Global energy consultancy Sproule open office in Mexico City

Sproule, the global energy consulting firm will open their inaugural Mexican office in Mexico City. The firm’s head office is located in Canada and they already have two additional offices in Latin America in Bogotá and Rio de Janeiro. In addition to an European office in The Hague, the new Mexico City office will mark the firm’s fifth office globally.

Sproule have been operating in the energy, oil and gas sector for over 65 years and are veterans of the industry. The move comes at a critical point in Mexico’s energy production industry and alludes to the firm’s growth strategy in the region. 

The Mexican energy reforms which were passed into law in 2014 were cited by the firm as one of the main reasons for the expansion. According to a press release following the announcement of the new office, the firm states that after the energy overhaul, the Mexican oil and gas market is poised for growth.

Back in August 2014, Mexican President Enrique Peña Nieto put a number of hydrocarbon fields up for tender to private oil companies – sparking a frenzy of investment. The policy created a framework which ended the Mexican state’s monopoly over the country’s oil and gas industry and made the energy industry more competitive as a result.

The move has already paid off for the Mexican Government, whose policy opened up the country’s oil fields to foreign competitors for the first time in nearly 80 years. Round three of the bidding has recently commenced with the rights for 35 contracts situated within the Gulf of Mexico opened up, having attracted big names such as Chevron, BP Capricorn Energy and Premier Oil. 

“Sproule has been paying close attention to the Mexican market. We are responding to new opportunities and are ready to service the market locally with our reserves certification, reservoir characterization and strategic advisory services," said Cameron Six, President and CEO of Sproule.

The new Mexico City office will be headed by Lionel Li, who has over 10 years of industry experience. Li will be serving as Country Manager and brings a wealth of petroleum engineering experience to the table. The firm says that Li has a proven track record of contributing to client success and are confident that Li will lead the Mexican team to success in the field.

"The decision to expand our presence in Mexico was a logical step in our business growth strategy," says Jim Chisholm, Sproule Vice President for Latin America. “The area is rich in oil and gas talent and the market is primed for local services. We have the opportunity to further expand our capabilities and increase our ability to service current and future energy markets.” 

The firm has been recently campaigning to the Mexican Government in regards to the Zama-1 drilling in Mexico’s Gulf Coast which “delivered a welcome surprise.” As the field stretches between neighbouring exploration blocks which have been awarded to multiple competitors, the firm is advocating for a deepened level of cooperation in the Gulf.

Specifically, this means that the 14.2 billion barrels which were located – one of the fifteen largest oil discoveries in the past 20 years – would be subject to unitization. The unitization framework aggregates adjacent licences of a shared reservoir as one unit and divides the costs and benefits according to the percentage of the size of ownership. 

“Unitization was developed primarily because the rule of capture creates incentives that can lead to undesirable consequences from the government’s perspective. The rule of capture encourages each party to develop a resource more quickly than its rivals can. This leads to fast-paced drilling programs, rushed field development and poor reservoir management. It can also lead to unnecessary duplication of facilities. The result tends to be lower resource recovery, higher overall costs, and lower overall profits. This means less revenue for government – lower royalties and smaller tax take,” states a Sproule report titled ‘Huge Discovery Highlights Mexican Unitization Policy Requirements’.

The firm promotes this regulatory development as a necessity for ensuring that returns are properly maximised for both the Government and Mexican citizens. “The country’s oil and gas reforms have been subject to intense political dialogue. Voters will want to know that the returns on oil and gas projects are being delivered back to the nation and are being maximized,” the report continued.

The firm concludes the report by stating that the first case for unitization will be the Zama field and that the Zama is a huge discovery where the national oil company has a stake in the outcome. “Opening up Mexico’s Gulf of Mexico waters could lead to discoveries that straddle the US-Mexico boundary. Mexico will want to demonstrate its strong and clear unitization rules to support international negotiations with respects to developing such resources.”