Nuvoil a story of strategic alliances José EDEL ÁLVAREZ DELONG

One of the characteristics of Pemex today is its willingness to do things in the best way possible.

José EDEL ÁLVAREZ DELONG CEO NUVOIL

Nuvoil: a story of strategic alliances

May 26, 2022

José Edel Álvarez Delong, CEO of Nuvoil, talks to The Energy Year about the latest developments on the Perdiz and Papan gas processing plants, the importance of partnerships for complex projects and the benefits of the company’s pioneer platform, Agosto 12. Nuvoil specialises in oilfield operation, natural gas compression and technological innovation in artificial lift systems.

Tell us about the Perdiz and Papan gas processing plants, which Nuvoil has been working on.
We are focusing on the developments of the Ixachi and Quesqui fields, given their gas potential. For 25 years, our niche as a company was to process, compress, dehydrate and sweeten natural gas. Both the Ixachi and Quesqui fields require gas processing.
We’re a Mexican company and our offices are located 100 kilometres from these fields, which means that we play as local actors, being strategically located to cater for projects we carry out there. In January 2021, we signed the contract to develop the Perdiz gas processing plant, with a capacity of 150 mcf [4.25 mcm] per day. The plant was installed in 140 days and was up and running in June 2021, which makes it one of the fastest instalments of a plant ever registered. The project is currently operating.
We’re handling an incremental capacity of 180 mcf [5.1 mcm] per day of gas, mainly from the Ixachi field. The project aims to sweeten this gas, which means removing H2S [hydrogen sulphide] – which is contaminating, toxic and corrosive – in order for Pemex to make the most of the gas. Pemex needs to capitalise on this sweet gas to put it into the Sistrangas system. We will inject the gas into this system.
When handling the liquids generated from the plant, we will treat them afterwards, making sure the waste complies with all the regulations. Subproducts, which were a problem before, will now be transformed into products that are reusable and generate value.
We are also working on the Papan gas processing plant. This plant is very close to the Perdiz one and the Ixachi field, and is designed to process 300 mcf [8.5 mcm] per day. The contract has two stages, each covering 150 mcf. The total value of the project is USD 1 billion and we are aiming to finish the first phase and enter operations in Q3 2022.
The difference between Perdiz and Papan is that the latter is not only for sweetening. We will carry out dehydration, sweetening and a cryogenic process because there is a demand from Pemex to generate LPG onsite. This is probably the first private cryo operation in Mexico.
One of the characteristics of Pemex today is its willingness to do things in the best way possible. There was a previous tendency to think of cryogenics as too complex to deal with. But this is the kind of technology we want to use and which will help us bring this added value to Pemex and enhance their ROI.

How important are partnerships for delivering projects of this calibre?
Traditionally, we partner with companies that bring in the assets because our strength is our people and know-how. In the Perdiz and Papan plants for example, we apply the so-called BOOM [build, own, operate and maintain] model. The investment required for the project is being fully financed by the consortium members, unlike other projects where the client shares the investment. This means that we finance the project, do the EPC of the plant, and once they are operational we are paid monthly per cubic foot processed.
Given the calibre of both these projects, we are in alliance with an associate called Coastoil Dynamic. For the Perdiz plant, Coastoil Dynamic’s role was limited to the financial part, but for the Papan one it is different. They have taken a much bigger role as they are managing and operating it along with us. For instance, they are responsible for the supply chain of the main international supplies and equipment.
After 10 years, there is an option in the contract for Pemex to keep the plant. If Pemex doesn’t apply this option, the plant passes into our ownership.
Partnerships will depend on the kind of project we are looking into. We always consider the possibility of making alliances with technology-focused firms or financers. As for ourselves, we add value in the technical and strategic areas given our experience. We’ve been very cautious in this sense, and have always looked for associates to carry out activities with. If a financing entity wants to partake in a project with us, we let them do that as a financing entity. At the same time, we are open to merging with an entity that will complement us with technical expertise that we might be missing. This gives us an advantage.

What are the benefits of your pioneer platform, Agosto 12?
The strategy throughout Nuvoil’s 25 years has always been to create value for the client by bringing to the table innovative solutions. We have developed pioneer projects for Pemex and for this reason they trust us to develop them.
A clear example is the self-raising platform Agosto 12, a unique project that consists of a gas compression system for sour gas on a jackup platform which interconnects with other fixed marine platforms. This solution allows the operator to compress associated natural gas, so the company can then either inject it into mature fields or transport the gas to processing centres to cater to end users. In addition, this project contributes to reducing carbon emissions.
Agosto 12 is currently located in Cantarell, receiving an average of 220 mcf [6.23 mcm] of gas daily. We bring it from a pressure of 3 kg to 80 kg and give it back to Pemex. The project has an operating reliability of 98% and continues to be a notable project for us. It was our first offshore project. This is an excellent solution for operators in the Gulf of Mexico given its flexibility – being able to move it according to their necessities. Financially, it becomes a very competitive option as it opens up economically viable possibilities for local operators.

