MEXICO CITY—The Mexican government has awarded three of the five areas of oil and gas reserves put out to bid in its second oil auction since opening the industry to private and foreign investment, according to a report in the Wall Street Journal.
The results gave the Mexican government a needed win after an initial tender this summer ended in disappointment.
The shallow-water fields that were made available were all in the southern Gulf of Mexico, off the coast of Tabasco and Campeche states, near the top-producing but aging shallow water fields Ku-Maloob-Zaap and Cantarell. The fields had already been discovered by state oil company PEMEX, a fact which lowered the geological risk for private operators.
The companies that submitted winning bids were Eni International; a consortium that includes Argentina’s Pan American Energy and E&P Hidrocarburos y Servicios; and another consortium that includes Fieldwood Energy LLC and Mexico’s Petrobal.
All three of the winning bids were in excess of the minimums set by the government for its portion of operating profit before taxes and royalties. The Finance Ministry said the overall government take from the proceeds of the fields will be 80% to 90% of the total once all taxes and fees are included.
Analysts said the strong interest in three of the five areas for the profit-sharing contracts came because of their promising geology and the desire by international firms to get an early stake in Mexico.
There was some consensus among oil analysts and executives from private oil companies that Mexican authorities had done a much better job in this auction than in the previous one, easing some requirements and lowering the minimum bids to boost interest.
Three of the areas turned into something of bidding war among mostly medium-size foreign oil firms, some with Mexican partners. A total of 20 firms were eligible to bid either alone or in partnerships.
In the first auction of exploratory blocks in July, just two of the 14 blocks were awarded.
The poor results of that auction led the government to improve the terms for the second auction and to announce ahead of time the minimum bids that the government would accept for each area.
The head of the National Hydrocarbons Commission, Juan Carlos Zepeda, said he was pleased with the results of the latest auction. “The government did its job,” he was quoted to say. “It made the corrections that were needed.”
The Energy Ministry said that all of the awarded fields combined should produce about 90,000 b/d of crude oil equivalent at their peak, and that production could begin as early as 2018.
Eni International offered the highest of nine bids for the first area, which includes three fields containing light crude and gas, with certified proven reserves of 62.8 MMbbl of crude oil equivalent, and proven and probable reserves of 121.5 MMboe, the hydrocarbons commission said.
Eni offered to pay the Mexican government 83.75% of the operating profit from the fields, while investing 33% above the minimum required.
Pan American Energy offered 70% of the operating profit for a field containing 21.3 MMbbl of proven reserves and 66.7 MMbbls of proven and probable reserves. It also offered to double the minimum required investment.
Fieldwood Energy and Petrobal offered 74% of profit and no additional investment for an area containing 41.4 MMbbl of proven oil equivalent and 85.4 MMbbl of proven and probable reserves.
Two areas received no bids.
The tender is the second of five planned in the so-called Round One, which will include subsequent auctions for onshore reserves, deepwater reserves, and nonconventional reserves such as those in shale rock formations.
The auctions follow changes in energy laws that included constitutional amendments to allow private and foreign companies explore and produce oil and gas in Mexico, a business that had been reserved to state oil company PEMEX since the industry was nationalized in 1938.
The energy overhaul is the flagship economic overhaul of President Enrique Peña Nieto, whose government seeks to raise the country’s flagging oil output. PEMEX is currently producing around 2.3 MMb/d of crude oil, down from a record 3.4 MMb/d in 2004.