Any activity within the industry requires some sort of insurance, which means that our business is always in high demand.


Insurance for Mexico’s oil and gas sector

March 16, 2022

Graciela Álvarez Hoth, CEO of NRGI Broker, talks to The Energy Year about the growth of investment in Mexico’s hydrocarbons sector and the evolving arenas of insurance and risk management. NRGI Broker is a group of service companies specialised in insurance, surety, reinsurance broking and risk management, with expertise in the oil and gas sector.

Is the Mexican hydrocarbons sector experiencing a rise in investment?
We are witnessing a clear increase of activities in the energy industry in Mexico, with 80% of this coming from the upstream sector, while the remaining 20% of demand comes from the midstream and downstream. We have seen an ambitious interest from the government in this past year to increase its reserves-to-production ratio via the financing of exploration campaigns, in addition to its interest in ramping up production levels, which today stand at 1.6 million-1.7 million bopd.
Despite the fact that 80% of our production comes from shallow waters, our country has tremendous potential in deeper waters, considering that 90% of the Mexican side of the Gulf of Mexico is still untapped. However, the deepwater is still deemed to require a longer-term investment. The onshore scenario is also gaining importance, seen for example in the Ixachi and Papán fields.
In this upstream quest we see Pemex at the forefront, investing intensively in 20 of its maturing fields to achieve quick production gains, in addition to private operators that are investing in the development phases of their corresponding fields, such as Fieldwood Energy, which recently hit first oil. Likewise, the price of oil hitting USD 90 has also been an important factor incentivising the sector and alleviating political tension over energy.
On the other hand, we have seen investment being poured into the downstream arena, specifically the Dos Bocas refinery – with a value of nearly USD 12 billion, as well as the recent purchase of the Deer Park refinery, as part of the overarching objective of this administration to achieve energy self-sufficiency and sovereignty. Lastly, we have the proposed energy reform that – although we acknowledge that Mexico has to respect the Paris Agreement and follow the path of the energy transition – still bets on the oil and gas sector as one of importance for many years to come.
Today, we see a more stable relationship between the industry and government. There are more stability and business opportunities, and the increase in the price of oil has been an important factor leading to the improvement of the business environment. As a result, we are witnessing a higher number of contracts being granted, which in turn is creating many more opportunities for oil and gas players in this country – for geological studies, production, maintenance of structures, etc.
The year 2022 is one of growth and stability, which is essential for the wellbeing of the industry. This will bring further interest from the Mexican and foreign investor community, bringing new developments in the energy industry.


How have the areas of insurance and risk management evolved since the 2013 energy reform and what trends do we see in 2022?
Deriving from the energy reform, ASEA [National Agency for Safety, Energy and the Environment] was created in order to regulate and supervise operational safety and environmental impacts within the industrial and hydrocarbons sectors. It ensures that each and every actor meets international standards for best practices.
NRGI Broker was directly involved with ASEA in creating these norms for the oil and gas sector. These regulations were not as necessary before, as Pemex had its own safety programme for contractors and subcontractors, but after the energy reform it became elemental. From here, norms for the upstream, midstream and downstream were created and today, they are well-established laws.
The same goes for norms of the insurance sector, where we were actively involved in the creation of DGS [Disposiciones Generales de Seguros] which were needed with the opening up of the sector to different local and international companies.
In this scenario, risk management and insurance became a matter which was taken more seriously. Any company working in the oil and gas sector in Mexico, be they an operator or a contractor, must be able to demonstrate that they have the adequate insurance coverage in place in the event of an accident. Moreover, with such a broad spectrum of activities within the industry, the regulation and limit requirements are highly detailed.
Likewise, we live in a world in which we are becoming more aware of the importance of following certain rules for the wellbeing of the environment. Insurance policies are thus important to cover financial losses – as in assets, human losses and environmental damage, among other things. This applies to the whole value chain and has become a norm in Mexico.
Considering the uptick in E&P activities in the Mexican hydrocarbons sector, we estimate a growth in the demand for insurance of around 20-25%. The government is opening up its doors for more activities, including more drilling and construction works, and this will be reflected directly in the need for more insurance coverage.

What position does NRGI Broker hold in the Mexican insurance industry and which sectors are demanding your services?
NRGI Broker is a pioneering specialised insurance broker with both knowledge and experience in the Mexican oil and gas sector offering insurance, guarantees and consultancy services. In addition, we understand not only the needs of the private sector, but also the will of the government.
Beyond knowing the area of insurance and the underlying risks in this industry, we also understand the overarching goals of what this government wants. For example, if you don’t present an insurance policy in the right form and within the right time, you cannot operate. We have a holistic view of the risks, the needs, the regulations and the environment we work in. This is part of the added value that NRGI Broker can offer to clients.
The demand for services we offer depends on each contractor and their specific needs. We can cater services to companies ranging from those in the retail sector all the way to upstream operators. Lately, we’ve had more demand coming from drilling activities that involve plenty of risk – insurance of platforms and jackups for example, as well as the maritime industry.
SEMAR entered the maritime sector and now controls Mexico’s main ports, which means regulations are more stringent. Vessels have to comply with the stipulated norms and financial guarantees in the case of accidents.
Consultancy and advocacy services are also on the rise, and more so given that the pandemic has had a harsh financial impact on the industry. It’s important to have a forum and seminars where you can transmit knowledge about insurance coverage to clients. The pandemic has given way to less investment appetite and fewer investors willing to take risks.
So, channelling information and know-how is essential to reactivate the sector. In any case, it is important to understand that any activity within the industry requires some sort of insurance, which means that our business is always in high demand.

How has public-private collaboration improved over the last couple of years?
Politics in this country change from one day to another, so it’s hard to make long-term predictions. The government has rolled out a very pro-hydrocarbons and nationalistic rhetoric over recent years that might come across as quite aggressive to foreign observers and the private sector.
Markets today are dependent on globalisation and the industry is also evolving quickly due to the implementation of new technology. The government understands it has to keep up and adapt. Like it or not, the country needs IOCs and private companies to help in the quest to ramp up production. Pemex cannot do it alone.
The oil and gas industry entails large investments over a long period of time. For this reason, companies need stability. Likewise, the rise of oil prices has been pivotal to stabilising the sector and opening up the appetite of the government to work with other stakeholders. These key elements have smoothed the way in an industry that is very sensitive to change.

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