Competitive dynamics in Mexico

Mexico

Rodolfo Alfonso Esquivel, general director of Grupo Roales, talks to The Energy Year about the competitive dynamics transnationals bring to the Mexican market, the company’s rewarding bet on diversification and its bid to become a technological supplier and partner. Grupo Roales is present in Mexico’s catering, outsourcing, consulting, equipment retail, civil construction and turnkey segments.

How has Grupo Roales bet on diversification and is this paying off?
Grupo Roales was established as a company with three business lines, and today we have more than 13. Initially, the sector did not like our diversified approach, and we operated under the stigma of a company that did a bit of everything without truly being specialised in one activity. Nevertheless, we continued betting on our comprehensive approach, creating different business entities under our umbrella company.
In the last five years, comprehensive services have been gaining ground and becoming more popular. Industry players realised it is easier, cheaper and more efficient to deal with only one company rather than with several – 10 subcontractors mean you can have 10 different problems, so why not have one that does everything?
Diversification is something we’ve long implemented within the oil and gas scene, but now, after the pandemic, we’ve decided to seek other interesting areas outside of hydrocarbons. Following this vision, we want to venture into other industries that have operations similar to ours, such as mining. Other areas of interest are automotive, infrastructure, tourism or aeronautical. However, our idea is not to completely change our market niche, which continues to be oil and gas.

What competitive dynamics do you find in working with transnationals?
Regarding exploration, over the last two years, we’ve worked closely with transnational firms on due diligence and standards matters. The challenge here is that these companies, when coming to Mexico, bring master contracts drawn up beforehand which establish other foreign companies they must work with on their projects. This closes off many opportunities for local companies.
It is here where “national content” comes in. When an IOC signs a contract, certain levels of national content are established but the problem lies in the enforcement of these commitments. Local companies like ours are asking to compete on a fair playing field with more access to market opportunities.
Ironically, even if these IOCs come with companies under their original contract, they realise that these are very costly, so they end up changing suppliers and opting for local ones. At this point, the supplier coming to Mexico eventually has to hire us, so at the end of the day it is us doing the work via these intermediaries. These suppliers become brokers as they don’t do the operations themselves, while Mexican companies do all the work.
We want transnationals to realise that we can do this work all by ourselves, from the beginning to the end, and not having to wait one or two years for the companies to change their original foreign suppliers. We could even improve our costs and create larger margins for them. It would be a win-win situation.
Hopefully soon, there will be a new bid round and local suppliers will be needed. IOCs have seen that we meet all the required standards and certifications. We’re used to working in difficult conditions and we have proven our resilience. Other companies did not survive the shock and sank. As a result, only strong companies are left, and these are the ones that right now can get a hold of this market.

What learning experiences and value addition have given you the chance to acquire more market share?
Some of our main projects have been completed for Pemex, which does not allow contracted companies to subcontract their services. This has forced us to do everything ourselves. For example, we’ve led engineering contracts directly outsourced by Pemex for specialised technical assistance for field development. The learning curve was long and steep, and after we achieved the level we desired, we were able to approach private players as we already had the know-how they required.
We offer comprehensive services that range from ship logistics, ship operations, ship maintenance and detail engineering to comprehensive maintenance – both dynamic and static, from the mechanics of a pipe to the maintenance of a turbine. This reflects our diversified nature, which has helped us during difficult times by letting us avoid putting all our eggs in one basket.
Moreover, we are also wholesale distributors. Everything we use in our contracts we then become the local sales representative for. This has allowed us to reduce our costs and to offer a better service quality, which we can then pass on to our own final clients. We bring a lot of brands and have many different commercial alliances, which has helped us in the area of representation.
Credibility is also essential, so we have seven different certifications. We are pioneers in having our ISO certificates even though Pemex hasn’t always required suppliers to have them. Regardless, we invested in this area and we are certified in ISO 9000, 45000 and 14000. We also have international certifications for TRACE, for anti-bribery and, for the third consecutive year, we have been recognised as a socially responsible company in Mexico according to the NOM-035 law.
Last but not least, as part of offering quality services, we have talented personnel that get paid above average to solidify certain principles of loyalty and commitment. We have thoroughly invested in people, and that is one of the major strongholds of Grupo Roales as a company.

