Faced with multinationals now moving into Mexico as the energy sector reforms become a reality, Fermaca is one local company unfazed by the influx of possible competition thanks to its long experience and alliances.
Fernando Calvillo Alvarez, President of Fermaca, provides an overview of an industry in the midst of unprecedented transition and discusses how his company is already seeing its effects. He also highlights the importance of local experience and accomplishments for major multinational oil and gas companies looking to enter Mexico.
Is Fermeca well positioned as a strategic partner for international investors coming to Mexico?
I believe so. I have always said our company has greatly benefited from the experience of past years. We are an international company, born and bred in Mexico. We have made alliances with American, German and Japanese companies and therefore we know how foreign investors think.
We have also brought technology from other countries to Mexico, so Fermaca can certainly be a great ally and partner for foreign companies that come to the country to invest.
Fermaca has been in the market for 52 years and we have made the best of the lessons we have learned in that time, developing government projects. Our acquired experience places us in a preferential spot.
Regarding large and international oil companies, I believe they have to work together with local companies because those are the ones that will guide them through the right path, a path they already know and have traveled.
Money and technology do not always level the playing field – the experience and tradition of the locals is necessary: they know the details, the permits, the security protocols, the way to protect the environment, etc.
How has Fermaca managed to endure for so long and what is the company’s spirit?
In the first place, our line of business has always been focused on Mexico. Only recently have we begun to think about international developments. I believe we are a few steps ahead of the competition, and this is our competitive advantage, both in possibility analysis and in the establishment of the necessary developments to execute our businesses.
What role does Fermaca have with regard to the new responsibilities the CFE (Federal Electricity Commission) will assume with the Energy Reform?
I believe we will have a window of opportunity. Compared with the gas pipelines in the United States, we can clearly see we have a great need for infrastructure. It is worth mentioning that the state of Texas has 500,000 miles of pipelines; our country has 13,000 miles and most of them are practically unused. This gives us an idea of the great need for infrastructure in our country.
All industries are crying out for cheap supplies. The Energy Reform will be able to generate those prices for our products, but I think it will happen over many years. Therefore, our vision tells us that we have to connect as much as we can with the United States’ southern gas supplies to bring it to Mexico.
This is possible because with new fuels the price of natural gas has dropped and they don’t have the infrastructure to store it in the U.S. Therefore, that gas will naturally flow to Mexico. This means I believe I can affirm we will be a net importer of natural gas.
Does Fermaca have national competitors?
On a national level, I don’t think so, because there aren’t any companies building pipelines as large as ours. There are very important local companies but in other niches, other sectors. We like to work with larger volumes and larger investments.
Fermaca has over 50 years of experience. Currently, what are the main activity levels of the company and what main services does it offer international partners interested in coming to a country like Mexico?
They say that to know success you need to have gone through failure. In fact, you always learn more from your failures than from your successes.
We almost lost the entire company in 1994 and we tried to recover from that scandalous devaluation the country went through. We had to redefine our objectives. So I proposed we enter into a long-term business with stable income.
Ever since, we have had three lines of business, of which energy is the most important.
Today we are a global quality company and we have the possibility of searching for $3 billion in investments.
On the other side, we have the engineering and construction company that has survived everything. And, last year we started something that has nothing to do with our traditional activities, but which has brought us great results: medicine distribution.
$3 billion to invest in the energy sector is a very significant sum. Where are you thinking of investing that money?
In the midstream sector.
2014 is the 20th anniversary of NAFTA. What do, or can, the northern countries represent?
I believe they must be at a lesser advantage because I think we signed a free trade agreement that is a little advantageous for our country.
We are trying to redefine some policies between the countries, because today we are service providers to the north. I feel like a service provider and not an economic partner.
Entering the north isn’t easy, but I am sure we are going to make it. I think doing the impossible is fun. It is an experience that starts at the very beginning.
We are here to demonstrate that Mexicans do things with quality, that we know how to work, that we are honest and that we are up for the challenge. That is the message we have always wanted to convey with the company.
What is the landmark you are most proud of having achieved?
I think breaking with the taboos that exist in the country. In 1997 we proposed building a new gas pipeline, which is a very risky enterprise. We received a negative answer from a public servant, saying that such large projects should be left to big, international companies. And, after many years, we demonstrated we could perform that huge challenge efficiently and those who didn’t have faith in us at that time ended up recognizing our hard work.
We have the advantage of supplying Mexico’s most important industrial cluster, which is Monterrey.
What are the main objectives and greatest challenges you will pursue in the near future?
The main challenge is the competition. Mexico is now an international focal point and the large companies are coming for the oil. Therefore, it is difficult to reinvent ourselves, because it is not the same to compete on a bid for a gas pipeline with three or four companies than to do it with many others, which are also much larger. The big oil producers bring their contractors and service providers with them.
The only option we have left is to keep on making Fermaca more and more professional to be able to qualify as one of those companies. For me, the ideal situation would be for us to become the most important gas transport company in the country. That is my objective.
And does the acquisition of other small companies enter into your plans?
We want to acquire greenfield, brownfield and some other assets as big part of our business plan
There are very strict policies regarding the environment. What is Fermaca’s engagement with its people, and its social responsibility point of view?
I believe the hardest thing here, respect of life, is to find the land to develop the projects. We have been successful in that we stay everywhere we go. Our projects are long-term projects, of 30 or 50 years. What we have to guarantee is an economic benefit for the local area and a fair price for the lands. We share with the community as much as the company allows us to. For this company, the most important things are security and the protection of the environment.
What do you feel when you look back and see everything you have achieved, not only through the work of so many people but also through your own influence? What are you most proud of?
I am very proud of the company. It has been a magnificent journey, a great experience, and pride comes mostly from seeing that what we do is part of the country’s chain of progress. I always tell my children that we have to do something to make the country better.
We have a very solid team that includes many second-generation employees. Ultimately, we have an organization to which people arrive and hardly ever want to leave.
We try to make our people comfortable and well paid. We believe we have to propel the three Ds: dignity, duty and diversion.