Mexico—Local Content Study

From 2013 to 2014, constitutional reforms and supporting regulations opened Mexico’s oil and gas sector to foreign investment for the first time in nearly 80 years. The reforms and regulations established safeguards to ensure that Mexico would capture socioeconomic benefits from its rich hydrocarbon resources. These safeguards came in the form of minimum national content requirements and were intended to promote local employment and contracting, as well as investment in local capacity development and infrastructure.

However, before these national content requirements could catalyze economic growth, Mexico needed to overcome a number of obstacles including lack of readily available national content information; limited multistakeholder dialogue; operator reputational risk and liability; and limited supply chain integration.

In response to these obstacles, the Mexican Association of Hydrocarbon Organizations (AMEXHI) commissioned the DAI Sustainable Business Group (SBG) to conduct a multiphase study consisting of policy analysis and benchmarking, national content methodology simplification, and supply-demand gap analysis.

Select Results

• Completed a policy analysis of the existing Mexican national content methodology and benchmarked it against other global regulations including those of Australia, Brazil, Canada, Nigeria, and Oman. The results of this policy analysis and benchmarking report were then used to design a few national content methodology simplification options, with the intent to facilitate simpler and more accurate data calculation, reporting, and verification.
• Organized workshops with AMEXHI and the Ministry of Economy to present the national content simplification options and gauge both industry and government interest. Following four workshops, a new alternative method that remained compliant with existing law was selected. This simplified methodology included: use of national content percentage coefficients and flowcharts; additional metrics (person-hours); more accurate metric definitions; creation and use of supplier balanced scorecards; design of an iterative methodology streamlining process; and creation of a joint public-private sector national content taskforce1.
• Used our Local Content Plan and Reporting Platform to gather the necessary operator and Tier 1 contractor data and generate the new national content coefficients by supply chain category to test the efficacy of the approach. DAI then helped the Ministry develop the proposed language for the amended directive on calculating national content and generated a preliminary set of standard coefficients for key upstream supply chain categories.
• Performed an industrial baseline study of the Mexican upstream oil and gas sector. We used our Local Content Optimization Model to quantitively forecast baseline and maximum amounts of economic value and full-time equivalent jobs that could be captured by local small and medium-sized enterprises in the offshore oil and gas sector.
• Assessed local supply chain competitiveness, identified current supply chain strengths and weaknesses, and proposed key investment opportunities where there was an existing industrial base that could be upgraded to capture more local value.