President Enrique Peña Nieto has made sweeping changing for the country through the creation of new laws, amendments, and reforms. The changes made in Mexico certainly show promise for the country, but what do you believe Mexico still needs to do to reach its full potential—economically speaking?
My assignment in Mexico began in November 2013, and within a few weeks of my arrival, on 20th December 2013, President Peña Nieto had signed the energy reform in to the constitution. Many people were not expecting change to proceed that quickly, so it has been quite exciting. From the very beginning, the government and the Secretary of Energy have been setting milestones, and they have been meeting those milestones over the course of the last 12 months. As each milestone is checked off, momentum builds toward a positive outcome.
What is key is that the reform addresses significant aspects of the economy. Expectations are high concerning new companies and investment coming into the country’s energy operations. More than 50 billion dollars of investment is expected to be introduced over the next four years, following the first round of bidding. This should make it possible to cost-effectively develop new resources that were not previously feasible in terms of technology and new processes. Particularly for developing deepwater and other unconventional energy sources, the risk is much higher.
Introducing to Mexico the typical industry approach of developing resources through partnerships and financial risk sharing among companies will enable developing new resources that in turn bring financial benefits to the country. Lower energy costs will enable Mexico to realize the potential of becoming a leading global manufacturing center. Although Mexico has made great strides in its manufacturing capabilities, there is a lot of potential for greater growth that requires access to cheaper energy, and this is a central goal of the Energy Reform.
The reform will also benefit jobs creation. Throughout the 78 years that Schlumberger has worked in Mexico we have had access to a highly proficient workforce, from professionals and engineers through to all levels of personnel. Human resources is not a challenge here in terms of the quality of our employees. It is the quantity of human capital that will need to concurrently increase with an increase in activity. That is one of the key challenges: developing proficient human resources at the same pace as the expected growth.
Schlumberger has evolved greatly over the years from its humble roots as a wireline well logging company. It now offers a wide range of products and services from formation evaluation through directional drilling, well cementing and stimulation, well completions and productivity to consulting, software, information management and IT infrastructure services that support core industry operational processes. With so many services to offer, how are you able to stay on top and offer the quality your customers want and deserve?
Since its very beginning, Schlumberger has been a company that is based on technological innovation as augmented through mergers and acquisitions. We started by conducting the first downhole electrical logging operations in 1927 to introduce metrology—the science of measurement—to the oil field. From there, we became international and also began acquiring new companies. When I joined Schlumberger, there were six product lines. Today, we have 14 product lines as we continue to both innovate and acquire. However, the acquisition of new entities is more than just introducing new technologies. It means there has to be a fit to our unique global culture, which is something that we have learned to do quite well. And our company-wide culture benefits from retaining elements of the acquired companies’ cultures. Our most recent major acquisition was Smith International, which is today fully integrated in our organization. At the end of the day, as a company, we have a very strong culture in terms of excellence in execution, customer service, and our passion for technology. So when we choose new companies to welcome into our fold, we are looking not just at technology but whether a company has these elements incorporated in its business culture.
We have four key pillars for continually improving our performance. One is technology; it’s our tradition of innovation—particularly emphasizing now on disruptive technologies—that keeps us ahead of the curve. Even during down turns we have maintained our industry leading investment in Research and Engineering. The second and third are reliability and efficiency. As we introduce new technologies, we must make sure that they have a level of reliability that is a step ahead of the industry. Especially as the so-called easier resources are depleted and we enter more difficult environments, reliability is critical for helping our customers reduce their cost of operation. In terms of efficiency, we are constantly looking at ways to streamline our operations, again toward reducing customer cost. The fourth pillar is integration. The Schlumberger product lines are organized into three technology groups: Reservoir Characterization, Drilling, and Production. We have the capability to integrate all across the groups, which span the hydrocarbon pathway for the upstream oil and gas sector. Improving our ability to integrate over the past two decades has brought us to the point where we can plan and execute multidisciplinary projects from A to Z. Integration ensures that our customers get the greatest benefit from our services regardless of the challenges they face.
Do you have any examples of any projects in Mexico that really progressed from A to Z?
We have been performing integrated well construction projects globally for two decades. Mexico has been one of the leading regions worldwide in the adoption of these large integrated projects, we are the pioneers and the leaders here. Customers give us a development plan, and we seamlessly execute all the steps in the plan, from building the infrastructure to drilling the wells, connecting the wells, putting them into production, and handing them over to the customer. We have active integrated projects throughout the country, encompassing a wide variation in factors such as the drilling environment and technical complexity, both on land, such as the projects in the South and the East of the country, as well as in offshore, such as the Integrated Services project for Deep Water exploration.
How does Schlumberger go about choosing which project to work on?
We have models and examples of ongoing long-term projects and those that we have already successfully completed worldwide that we can show our customers with similar challenges. This offers quite a compelling, convincing story, from the point of view of value addition for the customer. We have a portfolio of projects worldwide, and before entering a new project, a great deal of technical and commercial due diligence takes place, to ensure that we are focusing on the right opportunity where we can create a win-win combination with our customer.
