Ernesto Rios Patron

The government has to attract investment and make sure that it operates in a competitive market, with safety and environmental protection.

Ernesto RÍOS PATRON General Director Mexican Petroleum Institute

Strong institute for the industry

October 9, 2017

Ernesto Ríos Patrón, general director of the Mexican Petroleum Institute (IMP), talks to TOGY about how the institute is providing assistance throughout the domestic hydrocarbons value chain, with a long-term focus on deepwater and shale developments.

Established in 1965, the IMP is a public research centre dedicated to Mexico’s oil and gas industry. As a public research centre, the institution generates knowledge through basic applied research, technological development and innovation. The IMP is the leading institution for energy-related patent registration in the country. With a staff of about 3,000, its main focus is exploration, production and processes engineering research to provide support not only to Pemex, but also the wider domestic hydrocarbons industry.

On regulations: “The government needs to change its model from over-controlling Pemex to accepting that it needs to leave the operators to do their jobs and trust more in the capability of the industry, as long as regulations on measurement are strengthened.”

On production expectations: “The only thing I would warn against is a lack of short-term cashflow offshore and in many oilfields, both because of the difficulty of starting operations and because the cheapest way to monetise is to put money into those fields in which operators have already made a bet. There is a very dangerous lack of cashflow to really create the platform of production that everyone is expecting.”

Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Ernesto Ríos Patrón below.

What programmes is the IMP involved in?
The IMP is an organisation that covers all of the value chain. Our purpose in exploration has a lot to do with providing better tools for interpretation of the soil and the conditions of the soil, for example, double porosity technology.
If we move more into development, then we are working more strongly towards providing management of reservoir capabilities and information, so that better decisions can be made about how to deploy investment and monetise as soon as possible.
In production, we are strongly moving into increasing productivity and EOR. It is not only a matter of using technologies that enhance recovery, but also of making a correct assessment of the field situation.
In the downstream, we are focusing on the reliability of existing infrastructure and assisting distributors through the inspection, design and validation of the construction of petrol stations.

 

What unconventionals projects is the IMP working on?
A few months ago, we were awarded a USD 20-million research project to move into shale. We are sponsored by Pemex and the National Hydrocarbons Commission, but the money comes from the Conacyt-SENER [National Council for Science and Technology and Secretariat of Energy] fund.
We will continue our work in the area of Limonaria to be able to provide more data, which will give more certainty to the volume of oil and gas that is present in the region.

What deepwater capabilities is the IMP developing to be a partner to the industry?
There are five capabilities. The first are high-pressure and low-pressure loops, which are used to assess different technologies and operations. We will have the capability to help new operators assess different conditions that might occur in Mexican deepwater and better select technologies and modes of operation.
The second is called flow assurance, from underground to the surface of the water. The infrastructure is going to be subjected to varying pressure, temperature and stress conditions. Regardless of the quality of the crude oil, flow assurance is very important. Therefore, the IMP will be opening a flow assurance laboratory.
Third, we will be opening a numerical simulation of metocean and hydrodynamic phenomena laboratory. This means we will not only look at weather, but all the conditions, including the state of the waves, how they affect infrastructure and which stresses the infrastructure will be subjected to.
The fourth capability we will be pursuing is the geotechnics and interaction between soil and infrastructure. We will be looking at the way in which the different infrastructure designs affect the behaviour of foundations for subsea and floating production systems, including piping systems that need to be connected, as well as the behaviour of risers. This means that you will have the most cost-effective design before moving into very expensive operations.
The fifth capability is called drilling fluids, completion and cementing of wells. The infrastructure will allow the development of control fluids and cementing materials to build wells with hole quality, operational safety and environmental friendliness for deepwater fields.

How are the various governmental agencies interacting to implement new industry standards?
ASEA [National Agency for Safety, Energy and Environment], the CRE [Energy Regulatory Commission] and the CNH [National Hydrocarbons Commission] have shown a very empathetic relationship with the industry. Even though not everything is as the industry expects, compared to other agencies, they are continuously talking to the industry, taking into consideration the industry’s viewpoints and trying to find ways to get better results.
They have particularly strengthened their interaction through an OECD study, in which they are looking at how they are establishing the practices together.
They understand, as does SENER, that there are still too many requirements for companies to start operating and that that requires strong optimisation. As always, the IMP is working on different committees with those agencies to make processes more rapid and more effective to attract investment, without risking the technical strength the industry needs to have.
I think we need differentiate between the scope of the regulation and the number of requirements the regulation asks for. Also, the government needs to change its model from over-controlling Pemex to accepting that it needs to leave the operators to do their jobs and trust more in the capability of the industry, as long as regulations on measurement are strengthened.
The one taking the investment risk is the entrepreneur. The government has to attract investment and make sure that it operates in a competitive market, with safety and environmental protection. The government should not make assessments of investment conditions. Those assessments belong to the investors and operators.

What measures is the IMP taking to develop human talent?
We have been playing a very relevant role across a lot of research centres. In 2016, we were awarded MXN 1.1 billion [USD 53 million] from Conacyt-SENER’s FISH fund, which is a fund for the institutional strengthening of the hydrocarbons industry. A lot of the award went towards improving capabilities of operators, both in midstream and downstream, and also developing capabilities for the natural gas industry.
We won those funds by competing in an open call made by the Mexican government. The IMP’s proposals were accepted through a selection process with the participation of an independent jury. These funding projects will increase the IMP’s capacity to create a reliable, well-trained and safety-conscious workforce.
Internally, we have had to do some restructuring. Pemex’s business has been declining very much, which has affected the IMP and has led us to change some of our prices, making us even more available. We have had to reduce some personnel, mostly in administrative areas.
As the market improves, we expect to pursue new relationships with young people who are starting to come into the industry.

What is the outlook for the Mexican market?
My overall view of the industry needs to be put in the context of the oil price. Most analysts believe the Mexican crude oil price will stay somewhere between USD 45 and USD 52 per barrel through 2019. This is still a price that does not speed up investments. Therefore, reliable information and the capability to interpret it are very important, so that you become competitive.
Mexico is now a market with a lot of players. Many of those players have put their foot in the market, but if they really want to generate everything the government is expecting, then I insist on the capability to monetise properly at a low cost.
In terms of the production level we will have, we must remember that deepwater and shale are for the long term. In the short term, productivity is very important.
The only thing I would warn against is a lack of short-term cashflow offshore and in many oilfields, both because of the difficulty of starting operations and because the cheapest way to monetise is to put money into those fields in which operators have already made a bet. There is a very dangerous lack of cashflow to really create the platform of production that everyone is expecting.

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