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“By 2020, our natural gas production capacity will have increased fivefold”

Interview - July 14, 2016

In operation for only a quarter of a century, CMM has become an important player in the transformation that Mexico’s energy sector is going through. CMM’s participation in a tendering process without the backing of any multinational corporation demonstrates the capacity of a proudly Mexican company that, at the same time, is open to business partnerships so it can continue playing a leading role and pursue its primary objective: the recovery of residual energy and its efficient transformation into renewable energy. Currently, CMM Group includes five different divisions, offering services in practically all sectors: it has the capacity to design and build metal structures, assembly lines, pipelines, and develop hydroponics for high-volume production by using high-tech greenhouses to meet the country's growing demand for food, among others. CEO Juan Rogelio Rodríguez Velázquez explains.



The energy sector is experiencing a time of crisis, but crises also generate opportunities. You found that opportunity and won a bidding for Round 1 Phase 3. What does it mean for the CMM Group to participate in this current expansion of the sector in Mexico?

We made the decision to pursue this avenue in 2013. In doing so, we could start little by little and progressively grow according to our abilities and to the needs of the market. Nowadays, with structural reforms and 100% Mexican human capital, winning the bid for Round 1 Phase 3 is the end of this first part of the process; it is part of a plan for 2020 in which we are investing in Mexico and in the local energy sector.

The challenge is to continue growing. Round 1 is the first step of the new Mexican energy model, which only refers to the upstream (exploration and exploitation of crude oil). In the second stage – midstream and downstream – Mexico has huge opportunities to develop secondary and tertiary products related to the sector. We have excellent raw materials. The secondary petro-chemicals sector in Mexico is an incredible market; hydrocarbon-based energy has huge potential. The country is a net exporter of crude oil and, nowadays, the gates are open for you as an entrepreneur if you are part of the sector. In Mexico, we can complete the entire process that takes hydrocarbons to the goods and services we use in everyday life. We just need to invest in the country.


What are the CMM Group's plans and when are you expecting to reach your maximum production level?

Our plan for 2020 is to increase our natural gas production capacity fivefold. We want to grow, we have the opportunity to do it, and the country gives us that. It is very important for us to find the alliances that enable us to grow without ever reaching that point when our capital, our experience, and our human capital are at their limit. The market is going to grow so fast that we cannot limit the growth of the company to what the company can do on its own. We need to find alliances with people who, outside our market, have had the opportunity, over the past 20 years, of participating in a much larger market.


You won the bid without the backing of any international company, while other major companies had to have it. Are you open to partnerships to strengthen your interests?

Yes, we are open to new alliances. We went for it alone because we decided to do so. We analyzed partnerships with several companies – from Colombia, the United States, Canada – and we decided to go it alone because this phase of the bidding had a message: this bid is for Mexicans. And we are very proud of having achieved it. In terms of growth, we are going to invest in these fields, which still have a huge potential. We are happy to work in onshore fields; it is our area of expertise.

I think that what is in the hands of new oil field operators nowadays is less than a tenth of what it will be in the next 10 years. The CNH has the clear objective of developing this model. We are going for it, we want to be a part of it and grow within this context.

Pemex, with the focus given by the new CEO, José Antonio González Anaya, also has a clear message: we must seek alliances with the most efficient companies in the production areas where we are least efficient. And that makes sense. Pemex is the best company in the world in shallow-water fields, but that ability limits its capacity to develop onshore fields, deepwater offshore fields, and non-conventional fields. It is not their fault; it is merely a consequence of how things happened in Mexico. Pemex will continue to be a leading company in shallow-water fields, but now they offer us the opportunity to grow with them and with the country.


What would be the added value that CMM could offer to a possible international partner?

Obviously, our knowledge about the sector and the country. We Mexicans are a very hardworking and reliable people, but we have our own ways. We are stubborn. That capacity we have of rising up in times of crisis, which has helped us survive, is the same that at times represents a certain aversion to adapting to international standards. Companies like CMM understood how the world operates. The advantage is that we have a perfect understanding about Mexico and also about the world, and we can seek what is best for everyone. I think that CMM's main capacity is very simple: we understand that when the sun rises, it shines down on us all. If you understand me and you want what is best for everyone (for your employees, for your partners, and for the country), people will see that you are open and they will get closer to you, because they see that you can contribute to their growth processes.


