Incentives needed to increase local content in Mexico's oil and gas supply chain: panelists

Mexico City — Exploration and extraction activities in the oil and gas sector can develop local economies in Mexico, but incentives are needed to increase the participation of companies in the supply chain, panelists said April 28.

The coronavirus pandemic has taught Mexico that supply chains, which were believed to be reliable, can be disrupted, particularly if long distances are involved, said Marcos Avalos, head of local content oversight at the economy Secretariat, during a virtual panel organized by the national association of hydrocarbon companies (Amexhi).

"Mexico should take advantage of the trade agreement the country has with the US and Canada to increase integration of small and medium sized enterprises (SME) in the value chain," said Avalos.

The Mexican administration is currently working on measures to incentivize Mexican companies to join the chain, Avalos said. The measures, which are expected to increase the transfer of technology and improve training, will be announced soon, he said, adding that the minimum requirements currently in place are easy to meet and do not guarantee benefits for communities.

Warren Levy, CEO of Mexico-based Jaguar Energy, said during the panel that the abundant gas resources still found in the country present an opportunity for local companies to participate in the supply chain and increase the benefit for communities.

"We need more local companies to have a dynamic industry that allows us to stop relying on the US," he said, adding that the multiplying effect can be enormous.

Jaguar is currently producing small volumes, but the resources it has found could allow the company to supply roughly 10% of the total demand of natural gas in the country, according to data from the National Hydrocarbons Commission.