The Business Year

Close this search box.
Ivan Sandrea

MEXICO - Energy & Mining

Upstream energy reform success

Director General & CEO, Sierra Oil & Gas


Ivan Sandrea has more than 20 years of executive and technical experience in the oil and gas sector and has been active in Mexico for more than a decade. Prior to Sierra, he held leadership positions at EY, Statoil, OPEC, Merrill Lynch, and BP. He holds degrees from Baylor University, Edinburgh University.

“We want to move forward on the appraisal of Zama, get ready to drill blocks 5, 4, and 2, and make the final investment decision on the Caoba project in Tuxpan.“

How would you assess the implementation of the 2014 energy reforms?

For upstream, it is going well, which was expected and the results speak for themselves. There are over 60 companies, close to 100 licenses have been signed, many wells have been committed, and there is several billion dollars of immediate activity by the private sector. In midstream, there have been certain issues. There has been progress in terms of opening the market and many companies have been opening new petrol stations, though access to infrastructure and permitting, particularly with ports, has progressed slower than expected. Still, the intentions are good and everyone is working hard to solve the bottlenecks. From the start, Sierra believed in the reforms and in the capacity of Mexican regulators to carry them out; therefore, we had first-mover advantage there. We have done more than just participate and won bids; we have made discoveries and have actively been investing in the last three and a half years. The government has the right incentives in place, and with contracts and interests aligned, the opportunities are good, and the reforms can truly be successful.

How would you assess the investment climate in Mexico, particularly in relation to other countries competing for capital?

When the reforms started, the macro oil and gas system was collapsing, companies were cutting capital expenditures, and many in traditional oil and gas regions such as the Middle East, Russia, Africa, and Brazil were facing trouble. And at the end of the day, Mexico has to compete with everyone. Mexico is a top-tier destination—in terms of risk and reward, it ranks in the top quartile. I have worked in many places around the world, and Mexico competes extremely well—it is modern and has many strong institutions, bilateral agreements, and large, close markets. In terms of Latin America, it is the most exciting place to operate, and from an exploration perspective, the most exciting place in the world.

What challenges are you facing in the sector?

For entrepreneurial and growing companies, challenges are opportunities. One can find solutions after analyzing the challenges; however, if we cannot find a solution after many attempts, then the challenge becomes a problem. Through that perspective, we have few problems, if any. In the midstream sector, it has been a slower environment compared to upstream to execute projects, especially where we are participating; however, that comes naturally as part of specific land and ports, which is true anywhere in the world. Midstream has been a challenge because we have wanted to achieve more and we intend to do more. However, overall, for my people, my staff, and myself, every time we perceive a challenge, we start early, we work through the issues, and we solve it.

What is the significance of your discoveries in Zama-1 for Sierra Oil & Gas and the overall sector?

Chiefly, it was the first exploration well and the first discovery after the energy reform. From that headline point of view, it is material. Second, the size and quality of the discovery was bigger and better than expected, and we are now working with a great challenge. Third, it is the largest offshore discovery in the Tertiary reservoirs, which is exactly what the government wanted when opening up the market to private risk and investors. Pemex has done a great job in developing carbonate-level exploration in the Campeche zone, where there are billions of barrels still to be produced. However, the Tertiary reservoirs, which are on the subsalt level and require complex structures and higher risk, is where private investors will put their money, technologies, and capabilities. The Zama discovery has had a huge impact on investment, which was evident in the last round of bidding when many competitors bid on the areas surrounding our zone. It confirms to the entire industry—not just Mexico—that the newly opened zones are attractive. Finally, for us and our partners, it will allow us to make a quantum leap in terms of reserves, production, and hopefully cash flow.

What is the long-term strategy for growing your portfolio?

First, we want to test the portfolio we have and continue to meet the minimum work obligations set by the government. We have a few wells coming up as well as the appraisal of Zama, since we have completed the obligations. Our strategy is as any other company: we just do it faster and with lower cost. Our intention is to complete the minimum work obligations and if they are successful, there is then appraisal and steps to move forward.

How do midstream investments play into your strategy?

I am very excited about our midstream investments. We have an outstanding team and some brilliant ideas, which we are drawing on in, for example, the storage and transportation infrastructure that we are working on in Tuxpan Port. It is an import facility with four docking stations. It has connectivity to the local pipelines, trucking, and shipping to other ports in Mexico. It has the potential to be the largest facility built in Mexico in the last few decades. Looking to the future, we have interested shippers lined up and we are prepared, as we have been working on it for almost three years.

Do you see an IPO in the future for Sierra?

We are not in a rush as we have three strong investors. We will develop the business and will decide if and when it is ready to be put into another capital structure. However, we are currently content, as our investors want us to continue to operate as we have been and we have a great deal of capital, a small portion of which has been invested.

What are your short-term goals for 2018?

We want to move forward on the appraisal of Zama, get ready to drill blocks 5, 4, and 2, and make the final investment decision on the Caoba project in Tuxpan.

What is your general outlook regarding Mexico’s hydrocarbon sector?

It looks extremely promising. Three years ago, we were one of the only fish in the sea as the first license holder. Today, there are many companies bidding on new zones, and the entire Sureste Basin has been taken. The sector has to speed up and begin drilling more, proof testing, and developing. We are all looking forward to regulatory continuity. The regulators have done outstanding work thus far in the face of great pressure, both positive and negative. However, they have managed to pull off an amazing feat. We believe in Mexican institutions and outlook for progress. There is always uncertainty when there is presidential change; however, we maintain a positive outlook on the sector.



You may also be interested in...


MEXICO - Industry

Martín Toscano


President, Evonik Industries


MEXICO - Industry

Luis Gerard


President, Bohn de México/FB Group


MEXICO - Telecoms & IT

Alejandro Hernández Bringas


CEO, MCM Telecom

View All interviews



Become a sponsor