Market conditions may not be ideal, but oil and gas companies based in more than a dozen countries bid on two-thirds of the 15 shallow-water Gulf of Mexico (GoM) blocks offered by Mexico.
Energy officials in Mexico were pleased with the results of the June 19 tender—the first of the country’s so-called Round Two. The tender was held about six months after the country’s successful deepwater auction and comes amid a shaky market recovery.
“The federal government is highly satisfied. For us the results are wonderful,” Mexico’s Energy Secretary Pedro Joaquin said during a news conference following the livestreamed event.
Though crude oil prices have recovered some of their losses since prices plummeted in late 2014, Joaquin added it has not been enough. But with 67% of the blocks granted, the result of the first phase of Round Two is “an indication that our country is competitive to receive these kinds of investment.”
Thirty-six bidders—including 20 companies and 16 consortia—showed up for the event. The shallow-water round tender attracted majors, IOCs, national oil companies and Mexican oil companies vying for the 10 exploration and five production areas up for grabs.
Interest appeared to be the lowest for Tampico-Misantla, where four of the five areas offered received no bids. The consortium of DEA Deutsche Erdoel AG and Pemex was the top bidder for Area 2, which spaces 549 sq km (212 sq miles) offshore Veracruz. Prospective oil resources are estimated at up to 681 MMbbl of oil.
The bulk of the areas were awarded in Southeast Basin. Here, the competition was great for two areas in particular—Area 7 and Area 9.
Eight companies or consortia placed bids for the 562-sq-km (217-sq-mile) Area 9, with the two top placing nearly identical bids. However, the consortium of Cairn Energy Plc subsidiary Capricorn Energy and Citla Energy edged out Eni SpA (NYSE: E) with a larger cash offer. Located offshore the Gulf state of Tabasco, the area includes estimated prospective resources of up to 571 MMbbl of oil.
The consortium comprised of Eni, Capricorn Energy and Citla Energy were the victors in the battle for Area 7, which spans 591 sq km (228 sq miles) and has estimated prospective resources of up to 169 MMbbl of oil.
Geology drove competition in certain areas, according to Commissioner Juan Carlos Zepeda Molina.
“Those blocks we had more competition are at Tabasco coast, which is light oil. Where we saw difficulty are those [areas] linked to gas,” he said, later noting that low gas prices may have been a factor. “In general, light oil is where we see more competition and the granting of contracts. Gas and heavy oil, on the other hand, have some difficulties.”
But there was an unexpected surprise. Area 15, which has wet gas and oil, was granted, Zepeda said. The 972-sq-km (375-sq-mile) block, located off the coast of Campeche state, went to the Total SA (NYSE: TOT) and Royal Dutch Shell Plc (NYSE: RDS.A) consortium. Prospective resources are estimated at up to 496 MMbbl.
Other areas awarded included:
Area 6: The PC Carigali and Ecopetrol SA (NYSE: EC) consortium. Located offshore Veracruz, the area includes prospective resources of up to 516 MMbbl.
Area 8: The Pemex and Ecopetrol consortium. The area offshore Tabasco is estimated to hold up to 413 MMbbl of prospective resources.
Area 10: Eni was the top bidder for this block, also offshore Tabasco. It has prospective resources of up to 512 MMbbl of oil.
Area 11: The Repsol SA and Mexican firm Sierra Perote consortium made the winning bid for the 11th shallow water oil and gas block. Also offshore Tabasco, the 533-sq-km (206-sq-mile) block has estimated prospective resources of up to 949 MMbbl of oil.
Area 12: Lukoil was the top bidder for Area 12 offshore Tabasco, which could hold as much as 958 MMbbl of oil.
Area 14: A consortium comprising Eni and Citla Energy won this block, also offshore Tabasco. The area includes estimated prospective resources of up to 472 MMbbl of oil across 466 sq km (180 sq miles).
In all, the potential output from the 10 blocks auctioned could reach 170,000 bbl/d of crude equivalent with investments surpassing $8.2 billion, Coldwell said.
The auction was the most recent step in Mexico’s bid to attract more private investment to the industry after Congress changed the constitution in late 2013 to end the 75-year production and exploration monopoly of state oil company Pemex.
Top government officials told Reuters before the auction they were hopeful Mexico would assign at least one-third to 40% of the blocks in the shallow-water round.
The auction was the fifth since the energy reform, including one deepwater and two previous shallow-water tenders. They yielded 39 contracts signed with forecast investment over their lifespan of $48.8 billion, according to energy ministry data.
Mexico hopes by opening up the energy sector it will help reverse years of declining crude oil output.
Total crude oil production in Mexico now stands at 2.01 MMbbl/d, down from a peak of 3.38 MMbbl/d in 2004.
Velda Addison can be reached at firstname.lastname@example.org. Reuters contributed to this report.
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