At this time of transformation for Pemex, what is the relationship between both companies and the State's main productive company?

Pemex is very important for us, it is our number one client. We started in this sector as Pemex subcontractors, and we continue working with them and committed to this company. Although the current crisis has forced them to suspend projects and reduce budgets, we believe that Pemex will bounce back. We are, and will be, there to support our client.

For this new model that we are starting as oil field operators, we are depending on people who worked with Pemex and who are now with CMM. These people bring us a tremendous level of experience: they have been in so many places, they have great knowledge and expertise in the sector, they know what are the opportunities offered by the Mexico fields. For obvious reasons, Pemex has been exploring the fields with the highest production levels; there are many others with excellent prospects and great levels, and they will be explored when the time is right. These are times of crisis and change, and Pemex will surely seek the right partnerships for the fields it hasn't been able to fully develop. And that is where we will be.


So, the national pipeline plan, which plans to practically double the current grid, plays into your interests?

It is an area of huge potential, because the current grid has to grow three or four times more. The transportation of hydrocarbons has always been seen as a problem, but now our country has found a financial and legal way to find a viable source of payment. It is a business in itself, because that infrastructure is going to grow a lot. And we are very interested in it. In fact, we did projects with Pemex for the construction of gas pipelines in 2007 and 2009, in which we were able to put together models for the construction of pipelines and find the source of payment to respond to the need for transportation of natural gas.


What do you think about the current reform, which includes that practically half of the steel used for the construction of a pipeline has to be Mexican? Can local companies actually meet this demand?

If we were to start building all the pipelines the country requires right now, we would definitely saturate national production.

The country's steel manufacturers, like everyone else, will have to adapt to the new model. We must protect them, obviously, and as a proud Mexican I would go to them as a first option. We have excellent product quality.

Nowadays, I fully support the Mexican product, which has a competitive price and excellent quality (it has a better price point than German or American steel, with the same level of quality). If we are building, we are definitely going to seek the best quality at a competitive price.


What are the main objectives established for the short and medium term?

Considering the opportunities that we found during our development and the foreseeable effects resulting from the energy reform, the CMM Group designed its near future (that is, until 2020) by reaffirming its participation in the oil & gas markets, construction of infrastructure, and renewable energies.

The first step is to continue growing in terms of natural gas production – an area in which we are investing significantly. We are not saying no to oil, but we are seeking to consolidate in terms of natural gas.

The second step concerns the construction of infrastructure for the transportation of hydrocarbons. We know the models – the country has them – and we analyzed how to build the infrastructure that Mexico needs. The growth of the country's pipeline grid is going to be strong, like the growth of the transportation of hydrocarbons, and made up of multi-product pipelines and of storage and distribution terminals. This will continue to grow over the next 20 years. The goals will only be achieved by 2030. We have to continue there, in the midstream and in the downstream.

In 2009 we started a renewable energies area. We, the companies who operate in the energy sector, are part of a sector that moves the world. The issue of energy is complicated – some call us a necessary evil – but it is up to us to create a good image for the energy sector. All processes related to the burning of hydrocarbons have areas of opportunity, they can all become greener.

Today, we as a planet do not have the technology to dispense with hydrocarbons, or at least not a technology that can be used throughout the entire world; our technology recovers residual thermal energy from the burning of hydrocarbons (entropy) and turns it into usable thermal energy (enthalpy) and carbon dioxide for the food industry, both in greenhouse production and in the dehydration of food products.

This is what we are focused on. The market in Mexico is for companies who want to come work and invest in the country. There are projects for less than $100 million, and no one sees them. The country has them ready to be implemented. This is what is so special about Mexico: great opportunities for small and medium-sized companies.

We are doing well within the capital development sector, our main focuses are on the production of natural gas, on the midstream (construction of gas pipelines), and our baby, our biggest priority, our future in the very long term: the recovery of residual energy and its transformation in renewable energy. Let us use this, let us work this, and allow it to develop.