Latin American refiners may be bemused watching the Board-level shenanigans that have overtaken a few of the American giants. Case in point: the summer shareholder revolt at Exxon which put climate-savvy investors on the Board and all other oil companies on notice. The message is clear – change or be changed. As the Big Five go, so inevitably must everyone else – eventually.
With potentially game-changing shifts in the global supply demand, the markets are gradually starting to move away from fossil fuels and moving to green fuels and electric. With the major world automakers shifting their product lines, the product supply inevitably must respond. Refiners need to be triggered to adapt their facilities to meet the decline in fossil fuel demand, or eventually face obsolescence. “Our value proposition is that we can start small – now. And then our customers won’t need a drastic shift in direction or investment a few years down the road. The foundation is laid, and we have already built up the trust with the customer to support them to make the right decisions at the right time,” says Selwyn Maduro, Master Planning Lead. With some refiners facing increasing government intervention in the wake of unwise historical investments, the region’s refiners can learn from others’ mistakes.
The silver lining for the region is that the North American and EMEA markets are the first-movers and are making the mistakes that the smaller producers can learn from. Given that many refiners are committing to shifting their business model by 2025, they have a few years to determine which investments will be affordable while guarding their bottom lines. With European regulators adapting fuels and emissions standards to meet carbon emissions targets, including complying with a minimum percentage of renewables in their products, global markets will eventually follow suit.
Certain Latin American markets, such as Brazil, already have a ready market for ethanol and are well positioned to pivot. Other national oil companies will likely need to catch up, yet they lack the deep pockets of the oil majors. That’s where a consultancy of former asset owners, like Petrogenium, can help them determine which investments are worth the effort – which ‘vale la pena’.
Divestments Accelerating
Many oil majors are divesting assets at a fast clip. The issues are the same as in other parts of the world – potential investors and asset owners need to know what they are buying. Caveat emptor – buyer beware – has never been more relevant!
Beyond the due diligence, however, conducting a thorough risk analysis as well as business continuity are Job #1 once a sale is near completion. A buyer usually has only six months to make punch lists of what needs to be addressed before the sale goes through and the new owner ‘owns’ all potential issues and risks. And no buyer – whether it’s for a home or an asset – likes nasty surprises once the ink is dry.
Once these new asset owners have completed the acquisition, the ongoing operations and maintenance require specialized expertise and experience. Buying this from the previous owner can be very expensive.
This is where Petrogenium can step in. Our former asset owner consultants can look at efficiencies, upgrades and preventative maintenance that can save the new owners potentially millions of dollars over time. Dollars that would have to be spent on expensive repairs or safety incidents that didn’t need to happen.
With Spanish-speaking consultants, we can lead teams that can ask the right questions and lead workshops to help leadership teams make the right decisions at the right time. Petrogenium can also support smaller refineries in emerging economies to find better ways to place their crude output. We know the questions to ask.
Petrogenium has both the three-plus decades of industry experience and in-depth knowledge as an asset owner, while maintaining a lean and mean cost structure that supports a measured step-by-step approach. Our consultants know the headaches associated with running the business, day in and day out. They know the research and technological investments needed to stay on top of industry trends. They know the key investments in maintenance that are required to keep the core business running while pivoting to newer revenue streams. And they can recommend technologies that are best suited to each refinery, without being beholden to any one provider.
This neutrality is an advantage for refiners, who are looking to start slow and steady and not to make huge investments from day one. “Our independence, combined with our expertise and an average of 32 years of experience, is not anything to sneeze at,” says Selwyn Maduro.