WSS Energy has recently completed a study investigating the Oil and Gas supply chain in Mexico. The project was commissioned following the recent offshore licensing rounds, which opened up the Southern Gulf of Mexico and onshore fields to international operators for the first time. Prior to the licensing rounds Pemex had largely enjoyed a monopoly over Mexico’s hydrocarbon resources, with only a small number of production contracts in place.
The study contained a gap analysis between the capabilities of the Mexican supply chain and the anticipated future needs of international operators. Mexico’s E&P supply chain has developed over 100 years to meet the needs of Pemex, and also benefits from the relatively close proximity of Gulf of Mexico and onshore operations in Texas. This has created an imbalanced market, where small Mexican contractors have excellent manufacturing capabilities, but the knowledge-based segments, such as EPC, remain international. This leads to Mexican contractors being disproportionally used for relatively small engineering and fabrication scopes rather than as prime contractors.
Gaps identified were therefore mainly towards knowledge-based segments such as G&G and oilfield analytics. Mexico’s subsea supply chain is also weighted towards shallow water, given the current field water depths, and developments in subsea services will need to be seen as the deepwater becomes exploited.
The scope included in-country engagement with regulators, operators and the supply chain, and the results were presented at a number of workshops in the UK and in Mexico.
WSS Energy has delivered many projects for UK and overseas government industry stakeholders. Our work for governments considers the social, economic and environmental impact of conventional hydrocarbon development and energy transition technologies.
Supply chain geographic distribution
Mexico City is unsurprisingly where larger companies maintain their corporate headquarters. Adjacent to Mexico City in the broader State of Mexico is where companies are attracted due to cheaper operational costs and good communication links to the capital.
Ciudad del Carmen in Campeche is the operational centre of the Mexican upstream industry and the town port is heavily used for offshore resupply and logistics. Ciudad del Carmen is the home of 79 companies profiled. Dos Bocas in Tabasco state is the main operational port for Cantarell and Ku-Maloob-Zaap. Tabasco state is also the home to Pemex E&P in Villahermosa, this attracts technology focused companies who do not need facilities adjacent to the ports of Campeche. Villahermosa is also the headquarters for Pemex’s onshore fields operating in Tabasco state, so a natural home for companies active in both onshore and offshore.
Veracruz state has considerable onshore activity, but currently has limited offshore activity. Altamira in Tamaulipas state is a main offshore fabrication facility with activity across all segments. The state of Nuevo Leon contains Monterrey, Mexico’s manufacturing centre, and therefore has a high number of companies within the facilities segment - the home of 32 companies identified.
Seismic data acquisition and processing. Mexico is dependent on international contractors for seismic data acquisition. Seismic acquisition is an international market so this is not unexpected. Mexico has little capacity for processing with only one company active in the recent licensing rounds. The UK’s capabilities in processing are competitive with a strong supportive ecosystem for exploration excellence. Extensive seismic has been shot to support the licensing rounds so further need will come initially from deepwater exploration for any infill seismic rather than large acquisition programs.
Geoscience consultancies. There is little capacity or capability in Mexico away from the larger research institutions. The UK is very competitive in this sub-category at both SME and large consultancy level. Mexico’s onshore and offshore operators are likely to be capability constrained in this sub-category, so this is a good match for the UK.
Data interpretation consultancies. A similar picture to the previous sub-categories. The UK’s capabilities are significant due to the large number of independent exploration companies present in London, and the need for near-field exploration in the UKCS. This expertise is likely to be in demand in Mexico.
Seismic instrumentation. The UK’s expertise in this sub-category is broadly competitive with global peers. Mexico has no discernible capabilities in this areas, however there is also no market need.
Reservoir enhancement. The UK’s performance is better than Mexico, but comparable with other countries with EOR programs. Mexico will need EOR capabilities for both mature fields and new developments in the future, however the timeline is unclear.
The graph below provides an assessment overview of perceived capacity and capability deficiency in Mexico and overall competitiveness of UK industry compared to various international suppliers in the Reservoir category.
Drilling contractors. Despite drilling contracting being a global business the UK has a strong performance in drilling best practice. There will be strong demand from Mexico in the future, and local companies do not have deepwater experience. The UK component of future drilling projects is difficult to quantify.
Well services contractors. Strong future demand from Mexico will be met be international contractors rather than domestic companies. Specialist companies in, for example, well intervention and decommissioning, could be competitive.
Well engineering consultants. The UK will compete against the US well engineering companies who are closer and already active in Mexico.
Equipment design. Norway is a leader in advanced well equipment design, followed by the US. The UK is not likely to be competitive in this space.
Drilling and well equipment manufacture. The UK is not a manufacturing centre for well equipment, apart from low-volume specialist componentry. Mexico imports rather than manufactures well equipment.
Sales of drilling / well equipment with services. Future Mexican demand will be strong but US and Mexican companies are well equipped to cover the market.
Drilling and well equipment maintenance. US and Mexican companies are capable and well established in the market.
Laboratory services. Mexico has some companies providing laboratory services, however the gap can be filled by US based companies. There may be opportunities for specialist UK companies, however this is hard to quantify.
Structure and topside design and fabrication. The UK is not very competitive versus large international fabrication yards. Mexico’s future need will likely be met by these international facilities rather than there being a domestic gap. The UK is very good at high quality general fabrication at a smaller scale so companies can export UK engineering know how to Mexico via subsidiaries.
Engineering consultants. The UK is strong in engineering consultancy, but this is a competitive and international market. Platform modifications are within the capabilities of the Mexican supply chain.
Engineering operation, maintenance and decommissioning. Although the UK has capability the proximity of Houston and the presence of international companies will be a difficult barrier to entry. Mexico will have strong future demand.
Specialist steels and tubulars. Mexico successfully exports OCTG and has very strong manufacturing capabilities. The UK is not competitive versus Japanese, Chinese and Mexican OCTG companies.
Inspection services. The UK is very strong in advanced inspection technologies, and there will be demand from Mexico. This is a good fit for UK companies seeking to export.
Machinery / plant design and manufacture. The UK is broadly competitive with peers, and there will be strong demand from Mexico in the future. This is however a competitive market.
Engineering support contractors. Competitiveness of the UK is blunted due to this being a crowded market. There will be strong demand from Mexico
Specialist engineering services. The UK is competitive, but again this is a crowded market.
Chemicals, special materials and components. UK low-volume advanced manufacturing is very competitive but the future market need is not likely to be strong.
Category: Marine and Subsea
Engineering and construction contractors. Led by large international companies with fabrication facilities and installation capabilities. The UK is strong in subsea design so export success will benefit highly skilled engineering consultancies in the UK.
Support and services contractors. Mexico’s capabilities are broadly suitable, however will need supplementing by international companies with modern fleets. The UK has neither the Mexico expertise nor the fleets required to compete.
Heavy lift / pipelay contractors. This is an international business with Norway and the US in leadership positions. Few UK companies would be able to compete.
Floating production and storage units. The UK has no domestic capacity. There may be future demand, particularly for deepwater developments, but this is likely to be met by international companies.
Equipment design and manufacture. The UK has a strong subsea industry, both in new product development and in manufacture. There will be longer-term demand for deepwater developments.
Equipment maintenance and support. Subsea Inspection, Repair and Maintenance (IRM) is international vessel dependent but the UK has good experience and a number of competitive companies. Deepwater will drive future demand.
Underwater mapping and surveying. Generally an international business but the UK has competitive advantage with some SMEs with strong capabilities.
Subsea inspection services. The UK is a leader in ROV technology, and there will be future demand as Pemex modernises and as new operators start producing in Mexico.