2016 Oil and Gas Summit: PEMEX’s strategic priorities
Rodulfo Figueroa, the Corporate Director of Planning, Coordination and Performance of Pemex, talked about the changes the present governmental administration has enforced on the industry. It is a pillar that can boost the development of Mexico, and make it a key player in the world’s oil industry.
Currently, Pemex is the 8th most important producer of oil throughout the world, and even though it has always contributed to the income of the federal government, the development of the company in the past years has been less than harmonic.
Figueroa mentioned that in the past, Pemex’ investments and risks were assumed solely by the enterprise. The objectives, and production activities of the enterprise were determined by the Congress, and were focused on production goals rather than on activities of added value. The legal framework enforced by the energetic reform, transforms Pemex’ objectives, shifting from production goals to added value activities
Even though, private participation is now allowed on the hydrocarbon market, it is subject to regulation emitted by the National Hydrocarbon Commission (CNH). The Energy Ministry (SENER), Finance Ministry (SHCP) and ASEA are other agencies that regulate as well.
Pemex went from being a state-owned company to a state-productive company. The activities performed by Pemex have been distributed among the newly created subsidiary companies. Each one has a relevant function in the industry, and focus on activities related to drilling, upstream, industrial transformation, cogeneration of products, fertilizers production, ethylene production, and logistics.
The company faces challenges enrolled in asymmetric regulation. It has turned its gears towards becoming a competitive and added value enterprise, aiming to become an nternational reference.
Among the many changes faced by the enterprise is a new fiscal policy where prices are no longer set by the government, and are determined by the market. Pemex is now subject to operational and financial goals set by its corporative government.
The new working scheme is focused on increasing the company’s business portfolio, operational excellence, business model design, and high performance culture. The strategy allows the company to create alliances with private corporations in the production chain. The association with private enterprises provides benefits that extend beyond obtaining economic resources; it allows Pemex to diversify risks, include better practice’s standards, acquire new technology, and increase its materiality.
Figueroa mentioned that when it comes to extraction costs on shallow waters and land fields, Pemex is very competitive. However, it lacks the necessary infrastructure to maintain its cost competitiveness. Hence the importance of finding adequate joint venture partners.
Pemex needs to leave its role as the monopolistic provider of hydrocarbons. In the short term, the company will continue dominate the market, and the government is aware of it. Once private investors dabble into the industry, the national company will have to work harder to survive among competition.
The estimated prices of Mexican oil barrel have gone from US $50 at the beginning of the year to US $31.32. Figueroa mentioned that adjustments had been made to make sure the company’s strategies or the long term goals are not affected by market instability.The adjustments help re-dimension Pemex without compromising its future production.
Regarding the expectations of the company, Figueroa stated that Pemex needs to strengthen its capacities. It must evaluate new ways to finance its operations alongside partners that are willing to share risks and benefits. As well as take care of its main asset, human capital.
To comply with objectives, the company must change its main strategy. Pemex needs to let go of areas that do not promote growth. The oil company is moving towards stability, operational and energy efficiency, reliability and procedure safety, technology modernization, and the incorporation of best practices.
Clients should be the foundation of the business model. Changes in the production model and objectives are not enough to achieve a full transformation. They need to be constantly monitored to make sure the company is complying.
Pemex is currently working on internal re-organization, and reducing its debt level. On the medium term, the company is going to be focusing on strengthening its capacities, and attending its market objective. The long term goal is to achieve business sustainability.
For the next five years, Pemex has the intention of being a main provider of oil in Mexico, and to consolidate its presence in the market with stronger financial and operational terms. It is committed to maintain its role as a pillar of the country's development.