Tell us more about your latest patents in the area of mud treatment and supply.
We are developing a mud processing ship, a concept that only exists in Mexico. This vessel processes mud cuttings containing contaminated mud. Today, you need 12 different processes to clean the mud: the mud comes down from the platform, gets sent to onshore containers and then from there it is sent to processing. This implies very high logistics, time and decontamination costs.
What we decided was to set up the mud plant on a DP2 vessel, which means that, contrary to onshore or on-platform plants, you can process 24 hours a day on the spot. This option gives you the possibility of avoiding logistics and storage costs. In order to be profitable, the ship has to function in a space where there are three to five platforms.
A certain area can have 2,000 containers, each one occupying 1 cubic metre – this space can also be saved. The result is a 99% inert mud, with the residue being collected in the ship’s tanks. Around 70-80% of the mud is diesel and the rest are different chemicals that by the end of the processing line are inert. At the same time, this solution becomes self-sustaining, as the mud collected from the client can be used again once it’s been processed. From the ship, the residues are sent to a pit latrine and the diesel is recovered.
Along similar lines, we have a second patent which focuses on the recovery of the processed mud in the same plant. We’ve introduced injectors and additives to obtain, once again, the mud. Chemicals can be transported onto the ship and mixed on board. With these chemical solutions we are able to provide the client with the specific type of mud they need at a specific moment. This, of course, requires new technologies that you can have on the ship. This means that we can take your mud and give it back exactly as your operating area requires it, without ever having to touch land or generate pollution. We are dealing with a 99% inert product, while the other 1% is solid residue that is then taken to a pit latrine.
We want to go even further with this patent, using a hybrid vessel that has a higher performance with lower consumption. The idea is to implement additives, so that the products that are used by the vessel’s engines have a lower carbon output. The only limit of this technology is that you need a certain number of drilling platforms operating at the same time and in the same area in order to make the project cost effective from a logistics point of view.
This project relies on having a small polygon of drilling activities to make it cost effective. Yet, now that operations are on the rise, Pemex and other companies will need drilling muds and thus, there will be an increasing demand for this type of service, allowing us to put our patents to use.

How does Grupo Roales aim to become a technological supplier and partner in Mexico?
Field development and drilling will start shortly in the 111 active E&P licences. There is a larger focus on gas, which before was looked at in disdain as only a second option to oil. In this context, in Q1 2022 we will announce the introduction of new technology for gas handling.
What’s more, we’re working on several technological alliances. The oil and gas industry at large uses technologies over 30 years old. Oil producers are reluctant to change, suggesting that this industry is still anchored on traditional values. Sector players prefer to stick to what they know rather than take the risk of trying out new technologies – the collapse of a well due to the failure of a certain technology can cost millions.
Now, we’re doing pilot testing with companies that have mature fields. We’re importing technology that has already been tested elsewhere to see its performance in Mexico, to then start offering it in the local market. We do everything under the idea of optimisation and we are aware that there are technologies that can offer up to 200% and 300% daily production increases.
Our idea is not just to rent this technological equipment, but to offer it as a comprehensive technical package. We want clients to see us as a strategic ally and a commercial partner, not only as a simple supplier.

What projects is Grupo Roales working on?
We are engaged with an engineering contract for offshore installations for DG Impianti. This project involves the engineering, procurement and construction of service satellite platforms. The timespan of the contract is three years and it will involve the construction of two offshore platforms, one in Tampico and another in Arco Grande.
We’ll be developing the detailed engineering as it would be very expensive for them to transport all of their equipment to Mexico. We have a proven track record in this area, having acquired similar experience with Pemex – not to mention our certificates, flexibility and immediate availability. These were important bases on which to secure this contract. We are also bidding through DG Impianti for a project for Eni involving electrical and mechanical maintenance.
Furthermore, in March 2022, we won two contracts with Pemex. The first one involves a survey vessel where we will do everything related to mechanical integrity, process lines, etc. We will provide comprehensive and integrated services. This project was designed to inspect satellite platforms, which are remote and very complicated to access and operate. With this DP2 ship we can move equipment with its 150-tonne crane. It has the capacity to hold 140 workers, plus 34 crew. This contract is for three years with an option of two additional years. We have another similar crew contract, which has the same scope but without a ship.
In addition, we are currently tendering contracts for mechanical integrity analysis. These are very specialised projects and it’s the first time that a public tender has been held, which makes it easier for us to enter the market. We are bidding jointly with Penspen. We believe that this year we will have a few more contracts, and from there we will have to specialise. We want to specialise more so that our services are easier to contract. This is why we are currently working with UNAM [the National Autonomous University of Mexico], as we believe that there should be an educational entity as an intermediary to be able to regulate and generate technology transfer in these types of projects.

Read our latest insights on:

• Mexico