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Mexico to Reveal Oil Contract Terms on Day of Tenders

Posted by June 10, 2015

The minimum percentage of profits that companies must bid to win contracts on 14 oil and gas blocks offshore Mexico being auctioned this summer will be revealed only on the day the tenders are awarded, the Finance Ministry said on Tuesday.

The percentages have been set for each block, but they will be kept secret until unveiled by the National Hydrocarbons Commission (CNH), the regulator that will award the contracts on July 15, the ministry said in a statement.

It had previously said the minimum values would be made public some weeks before the day of the auction.

The decision to make sure oil companies prepare and submit bids without knowing the minimum percentage of profits companies must offer the government "is consistent with the best practices of economic competition," the ministry said.

The CNH will award the production-sharing contracts based on which companies offer the biggest share of profits to the government via a weighted formula that also includes an investment commitment.

The share of profits is 90 percent of the formula, while the investment commitment accounts for the remaining 10 percent.

The 14 shallow water exploration and production blocks located along the southern rim of the Gulf of Mexico mark the first package of contracts up for grabs in Mexico's so-called Round One tender.

The tender features packages of blocks grouped by type of petroleum basin and heralds the opening of the oil industry after a sweeping reform finalised last year.

The reform ended the decades-long monopoly on oil production enjoyed by state oil company Pemex and aims to reverse a decade-long slide in crude output in Mexico, the world's tenth biggest producer.
            
Reporting by David Alire Garcia

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