Landlocked Oklahoma wants a piece of Mexico’s offshore industry

Private oil companies soon could partner with Mexico’s Pemex on operations like this in the Bay of Campeche. (Susana Gonzalez photo/Bloomberg)

By Lydia DePillis

Not every middle-of-the-country state can be a player in Mexico’s developing offshore oil industry, but if anyone has a chance, it’s Oklahoma. 

The landlocked state has a native oil industry and a number of companies with expertise in onshore technology that can be transferred to deep waters. It even has an inland port on the Arkansas river, which allows manufactured goods to be shipped straight to the Gulf of Mexico. 

That’s what Luis Domenech is hoping, anyway. He’s the international trade director at the Oklahoma Department of Commerce, charged with hooking the state’s oil and gas-oriented manufacturers up with the companies that are capitalizing on Mexico’s energy reforms, which opened the industry up to international business.

They haven’t had much luck yet. According to Census bureau trade statistics, oil and gas equipment doesn’t crack the top five exported goods in Oklahoma, and overall exports to Mexico have been dropping. But Domenech figures that in the coming years, those major oil companies will figure out their strategies for exploiting Mexican oilfields, and will come looking for supplies. 

“They need to be patient,” says Domenech, of his small business clients in Oklahoma. “In one or two years, demand for new production equipment will be very, very high.” 

READ: Pemex CEO seeks investment for more than drilling

Figuring out how to export to Mexico is tricky. You need to know the right distributors, you need to have a willingness to wait for a contract, and you need to get used to the fact that you might not have as good a profit margin as you would in Canada, for example. There’s a language barrier, and Mexican executives like to do business in person, Domenech says. 

But once a company figures that out, Mexico can yield a world of new customers. Domenech holds up Everest Sciences, which makes chillers for the air that feeds into turbines and won a contract to supply Mexico’s state-owned oil company, Pemex, in 2013. “Once we help one of these companies to become an exporter, that continues,” Domenech says. 

There are other dangers on the horizon, though. If the United States erects trade barriers to imports from Mexico, the country might retaliate by putting tariffs on the oil industry equipment that it mostly buys from the United States. International oil companies operating in Mexico are already looking to diversify their suppliers beyond America. 

Meanwhile, the Oklahomans are waiting for a convincing run-up in prices, which will determine prospects for drilling in Mexico as much as anywhere else.  

 

 

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