2016 Oil and Gas Summit: Challenges and Opportunities in Refining & Petrochemicals

The second panel’s moderator, Ovidio Noval, Director General of API Coatzacoalcos, directs the port of Coatzacoalcos that dominates the country’s cargo with more than 30 million tonnes of products per year, and more than 90% of the petrochemical production.

Novak introduces ports as a special economic zone that has training, customs advances, and regulatory advantages. China has the highest logistics cost in the world. The closer they can get to their clients, the cheaper their operations will be, illuminates Noval. For this reason, countries such as China would want to enter into the special zones scheme.

The Director also highlights issues in terms of logistics that relate to railway lines, and evokes the need for investment in Mexican infrastructure describing how railways have remained the same or incomplete for decades.

Introducing Abraham Baruch Zepeda, Stakeholder and Commercial Director of Grupo Hosto, Noval asks Baruch which he considers to be the advantages that the Energy Reform will generate for his company and the industry. Baruch reiterates the many advantages in infrastructure will emerge thanks to the reform, but also that experience must be broadened to improve projects. Some projects have 40% potential ROI, for example the association with outsourcers that PEMEX is investigating. The representative of Grupo Hosto urges companies to invest in infrastructure, as well as in training human capital, citing that we will need thousands more trained professionals in the oil and gas sector by 2019.

Touching on opportunity areas for companies, Baruch’s opinion embarks on the importance of young people and entrepreneurs, who should create alliances and services that add value to products made in Mexico.

With regards to refinery, Baruch recommends alliances with foreign companies to use the best standards from each country’s operations, a recurring topic throughout Mexico Oil and Gas Summit. Homogenizing operations with the certifications and support that Mexican companies can offer newcomers from overseas, he points out, is the best way to smoothly introduce foreign investors to Mexico.

Vernon Murray, Director General of Emerson, also mentions the opportunities in Mexico, as Emerson is working at 60% capacity. In terms of automation, the company focuses on being trustworthy and punctual. Murray believes that most projects are handed in over budget. Project certainty in their area of the sector must be accompanied by new technology.

To increase the safety of our operations, automation can increase the probability of executing a project on time. In the control systems, Emerson has the technology to increase efficiency in industry.

Juan Marcelo Parizot, the Commercial Director of PEMEX's Industrial Transformation, embarks on the topic of making extraction more cost effective. The trustworthiness of refinery complexes must be improved, he states, increasing market competitiveness.

The challenge for PEMEX in the Mexican market is the large volume of gasoline imports, as sixth consumer in the world, while being next to a large economy that dominates the market.

The moderator points out that PEMEX is the only producer of polyethylene. There is a need of substituting imports for internal supply. It is a front-row seat in terms of areas of opportunity.

The ports have fascinating characteristics, he says, one of which is a ferryboat that connects Alabama door-to-door with Mexico, which no other port has. Braskem Idesa already takes advantage of this link in the most important petrochemical port in the country.

Leite also proclaims that the deficit in supply for demand must be attacked. If this can happen either via PEMEX or other suppliers, the best petrochemical industry in the country can emerge to produce products that are worth US$1000 or US$2000 per tonne. Added value can be contributed in Mexico, and this would generate more employment. “There’s a world of opportunity up for grabs in Mexico,” he illuminates, “local universities and schools must support the development of engineers and operators.” Leite is certain that human capital is available to take advantage of. His company has contracted 200 cranes and 17,000 employees, and the Commercial Director assures the audience that deficits are opportunities in Mexico.

“There are plenty of natural resources under the soil here, so we expect to see many fantastic projects underway to extract these.”

Handing the microphone back to Noval, the moderator expands on the facileness of the ferry that links the US with Mexico the port he oversees. The port has facilitated the entrance and exit of a large amount of products, especially for Braskem Idesa.

Parizot comments on the observed reduction in production by PEMEX. Since the culture of contracts arose in 1995, long-term contracts were kicked off by natural gas pipelines. The idea was to supply the demand created by PEMEX. However, the reduction of governmental aid has led to a drop in wet gas extraction. Parizot hopes that alliances will allow the company to meet demand for petrochemicals.

Leite further expands on how the drop in petrochemical production by PEMEX has affected the whole supply chain. Budget cuts have hit the whole industry, and companies caught in the middle of the supply chain have stopped adding value to products. His company sees natural gas being burned at US$150 per tonne knowing that it could have been converted in a product worth US$1000 per tonne.

Murray is asked how PEMEX could improve its operations despite budget cuts. He tells the audience how his company’s monitors refineries, and has seen extremely high returns and drops in operating costs of as much as 60% from companies using preventative technological measures.