 

How has Nuvoil’s growth been aided by its strategy of not owning assets?
The story of Nuvoil is one of strategic alliances. We are against the strategy of owning assets because, for us, the main competitive advantage we have is our flexibility and capacity to adapt to changes. If we had assets, we would need to find work to deploy these, and this would limit us.
We are a company that, even with such a large volume of projects, is very rapid and moulds swiftly to market changes. The strategy has always been to maintain this flexibility. We have had a lot of opportunities throughout the years to become asset owners and we’ve even had opportunities to be compressor producers. If we need certain assets, it’s better to work with an owner dedicated to them.
For example, if we have to reinforce the control segment of our business, we bring the best control company from the US or Mexico to carry out this work. We want to transform into project integrators, which means that whenever we have the technical expertise and the financial capacity, we should grasp the opportunity presented. In this quest, one has to manage suppliers and associates to execute the plan.
We will never be immune to oil and gas market fluctuations. But one can be as protected as possible, anticipating these matters. It all comes down to the capacity to adapt and be flexible. We don’t see challenges in the same way as someone that needs to relocate an asset and a whole team. We move rapidly.

Are you seeing an increase in demand for artificial lift solutions?
Yes, indeed. Mexico’s fields are maturing and thus demand more and more technology to produce at optimal rates and reduce the rhythm of decline. Accordingly, we see growth in the demand for artificial lift systems. The hydraulic pump part of the business already has a defined market and has grown. In this regard, we have a number of devices installed in Mexico and the business has been increasing. We keep on needing this technology.
For instance, electric centrifugal pumps have good results offshore. Pemex has been using that technology for years as it is one of the most productive artificial systems. On the other hand, the PCP [progressive cavity pump] is a tailored pump that has been a perfect match for the Samaria field, as it needs a metal-to-metal pump solution due to the temperature. Interestingly enough, apart from the focus of Pemex on 20 designated mature fields, we also see a ramp-up of privately operated projects in the country.
As a result, our subsidiary Geolis, a local oilfield equipment supplier, invoices 70% from private operators and 30% from Pemex. Through them we have carried out multiple projects for companies such as Perenco and Wintershall Dea. There is an uptick in E&P activities both onshore and offshore and we see this business for Nuvoil increasing in the coming years. The largest player in this scene is and will continue to be Pemex, so we have already closed several contracts with them.

What kind of expansion plan and sustainability schemes do you have?
We would like to expand regionally, in LatAm. Our business model facilitates us to establish operations in practically any market. We have very strong ties with companies like Enerflex, which operates in many countries overseas. This would be the easiest way to penetrate the region, through partnerships. Hence, due to our flexibility and adaptive nature, we are openly seeking new opportunities in other markets. The recent projects in Quesqui and Ixachi opened the doors for a possible internationalisation of our services.
Furthermore, sustainability has become an utmost priority for us. Our focus is very much on gas-based projects, which is the natural step towards the energy transition in this country.
On top of this, if an operator hires our services, we make sure we keep gas burning and flaring to a minimum or zero. It’s not only about complying with the stipulated contract, but about giving added value to the client. We can certify plants with the latest mechanisms and technology so they reach sustainability targets. For example, there are a couple of proposals to make our plants much more sustainable. All of the waste from the Papan facility has to be processed. Our aim now is to find a solution for plants to be more sustainable. Step one is to eliminate gas flaring.

How competitive are the areas of gas compression and processing in Mexico?
The activities of gas treatment could be divided into two main business branches. On the one side, there is compression alone, where we see a lot of competition. If a request comes out privately or from Pemex, an array of companies present themselves to carry out the project. However, many of these firms are small or lack capabilities. This segment is very competitive to the point that, today, one can say that the price for compression in this country is almost inconvenient.
There is a tendency to say it relates to compressed volume, but this is the mistake. The driving force behind compressing these million cubic feet is the difference from one pressure to another. It is not the same to bring the pressure from 0 to 100 kg or from 100 kg to 120 kg. You need many more million cubic feet from 100 kg to 120 kg, but the investment for this is much smaller than from 0 to 100.
We have tried to give added value to the client by having assets in good condition and by offering the service at the best price. This service of compression is required in many wells that aren’t very profitable anymore, which means it is essential.
On the other hand, we have the area of gas processing. In terms of competition, we have fewer companies playing in this arena – around four solid ones, plus ourselves. Everyone has found their place in the market, especially in the fields of Quesqui and Ixachi. In this competitive environment, we try to focus on where we can generate more value. In the artificial lifting part, it depends on technology.
In the case of electric centrifugal pumps, which is very important to us, the competitors are all international companies. This contrasts with the segment of hydraulic pumps, where competitors are more local. In any case, we are a strong player in all these areas, being a proud Mexican firm.

Read our latest insights on: