Jaime Buitrago, EXXON MOBIL
Release Date: 0000-00-00
ExxonMobil’s involvement in the upstream sector is limited in this country. However, the presence of the company is quite strong and you have a very good relationship with Pemex. So, could you tell us how ExxonMobil sees Pemex and the oil and gas sector in Mexico?ExxonMobil has a venture office in Mexico with the objective of evaluating potential business opportunities in the upstream. We believe we can contribute to maximizing the benefit to all Mexicans from the development of additional oil and gas resources. Today, we are excited about the steps that Mexico is taking to modernize its energy sector through energy reforms.
As you mentioned, there is this 2008 Reform and Pemex seems to be more open to attracting foreign investment. Many -IOCs like ExxonMobil Ventures Mexico have an established presence in this country. However, as time goes by some have given up. Has Exxon lost its enthusiasm for this country?
We have always had a long term vision in Mexico. We have been in Mexico for 125 years. This presence demonstrates our long term commitment. We think the 2008 energy reform was an important step in the right direction. And the integrated exploration and production service contract, which is the result of the reform, is best suited for the types of opportunities where Pemex has focused its application - such as the reactivation of mature fields – in contrast with more geologically risky projects such as deep water exploration. The challenge in using a modified service contract as a production agreement is to obtain a proper balance of risk and reward, and a natural alignment between the parties, in the presence of significant sub-surface risk.
Incentive contracts are a reality today and deep water is to come. What are the main challenges to overcome? Do you think that the company is ready to face the huge capital and technical challenge that incurring in deep waters imply?
It is up to Mexico to decide which regulatory framework to use to develop resources in deep water. But that said, as in every other part of the world, there is a need to be globally competitive to attract the necessary investments, which in the case of deep water exploration are very substantial and risky. Deep water exploration is an obvious case of a difficult environment that requires not only the investment in technology and the qualified personnel, but where there is important risk with no guarantee of success for investments that, in the case of an exploration well, can be in the $150-200 million range. Hence, we believe that a successful partnership between an NOC and an IOC must be value-driven, and must be structured in a way where both, the investor and the resource owner, feel that they are in a win-win relationship, so we can work together to achieve a positive outcome. As it is usual in the oil industry, companies have diverse non-commercial cooperation agreements to conduct Research and Development (R&D) or scientific and technical developments. Could you briefly tell our readers what kind of cooperation does ExxonMobil Ventures and Pemex have? We have a non-commercial technical collaboration agreement with Pemex. It is a five-year agreement under which we have carried out a series of interactions and share from both sides some of the technologies and best practices in the industry.
Through these agreements, has ExxonMobil learned something in particular from Pemex?
The collaboration agreements have been both ways. In several instances we brought to Pemex some of the techniques and experiences that we have developed elsewhere. In others though, we have come to Mexico to learn from Pemex and from their experiences. I can mention specifically a collaboration that we had on a nitrogen injection project. Mexico has one of the largest nitrogen injection projects in the world, and that is one where we were able to leverage that experience.
Going forward in cooperation in terms of safety and the environment, how can ExxonMobil and Pemex further collaborate?
Worldwide, ExxonMobil continues to lead with employee lost time incident rates, which were at best-ever levels last year. We put a lot of focus on implementing what we call our Operations Integrity Management System (OIMS), which is design to identify hazards and manage risks inherent to our operations during the full cycle of the projects. It is a system that focuses on behavior based safety, which we think is the key. It also focuses on leadership, security and environmental aspects, as well as involvement in the communities in which we operate. Ours is an industry in which companies collaborate to optimize outcomes. International oil companies such as ExxonMobil offer an ability to integrate all aspects of a successful project – cutting edge technology, financial strength, access to markets, operating experience, and proven product management practices. Thus we think that we have the global know-how and experience that can help Mexico, for instance, mitigate the risks of deep water exploration and development.
One thing we cannot overlook is shale gas. Exxon is very active in this area and you have a lot of expertise. In Mexico, shale gas is new. What potential do you see for shale gas in Mexico?
We do have, through the acquisition of XTO a couple of years ago, a large presence in shale gas. Mexico faces a very significant increase in demand. It is estimated that by 2030 the demand of energy in Mexico will grow by 20 percent. To satisfy this growing energy need, Mexico will have to optimize the production and use of all energy resources. Shale gas is one of them, but Mexico needs to continue its efforts to optimize the production of oil and the discovery of new oil resources as well. If you look at the shale gas revolution that took place in the United States, it is clear that it was possible through the potential for innovation and investment from many actors in the private sector. So, for such shale gas revolution to take place in Mexico, there will need to be in place a legal framework and business environment that would be conducive to such a development.
You mentioned the challenge of the increasing energy demand. What kind of contribution would ExxonMobil like to bring to Mexico in the future in order to have more energy efficiency ?
In the past five years, ExxonMobil has invested more than $1.3 billion to increase energy efficiency and reduce greenhouse gas emissions. We monitor emissions in our projects to continuously improve. Efficiency is also important from the production side, from the supply side of energy. We have the global know-how and expertise that we can apply to complex projects, especially large and risky projects, so that the new supplies of energy that are so needed can be accessed in the most efficient way.
How can society also be part of this?
We think that societies around the world, through their governments, need to implement policies that are conducive to meeting the challenge of increasing energy supply worldwide and at the same time mitigate greenhouse gas emissions. We think that the best policies to be put in place are those that are transparent, that are long term and predictable, so that businesses can best plan their projects based on these policies.
Sir, if we came back in five years, what would we find within ExxonMobil Ventures Mexico?
We hope that Mexico continues in its efforts to optimize its oil and gas sector. Again, it will be up to Mexico to decide which framework to use in response to the growing energy needs and challenges. They must decide if they want to adopt a framework in which both the private and the public sector can cooperate to optimize its oil and gas resources for the benefit of all Mexicans. National companies, like Pemex, and international companies, like us, face common challenges and share common goals. We can develop dependable and long term partnerships based on these commonalities. That is crucial in an industry such as ours which is high risk and ever changing.
How do you think you can work together?
It is for Mexico to decide how to do it. We know that we have value to add to the resources in Mexico. We look forward to contributing to the degree that we can in Mexico.
On a personal note you have been working in the industry for a very long time. What advice can you give to the foreign CEOs that are coming here?
The two years that my wife and I have been in Mexico have been very enjoyable. I think that anyone coming into Mexico will have as good a time as we have had. The advice that I would give is to get to know the country well from the beginning. Dig deeply into its history and into its culture, which is very rich and interesting. That will help them enjoy their assignment tremendously. Also it is important for foreign CEOs to understand the nuances of Mexican society and the Mexican way of doing things.
What is the most gratifying part of working for both ExxonMobil and the oil and gas industry?
I have been with ExxonMobil for over 30 years and I think the most gratifying part is having been able to spend my whole career with one company in a variety of assignments and projects. It has never been routine and I have had the opportunity to grow personally throughout those years. I think that is the most gratifying and important part of working with ExxonMobil. As far as the oil and gas industry goes, once you realize the scale of the industry and the importance of its role in supplying 60 percent of the energy the world needs, it really leaves you with a good feeling of contributing to society. Societies need modern energy in order to make economic progress and increase their standards of living. Contributing to that end is very rewarding.
| Company: | EXXON MOBIL |
| Country: | Mexico |