Salvador Escobedo, CEO of Pemex Procurement International talks about how they explore, produce, refine and commercializes oil and gas for Mexico.
Please excuse any typos in this hasty transcript.
Jay Curry: And we’re back. Hello Texas, welcome back to Texas Business Radio. We’ve got a great program going today, four very interesting segments. This one is kind of unique. I think you’ll learn a lot about how we work with Mexico, how their companies work with us. Very informative. And if you’re in the oil and gas business anywhere in the United States, obviously Texas is big on that, Houston is huge. This is a segment you’re going to want to hear, because we’re going to talk about how Mexico’s oil company procures the services and the products we build here in the United States.
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I have, in the studio with me, Salvador Escobedo.
Salvador Escobedo: Hi Jay, thank you for the invitation.
Jay Curry: So Salvador is the CEO of Pemex Procurement International. Thank you, Salvador, for joining us. Let’s start with what the heck is Pemex Procurement International?
Salvador Escobedo: Thanks, Jay. Well, Pemex Procurement International is an affiliate of Pemex. Pemex is the NOC in Mexico, the national oil company, and it’s the largest company in Mexico in the entire chain, production chain of oil and gas. So basically Pemex explores, produces, refines and commercializes oil and gas, for Mexico to the world.
Jay Curry: So the reality is it’s like the Exxon of Mexico?
Salvador Escobedo: That’s right.
Jay Curry: And Mexico is very energy generating nation, and you’ve got to get products, right? You’ve got to get the pipe, you’ve got to get the derrick, you’ve got to get the expertise. You’ve got all the stuff that’s involved, and to do that outside of Mexico, if you don’t produce it, that’s what you do?
Salvador Escobedo: Exactly. So Pemex has two procurement arms. One is a national procurement arm in the corporate offices back in Mexico, and the other one is the international procurement arm, and that is Pemex Procurement International, and our main objective is to have a direct relationship with manufacturers from the US and all around the world, but specifically from the US, so we can skip this third party in Mexico that would charge another head of 15% to 20%. So the main objective is to have this direct relationship and save those extra costs that we represent the third parties in Mexico.
Jay Curry: So we talked a little bit about this before we came on, between the break, and it’s very interesting. I’d like the audience to understand. So normally, if I have, say I manufacture gaskets or valves or something that’s needed in the oil business, normally there would be some company in Mexico or here who would arrange for the product to be sold, but they add 15% to 20% right, because they’ve got to pay their bills. So basically, they created Pemex Procurement International to eliminate that increased cost, so it’s more competitive. Helps American companies, right?
Salvador Escobedo: That is correct.
Jay Curry: Also helps Mexico get what they need, here in the United States, for their oil business.
Salvador Escobedo: Better prices and better terms and conditions and insuring the best quality possible.
Jay Curry: So this is really interesting, when you look at the difference. You were saying 15% to 20% is what a company would normally charge, and you guys have a mark up of?
Salvador Escobedo: I mean, the business model that we have with Pemex is a cost plus model. So basically, what they do is they just pay for our costs, and that’s it, and a price, a little overhead, which is around 3%, and that costs around .5% of total operations for Pemex, instead of around 15% to 20%. So basically, we are saving Pemex from 14.% to 19.5% of everything they buy.
Jay Curry: Huge difference.
Salvador Escobedo: Yeah.
Jay Curry: And we’re talking about a massive market. You were saying $2 billion?
Salvador Escobedo: Yeah, what we buy from Pemex is from $2 billion to $4 billion, it depends on the year and how the oil and gas market’s going. This year I think we’re going to be closing a little above $2 billion, but that’s the operations range that we manage for Pemex.
Jay Curry: So actually, you’re saving 15%, 16% on $2 billion to $4 billion dollars every year, and that money is helping the American companies be more competitive in getting into the biggest …
Salvador Escobedo: Yes, that is correct, and that’s a win/win, because that helps American companies to be competitive and to be able to get into the Mexican business, but that helps us, Pemex, as well, in terms of getting the best prices, the largest amount of companies competing to each other to get the best terms and conditions and the best prices for Pemex. So it’s a win/win.
Jay Curry: So let me emphasize this for our listeners. If you are part of a manufacturer or any type of company, I assume, that’s involved in oil and gas, whether it be from upstream, mixed stream?
Salvador Escobedo: Yeah, since Pemex works on the entire production chain of oil and gas, midstream, downstream and upstream, basically we actually have a relationship, a close relationship, with all manufacturers that are involved in the oil and gas company, whether it’s upstream, midstream or downstream.
Jay Curry: So anybody that is providing to that, providing services, do you do services or it’s just hardware?
Salvador Escobedo: No, it’s services, hardware.
Jay Curry: The whole thing?
Salvador Escobedo: Even software. We have a lot of contracts with software manufacturers. Yep.
Jay Curry: So that’s a huge number of Texas companies. So if you’re involved in the oil and gas business and you have an interest in selling in Mexico, this is the company? You want to give Salvador a call, is that right?
Salvador Escobedo: That’s correct.
Jay Curry: And what are you going to do for them? What happens when you call?
Salvador Escobedo: The first step, and the way we help them, as a first step, is to help them get involved in the Pemex procurement list, Pemex suppliers list. We have a contract with Achilles, which is a platform that helps a lot of companies regarding suppliers’ management, and we help them to upload all the information that they need to be in the Pemex spectrum and in the Pemex radar, so when we actually have a specific requirement, we can search in that list, and if they are there, then we can actually reach out to them and ask them for information about their services.
Jay Curry: So Salvador, in essence, you not only are helping American companies get in, and that being that you’ll work with the companies to make sure they get on the right procurement list, that everything they need to do, all the legal stuff they’ve got to do, you’re here to help them do that, and you do it at a price that will make them more competitive?
Salvador Escobedo: Yeah, actually I don’t charge anything for the American companies. My bills are paid by Pemex, and they actually have PPI to get the best prices and to build a competitive market in the US. So yeah, we are here to help.
Jay Curry: So if somebody wants to learn more, if they’re in the oil business and they want to do some marketing and sales into Mexico, they’re going to need to get a hold of you. How do they do that?
Salvador Escobedo: They can search information about PPI, they can go to our website. It’s Pemexprocurement.com, and they’ll have, they’ll find all the information there, and they can send us an email from our website, in order to start our relationship and help them to get in our list.
Jay Curry: Well, this is a win/win situation as far as I’m concerned. This is really great. Salvador, thank you for joining us. This is an interesting conversation.
Salvador Escobedo: Jay, thank you for the invitation. It was an honor.
Jay Curry: Alright, folks. We gotta pay a few bills, but don’t go anywhere, this is Jay Curry. We’re going to be right back.
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Jay W. Curry
Along with hosting “Texas Business Radio”, Jay is a Professional Certified Coach and Master Chair facilitating four Houston-based Vistage peer groups. In addition to being a best selling non-fiction author, the 2015 release of his award winning novel, Nixon and Dovey: the Legend Returns, adds novelist to his title. Jay holds a BS in Mathematics from Oklahoma State and an MS in Computer Science from Kansas State. You can learn more about Jay HERE.