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Luis Vielma Lobo: Private firms set to boost oil output

In this video interview, The Energy Year talks to Luis Vielma Lobo, CEO of CBMX Servicios de Ingeniería Petrolera and president of AMESPAC, about the current trends in Mexico’s upstream sector, the crucial role of private operators and opportunities created through the adoption of new technology. CBMX is a Mexican consulting firm focused on developing strategic, tactical and operational processes and methodologies for the hydrocarbons value chain.

The Energy Year, Mexico May 12, 2022

Transcript:

What is the status of Mexico’s E&P arena and what role do private operators have when developing the country’s wealthy oil and gas plays?

Mexicoas a country with reserves depends on its national oil company, Pemex. Venezuela used to depend on PDVSA. Argentina and Brazil used to depend on a national company also. Those countries that have reserves will keep having a strong national oil company. Mexico is no different.

The second situation is that Pemex is not increasing production. It looks like they reached the highest production that they could attain with the current reserves they have. That means that they probably won’t change the trend. If they do change the trend, it will probably be to diminish production, not increase production. They closed the year with 1.7 million bopd and I think they will be in that neighborhood. I do not think they will increase to 1.8 million bopd.

The third point is that Mexico has a great opportunity because they have more than 30 international companies working in country. If you look at the numbers of those companies, they produced around 70,000 bopd at the end of 2021. You could say that it is not that much for companies that have been here since 2015, but we have to recognize that many of these companies decided to explore, and the exploration process will take between five to eight years.

Other companies, the principal producers, are going into areas of production. They could do exploration to increase the reserve-to-production ratio but not necessarily have initial production.

That type of work will have results in years to come, including this year. I reviewed several reports from different companies and by the end of the year, private operators could produce close to 170,000 bopd. So, there is a big opportunity. If Mexico can take those opportunities it will be able to take advantage of the future.

What opportunities and levels of receptiveness do we find when adopting state-of-the-art technology and automation within Mexico’s hydrocarbons industry?

 I think this is a great opportunity for the country. The first thing is to understand the digital development and opportunities, not only for the oil industry but also for manufacturing in general. Even though the private sector has been doing some development in the manufacturing process, they still have space to keep improving because technology changes so fast in today’s digital world.

Another point is that that the E&P area has to be understood, not only for Pemex but also for some of the other companies. Big majors have organizations dedicated to understanding and developing whatever technology they can lead based on that process of understanding and analysis.

Mexico has to understand that its supply chain goes along the entire spectrum of the industry. This includes the upstream and downstream.

One thing that is important, and a practical example for Mexico right now, is to take advantage of automation, digital systems, and transmission to increase the security of pipeline transmissions. Phenomena’s such as Huachicoleo and oil thieves have not been controlled. Using digital systems and technology, specifically drone technology, will help this situation. It is a very practical situation for them.

The other situation to understand is what we call “digital fields” which could give solutions not only to Pemex but also to other private companies. It could make it easy to handle and manage reservoirs and fields that are offshore but also onshore. That would also reduce the costs. They need to try to initiate this technology with small, mature, and declining reservoir. The technology to understand the subsurface and the current reservoir could give them the chance to rediscover opportunities that will increase the production in the fields.

What needs and opportunities does Mexico have when it comes to developing its natural gas resource?

The chances of developing gas internally are huge as it will not only help with cashflow because they have to pay for the imports of the gas that represents about 50% of the consumption of the gas in Mexico. They have the opportunity to develop the gas.

One example is the Lakach project, which was closed when this administration arrived. It even had a lot of materials already bought. That reservoir of gas is the perfect opportunity that Pemex and the country has to learn how to deal with gas, which is totally different than dealing with oil. That is a very important point to understand.

The country has the opportunity to develop that part of its industry, and some of the companies that are in the country have the knowledge, competence, and money to help develop this important part of the country.

Mexico should also try to develop cleaner strategies. So far, both the media and some government speakers say they want to increase fossil fuels for power generation. Mexico has to understand that if they use gas it could be an excellent transition for them and it will give them the space to be prepared to comply with Glasgow’s COP26 agreement.

What is the rationale behind the recent rebranding of CBMX Servicios de Ingenieria Petrolera and what capabilities does it have?

We saw opportunities to expand and extend our core business. Until last year, we were only dedicated to exploration and production. We now put an “X” in our logo so now we are named CBMX. That “X” includes all of the downstream and anything else that could be required for the energy sector in Mexico.

We want to be players in the downstream, not necessarily in the construction. It is underway and we have a lot of companies working there. I would say that we want to be in the process of construction. We have put together an interesting team with a lot of experienced people in the refining process area that I will activate in the right time to offer these services to the refining area.

I have already talked to the IMP about this particular area because the IMP is very strong downstream. I think I can refresh that area with different and new knowledge and we may have an opportunity to work with them in the refining process in Mexico.

Another area has to do with energy transition. If you talk about energy transition with different people, each person will have a particular understanding and definition of what it is. This is important, but what is more important is that, based upon the understanding of the role of institutions and companies, one has to develop the strategy that has a point where to get to and also the activities that you need to do to get there.

This is not a one-year plan. Business plans in the oil industry are not made up of short-term projects but rather long-term project. The business plan has to be a long-term one as it normally takes 10 years to develop a business plan. Nevertheless, CBMX will continue to do its best in order to help this country.

CBMX was born in this country and since my arrival, I have received a lot of opportunities, especially with Pemex. I feel committed to this country and will keep helping it in the new challenges it has. We need to understand the energy transition, formulate a plan, and then take the right decision in order to accomplish the established goal within the plan. I hope we can do it.

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