul of the nation’s energy policies in 2013 and 2014 opened its energy industry to foreign investment, prompting Pemex to enter new partnerships and streamline its operations in the face of new competition.
CEO Carlos Treviño, who took the helm in November, sees a future for the company in oil production and partnerships. Earlier this year, Pemex partnered with BHP Billiton on its Trion project, a deep-water discovery in the Gulf of Mexico. The company plans to open a bidding round for certain onshore projects in the coming weeks and expects to seek new partners for shallow-and deepwater projects in the coming years.
Pemex also is allowing foreign companies to open gas stations while expanding its own chain of stations in the United States. Treviño spoke with the Houston Chronicle at the annual energy conference CERAWeek by IHS Markit.
Q: What is your outlook for deep-water drilling, given the challenges the sector faced during the downturn?
A: The technology has improved a lot, and in a way, I think we may have a very competitive cost structure. The reserves and the resources that we have in Mexico are really big. It’s going to be a very cost-challenged area, but where we are looking right now, we are performing very good.
Q: With Mexico’s general elections coming up in July, do you anticipate any significant changes in the country’s energy policies going forward?
A: To change the constitution in Mexico is a very big challenge. You need two-thirds of each chamber, the Senate
and the lower chamber, and to have those votes is difficult. The contracts we have signed are going to be impossible to cancel or reject or reverse. And Mexico doesn’t have the money to pay back the people or the companies who have signed those contracts. We also have a better arrangement in our corporate governance than we had four or five years ago. Our partners can feel OK because it’s very difficult to change those things.
Q: Given the decline in natural gas production in Mexico, do you anticipate continued reliance on U.S. imports?
A: The gas you have in Texas is very cheap. This technology for exploiting the shale basins is amazing. It would be unintelligent for Mexican companies not to use that gas.
It would be great if we could have a very high price so that we could exploit our own fields, but right now what we have done is stop the investments in those fields. We’re waiting for better times.
There are some talks in Pemex to build some LNG ports in the Pacific, but we need the pipelines so we can transport our gas or Texan gas. Maybe in the future, in the next five to 10 years, that could be a very good business. But for the short term, we are more focusing in oil production. We are trying to recover the levels of production we used to have.
Q: Is the company still working to downsize, given that Mexico’s energy reforms coincided with the global energy bust?
A: We are trying to focus on those businesses that are a better fit for Pemex. For example, we are spinning off our (hydrogen production operations) to a state-of-the-art performer to produce the hydrogen we need. We are divesting in areas that are not part of our core business, and we are focusing on the upstream and the refinery process. Q: When it comes to retail gasoline, Exxon, Shell, and BP are all opening stations in Mexico. How do you regard the competition?
A: We in Mexico used to have some laws that promoted a monopoly. Now, we have to be more competitive. A gas station in Mexico sells more gasoline than one in the U.S. because of all the competition you have in the U.S. At the end of the day, the consumer is going to capture that benefit.
Q: Do you have a growth plan for your U.S. gas stations?
A: It’s not a plan yet. We are opening some in Houston, some in California. We are testing the market. The Pemex brand is very important. It’s the most valuable brand in Latin America. What we are doing with this initiative is to put Pemex in different atmospheres. The stations in the U.S. are part of this new way of putting Pemex around the world.