Mexico Awaits Next Oil Round with Cautious Optimism

Mexico is looking forward to its next round of offshore oil auctions on Monday with guarded optimism thanks to robust interest from oil majors for the shallow-water tenders.

 

On Monday, Mexico auctions 15 oil and gas blocks along the southern coastal waters of the Gulf of Mexico in the next stage of the country's historic opening of the industry following a 2013-14 energy reform.

 

In December 2013 Congress changed the constitution to end a 75-year production and exploration monopoly enjoyed by state oil company Pemex in a bid to reverse years of declining output.

 

Among the companies that prequalified to compete are Chevron Corp, ConocoPhillips (COP), Eni SpA (E), Repsol SA, Royal Dutch Shell Plc (RYDAF), Total SA (TTFNF) and China National Offshore Oil Corporation (CNOOC Ltd) .

 

All told, 20 companies signed up to take part on an individual basis, with 16 consortia also on the list.

 

Energy Minister Pedro Joaquin Coldwell said he was hopeful that at least 35 to 40 percent of the blocks would be won.

 

"The pleasing thing about this auction is the high number of consortia taking part, which is a sign there will be plenty of bids," he told Reuters on Friday. "There wouldn't be much point in forming a consortium and then not making an offer."

 

How many blocks were snapped up would depend on whether bidding focused on just a few areas, or many, he added.

 

The auction is the fifth since the energy reform, including one deep-water and two previous shallow-water tenders, yielding 39 contracts signed with forecast investment over the life of the contracts at $48.8 billion, according to energy ministry data.

 

Juan Carlos Zepeda, head of the oil regulator known as CNH which oversees the auction, also saw the number of equity tie-ups among oil companies as a positive sign, expressing optimism that "a bit more than the international benchmark of 30 percent" could be assigned.

 

The blocks up for auction are spread between the coastal waters of the Gulf states of Veracruz, Tabasco and Campeche, with an average size of 594 square kilometers.

 

If successful, the blocks could yield production of some 200,000 barrels per day (bpd) in five years, the CNH estimates.

 

Total crude oil production in Mexico now stands at 2.01 million bpd, down from a peak of 3.38 million bpd in 2004.


(Reporting by Ana Isabel Martinez and Dave Graham; Editing by Matthew Lewis)