Petrobras + Pemex

A Tale of Two Companies…

Early last year, two studies brought us face to face with Petrobras and PEMEX.   Both market opportunity projects were commissioned by global OEMs interested in selling product into the oil & gas industry.  In Brazil, we green-lighted the opportunity and highlighted strategies most likely to result in sales success with Petrobras (unique and differentiated product, an understanding of local content laws  and local business practices, climate considerations, regions incenting investment and exploration, etc.).  The bid process in Mexico looked reasonable on paper.

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 But the reality was not reasonable, not simple, and typically resulted in failure.  Barriers erected to keep global companies out and PEMEX’s failure to invest in energy infrastructure resulted in serious underperformance of the Mexican energy sector.  We suggested to our client that liberalization of Mexico’s energy sector needed to occur before concerted efforts were warranted.  A national effort to open energy markets to foreign investment, a new level of transparency in bid process & procedures, and a detangling of the norms and standards and sales practices that effectively barred foreign participation would create a sea change in Mexico.

Fast forward six months to December 2013. Mexican President Enrique Peña Nieto signed legislation enabling foreign companies to drill for Mexican oil in partnership with Pemex.

Then, in July 2014, Mexico’s Senate voted in favor of a new Electricity Industry Act.  Background:  the Federal Electricity Commission (CFE), a state-owned utility, required private generators to sell all their output to CFE: a system that handed the government control of electricity pricing. The new law (which is still working its way through the system) creates a National Center for Energy Control and requires that generation and sale of electricity services are to be provided within “a system of free competition.”

Who’s excited?

This is a win for oil & gas and energy sector manufacturers/service companies, and for Mexico.

The party is just getting rolling…

 

Nancy Musselwhite is Senior Consultant of Geo Strategy Partners, a  B2B/Industrial focused market research and Strategy consulting firm.

www.geostrategypartners.com

 

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