The strength of Mexico’s value chain

Mexico

Rafael Parrilha, General Director of Bureau Veritas in Mexico, believes the downturn in oil and gas prices in late 2014 and through 2015 will pose serious restrictions to the domestic hydrocarbons value chain but offers opportunities for operational improvement and implementing necessary maintenance and certification procedures. Bureau Veritas is an international testing, inspections and certification company.

How will budget restrictions in 2015 impact the demand for inspection and certification services in the oil and gas industry?

It seems that 2015 will be a difficult year. The low price of oil and unexpected $4-billion budget cut by state-owned oil company Pemex is forcing the country’s oil and gas industry to re-adjust.

The industry will have to diversify and be more cost efficient in adapting to a market that is still largely dependent on a single oil and gas company.

Budget restrictions also create opportunities, particularly when all of the companies are looking to increase efficiency. This is also an important time for every organisation to review their business processes and increase the reliability of their existing assets. In this sense, it would be wise for oil and gas companies to invest more in maintenance and certification procedures as companies have very little margin for error.

Are Mexico’s regulations adequate to successfully tap into the resources at hand?

Many regulations are still being defined. The National Agency for Industrial Safety and Environmental Protection of the Hydrocarbons Sector is the regulatory body in charge of enforcing environmental and safety standards within the oil and gas industry.

The agency was established in August 2014 and is still formulating regulations. This offers an opportunity for organisations such as Bureau Veritas to provide feedback.

The government has already done an excellent job in modelling different elements of the Energy Reform from other reforms around the world. However, the best practices from the most challenging operating environments in the world, such as Brazil and Norway, still need to be implemented.

How have the compliance and regulatory standards evolved in the decade leading to 2015?

Regulations are drastically different than in the early 2000s. In some cases, they are more flexible and in others they are more rigid. Standards are more adaptable due to technological developments.

An example of this would be in subsea pipeline regulations. We have new tools for numerical modelling using tailor-made software that allows us to anticipate the risks and produce simulations of potential hazards with degrees of precision previously unavailable. This has permitted investments formally earmarked for safety precautions to be engaged in areas where it is more needed.

Regulations in environmental protection have become more stringent. The Deepwater Horizon oil spill called attention to the potential dangers of using unreliable equipment. In effect, the regulator carries increased responsibility.

How can certification and inspection services contribute to improving cost efficiencies?

The real value in performing regular asset inspections during an oil and gas operation is in risk mitigation. An asset with fewer risks and better performance will improve profitability.

Bureau Veritas has been more active in the upstream sector, but inspection and certification services are needed throughout the entire oil and gas value chain. The low cost of oil and gas affects upstream investments, but it may provide more activities in the downstream sector where cheap feedstock will allow for more production.

Additionally, there is a lot of work to be done with refinery upgrades in Mexico that will require extensive inspection and verification services. These refineries need to improve their efficiencies and implement new technologies that will be producing more environmentally friendly fuels.

It is crucial for new technologies and equipment to be thoroughly tested prior to operations. These downstream developments offer valuable opportunities for diversification for Bureau Veritas and similar providers.

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