You have also expressed interest in getting more involved in shale oil. What services do you feel you would have the greatest advantage in employing with shale?
Schlumberger has extensive experience working with companies to reduce the development costs associated with shale oil projects in North America. Shale fields have historically been developed through horizontal drilling and then completing the entire well. We have technologies and workflows that identify and design the completions for the sweet spots in the well, which enables our customers to complete wells in a much more economic manner by focusing on specific zones to maximize productivity at the lowest cost. When you optimize where you are going to complete the well, you optimize the amount of resources used. These technologies are already available in Mexico today, and have been used albeit in a limited manner.
What is Schlumberger’s track record when it comes to working in deep water?
We already provide deepwater services to Pemex. Schlumberger has the leading presence in all of the world’s deepwater basins, including the Gulf of Mexico and Brazil’s subsalt. The very high cost of a deepwater rig and its associated services makes reliability and efficiency critical concerns. Every hour lost to nonproductive time is a lot of money lost for operators, which is why they contract with service companies that have not just the technological capacity but also the necessary service quality. That’s why Schlumberger is the leading service provider in deep water: we provide the technology, service quality, and answers that reduce uncertainty.
You have been quoted as saying that if investment in Mexico doubles in the coming years you hope for Schlumberger to double as well. The same goes for if Mexico sees triple the investment. What are you doing to make sure investment goes your way?
Our goal is to grow our market share. Not only are we reaching out to the companies now entering Mexico, but we are also being approached by many of them. What makes Schlumberger attractive is not just our capacity to provide services—as demonstrated by our extensive experience in this country—but also our capacity and track record to put it all together in a package and execute efficiently. These highly integrated packages are developed by working very closely with our customers; obviously, this is not something you learn to do overnight. We leverage our customers’ experience and knowledge and complement . We have achieved tremendous success with this approach, and our customers know this because we are doing it for them in other countries.
It has recently been suggested by news sources that if the price of petrol continues being weak, this could reduce the amount of exploration and production in Mexico. Is this a worry for Schlumberger? What are you doing to make sure investment indeed comes?
We are working with our customers who are planning on coming to Mexico to make sure that their transition is as smooth as possible. To help them thrive in this new market, we must ensure that Schlumberger provides adequate services, resources, and trained professionals in Mexico. In terms of investment in the country at current oil prices, Mexico has a major concentration of hydrocarbon resources and the energy reform has been widely anticipated for some time. Some companies that are now getting involved have a very long-term view of Mexico. The investments that they need to make are not intended to see production results from day one. For example, in deepwater fields there is much to be done before production can occur. The process that leads to production takes a few years to complete, and it is difficult to predict where oil prices will be in that time span. The companies we work with are used to fluctuation in oil prices, and this will go in to their evaluation model.
Pemex is one of your largest customers, and with the energy reform you have the opportunity to attract even more. What are you doing to stand out from your rivals like Halliburton and Baker Hughes?
Schlumberger has a proven track record for technology and field operations in Mexico that many of our customers are already familiar with. We have a sizable presence of more than 5,000 people in Mexico. In terms of access to technology, services, or professional staff, there is nothing lacking in Mexico. Mexico has not had trade restrictions over the last 20 years because of NAFTA, so our ability to bring in new technology has not been limited. Our Mexico operations include an extensive number of integrated projects from over the past 15 years. In all of these integrated projects we were the pioneers as market makers. Schlumberger created the integrated project market, established the performance benchmarks, and still sets the pace. When Pemex ventured out to deep water, we went along and provided all the services and technology on the initial wells. Once again, we were pioneers working with Pemex, and this pioneer spirit and what it accomplishes set us apart from the norm.
The energy reform presents a great opportunity for growth for all companies related to the sector— What is Schlumberger doing to ensure its continued growth?
Besides introducing customers to the opportunities Mexico offers and assuring them about Mexico´s capabilities, we are making sure that our infrastructure and capacity is at the right level for what is coming in the future and what our customers expect from us. We are also looking very closely at our human resources and technology requirements. And, of course, we continue to work with Pemex, and those projects are proceeding well.
You have held leadership positions with Schlumberger for a number of years. How would you describe your style of leadership?
Schlumberger is a multicultural company. On any project team, you’ll have people of different nationalities, and that diversity fuels creativity in the thought process. The teams that I manage typically have both a variety of nationalities and work styles. As a team leader, my approach is to reach out to leverage the team’s various differences in achieving results that enhance and optimize our customers’ operations..
I like to set clear goals and then give the team sufficient freedom to be able to achieve the goals. It is important in a country such as Mexico, which is changing so quickly, to have both short-term and long-term goals and to never lose sight of what you want to accomplish. Maintaining close relationships with people is also very important in Schlumberger. Conducting regular field visits and inspections and listening to the team directly supports and encourages communication, which is greatly valued by Schlumberger’s leadership.
Schlumberger in 6 months?
We would like to see a very successful round one with new customers coming in and starting to implement their investment plans. Ideally, Schlumberger will be working side-by-side with the new companies entering Mexico, as well as continue to build our portfolio with Pemex.