Wind energy prospects and a boost for Mexico’s offshore logistics Luis FARIAS Managing Director WATSEN

We are anticipating market trends, so we have one foot in the oil and gas industry and another in wind energy.

Luis FARIAS Managing Director WATSEN

Wind energy prospects and a boost for Mexico’s offshore logistics

January 5, 2022

Luis Farias, managing director of Watsen, talks to The Energy Year about the company’s project to build an oil and gas logistics base in Altamira and its strategy for catering to onshore and offshore wind energy. Watsen provides project development and services in the areas of energy, ports, infrastructure and manufacturing.

Tell us about the oil and gas logistics base Watsen is developing in the Port of Altamira.
Watsen was founded in 2020 to originate, structure and develop port infrastructure in Mexico. We have set our sights on the Port of Altamira, which offers an array of different opportunities. One could say it’s the gateway to the Gulf of Mexico, being very well suited to serve the offshore oil and gas industry. We chose to develop a logistics base in this particular location because it is unique in its nature.
There is already an existing logistics base in Tampico, but it’s a river port, which implies navigational difficulties – as one cannot navigate in two directions simultaneously, and it’s too far from the sea. On top of this, river ports normally pose problems with silting, as drafts tend to change during the rainy season. By contrast, Altamira is an industrial man-made port and presents plenty of advantages from a navigational point of view.
The offshore logistics base we are now developing lies on 20 hectares [200,000 square metres] of available land. It will have five berths and four docking areas of 100 metres each. Moreover, the project represents a USD 50-million investment and will generate around 1,000 jobs.
A project of this nature is normally long term. We are expecting to finalise lease agreements by mid-2022, with 5-10 years’ tenure. Once we enter into binding agreements, we should be able to finance with equity and bank debt. The origination and structuring is the main role played by Watsen.

How unique is this multipurpose facility and what partners are involved in its development?
This offshore base will be elemental for the northeast region, as it will be a dedicated facility aimed at servicing offshore oil and gas activities. It’s unique as it’s not a multipurpose facility, but rather a dedicated one, exclusively catering to hydrocarbons-based activities. Companies will have a much better service out of Altamira – from helicopters all the way to the supply of all kinds of drilling equipment.
When it comes to developing the base, we have a strategic partnership with Grupo DPH, which actually owns the land and has the rights to secure the use of the waterfront. We anticipate the base will be fully utilised by the offshore oil and gas industry in that particular region, namely the blocks of Cinturón Plegado Perdido and Cordilleras Mexicanas.

 

How will Watsen cater to onshore and offshore wind energy?
There is a lot of talk about oil going out of fashion. But this will take time. So, our idea is that we will serve this industry for the next 20 years or so. However, we are anticipating market trends, so we have one foot in the oil and gas industry and another in wind energy.
To this end, we have recently acquired additional land of around 100 hectares [1 square kilometre] in the area of Altamira where we plan to develop a facility to manufacture large components for onshore and offshore wind farms – monopiles, transition pieces, blades and so on. You see, the area of Tampico-Altamira is very strategic as it has a lot of qualified and skilled labour such as welders. This is so because historically the area has had a thriving oil industry.
The project itself is valued at around USD 150 million and is expected to generate more than 3,000 jobs. What’s more, it is poised to increase the load flows in the Port of Altamira by 30,000 tonnes per year. This site also has access to a dock that’s already in operation. Thus, the idea is to manufacture components for exports, as unfortunately wind projects have slowed in this country.
We’re currently in discussion with several players who want to take the opportunity to manufacture these components in Mexico. This country could be a crucial part of the solution for the US’ plans to decarbonise and shift into greener energy. They have already announced their intention to build 30 GW of offshore capacity in the eastern region alone, as part of Biden’s Green New Deal. We want to capitalise on this opportunity.

What need does Mexico have for grid expansion and what trends will its energy mix undergo?
We reached a point where the cost of solar came down very fast. Wind prices will follow to compete with solar. This competition is not only very healthy but also complementary. There are some cases where the wind blows when the sun sets. The same goes for the combination of hydro and natural gas. There is plenty of gas in Texas and the pipelines are there, feeding Mexico. There is no doubt that Mexico can have a very resilient and sustainable electric power system, but in order to do so, the country needs to invest in grid expansion.
Peak power generation capacity in Mexico is around 50 GW but it is bound to grow given the tremendous demand from our growing population, and the advancing integration between Mexico and the US. The demand for energy will gradually increase. While coal will eventually be phased out – plants are just too old and there is very bad quality coal in Mexico – this demand could be met by a mix of hydro, natural gas and renewables.
However, a larger grid is needed to connect the areas where there is wind or sunshine with the consumption centres. And whenever there is a shortfall, we could use natural gas. We are still very far from this renewables-based reality, but in the coming years we will see this combination become a reality.

Where do these projects stand?
In 2022, we are aiming to reach financial closing on two projects. Together they require around USD 200 million in investment, which means there are plenty of arrangements to be made. It’s like a puzzle and we’re now putting all the pieces together. We have around 120 hectares [1.2 square kilometres] in total, and both areas have access to waterfronts, which means we have plenty of other development ideas in the pipeline.
However, we’re looking to first finish up the first couple of projects and after, we’re sure more will come. Mexico has plenty of opportunities in undeveloped ports that can be converted into special-purpose ones to serve the US energy industry.

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