By Bruce Peterson, Korn Ferry
The major reforms regarding privatization of Mexico’s oil and gas industry are exciting news to international companies looking to invest in this lucrative market. As one of the world’s top producers of hydrocarbons, coupled with its central location in the Eagle Ford Shale play, Mexico has tremendous onshore and offshore resources that have gone untapped for more than 75 years. This historic legislation is destined to benefit Mexico and the worldwide oil and gas industry in terms of employment opportunities. But these benefits will not surface as soon as one might think.
Currently, energy talent and employment in Mexico are focused on the upstream sector, primarily because Petróleos Mexicanos (Pemex) has been the country’s sole employer for this market since 1927. Oilfield service companies such as Schlumberger, Halliburton and Baker Hughes have been in Mexico for years, working with Pemex from the drilling and completion sides of the business. Since these companies already have infrastructure in place, it is natural to assume that once the reforms’ details are made clear and approved by the Mexican Congress, upstream expansion via international investments (and ultimately jobs) will immediately follow.
In truth, the extent of international investments and job growth will be unknown for quite a while. A lot of technology and infrastructure pertaining to the exploration and production (E&P) sector must be reviewed and processed. For example, Mexico has not built its deepwater infrastructure off the Shelf like the U.S. has into the Gulf of Mexico. This must be examined before companies can be retained to construct new offshore wells. It may take several years to collect relevant seismic data and drill enough test wells before major production can begin.
Furthermore, the current reforms will require partial use of local content – goods and services within Mexico – to further develop the upstream sector. The legislation currently being negotiated will outline the required percentage split between local content and out-of-country resources. Once these details are known, it will take the global upstream market two to three years to fully understand the new regulatory environment, and obtain legal opinions on whether or not investment makes sense.
As a result, it is difficult to predict the exact types of talent needs and number of job opportunities for the upstream market that will arise from these reforms. It is safe to predict that there will initially be a high premium on technical skills, followed by an emphasis on engineering and construction skills and ultimately on operational skills. Since the U.S. talent pool is currently at capacity within the upstream sector, it also is safe to assume that the resulting talent requirements to service the expansion in Mexico will come from an international pool that includes enticing candidates from the U.S. as well as countries such as Australia, Canada, the U.K. and others.
Employment impact is a bit more optimistic, though, for the midstream and power generation sectors. The reforms will enable Mexico to shift from coal to a gas-fired power generation strategy, thus requiring construction of many new, smaller-sized, gas-powered natural gas plants. Comisión Federal de Electricidad (CFE), the government-owned electrical utility, lacks the pipeline infrastructure to support such a shift, so additional talent to build this infrastructure will be required.
Mexico already has a fairly solid regulatory environment in place for midstream power generation. This presents opportunities for pipe manufacturing and construction companies to immediately come into Mexico to support this buildout once the legislation passes. Expect to see a rise in talent needs in any area touched by complete buildouts of pipeline infrastructure and gas treating facilities.
In the end, the reforms will result in a talent market consisting of Mexican citizens and outside professionals – both from the upstream and midstream sectors. Extensive training and development will be essential for Mexican citizens to be successful in exploring for and producing oil and gas and operating the new infrastructure. It will require forming strategic partnerships with international companies to gain the knowledge and skillsets necessary for Mexico to realize its energy goals.
Bruce Peterson is the Houston office managing director and a senior client partner of Korn Ferry. He leads the firm's energy efforts, as well as the electric and natural gas utilities efforts within the natural resources sector.
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