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A new kind of partnership

Article - June 21, 2016

Large international investors look to form strategic alliances with Octopus Group ahead of the maturation of energy reforms, says managing director José Pablo Mendoza

As Mexico’s energy reform continues to shake up the sector, opening a wide entry for newcomers, Mexican oil and gas service providers are being sought as strategic partners in the shifting sands.

Constitutional amendments aimed at correcting shortcomings in supply of oil products and petrochemicals now allow private investment in practically every area of the sector, from exploration, extraction, refining, transport, storage and distribution of hydrocarbons and their derivatives to activities related to generating and commercializing electricity. It goes without saying that the new legislation, which offers numerous opportunities to private investors, is intensifying the competition as companies jockey for new positions.  

Consequently, the reforms have significantly boosted the value of local partners like Octopus Group, which specializes in the design, manufacture and procurement of custom products for the power, petroleum and industrial segments. Yet, Octopus Group’s managing director José Pablo Mendoza says the possibility of contracting local content is not why his company is being sought as a potential partner for international companies entering the market. He says a new trend is in place that is likely to transform the energy sector landscape as never before.

“I feel that in the long term, the companies we are working with now are not going to be the ones we are working with in the future. Something new is occurring here, which has not happened to us before. In the past, transnational companies approached us because they were looking for quality production and cheap labor. And we do have excellent skilled workers in Mexico, which is why the automobile industry has been so successful. Custom work done in Mexico is incomparable,” he comments.

“So, yes, we have highly qualified workers, and it is true that our wages are lower, but while international companies looked to Mexican partners in the past for these qualities, today large companies are approaching us as a way to position themselves in the market. They are looking to form strategic alliances now ahead of the maturation of the energy reforms. This is a first for us.”

Meanwhile, these new partnerships are being used to boost exports, says Octopus Group’s chief. International partners help supply the equipment to their Mexican partners that will increase their manufacturing production for export.

Octopus Group’s product range includes oil and gas separators, skid-mounted process units, pressure vessels, piping spools and pig launchers. “We are not a drilling company but we make a lot of the equipment that companies need to extract hydrocarbons and deliver them cleanly to the receiving tank,” says Mr. Mendoza.  Octopus Group is heavily focused on the gas sector, which he believes is not only important today, given Pemex’s slowdown, but will also continue to play an important role in the country’s energy sector over the next four decades.

While Octopus Group is not actively recruiting new partners, Mr. Mendoza says the company is certainly open to them. “We are just concentrating on serving the market we have now and the one we will have when it comes knocking,” he concludes.