Local firms dominate Mexico’s onshore third-phase Round 1

Twenty-five entities comprising individual companies or consortia were awarded contracts on Dec. 15 in Mexico’s Round 1 Phase 3, marking the entry of 22 firms into the country’s oil and gas sector, according to Mexico’s National Hydrocarbons Commission (CNH).

Forty entities, of which 26 were individual companies and 14 consortia, qualified for the auction covering onshore conventional blocks in the states of Chiapas, Nuevo Leon, Tabasco, Tamaulipas, and Veracruz.

Of the 22 firms entering the country, 9 operate independently and the rest are grouped into 5 consortia. Entities based in Mexico were awarded 18 of the contracts, and no major international oil and gas firms participated. Each block has at least two bidders to ensure an entity is in place should another choose to not move forward with a contract.

The third phase involved smaller fields scattered around the country, contrasting with the second phase in which CNH awarded three of five shallow-water blocks (OGJ Online, Sept. 30, 2015).

Of the 25 contracts, 17 are oil fields and 8 are gas fields in the Burgos basin. The Mexican government projects the tender will result in peak production of 77,000 b/d of oil and investment of $1.1 billion.  

“Appetite for these blocks is at a high with many companies offering bids with surprising royalties,” said Alfredo Alvarez, Ernst & Young’s Mexico oil and gas leader. “Most of the over-royalties offered—on top of regular royalty—on gross revenue landed between 30% and 60%, far higher than minimums set from 0% to 10%.

“One participant even offered 85% plus a 7.5% royalty on gross. High royalties are good, but some cases in L3 they seem too high to sustain,” he said. “Some bidders may not sign the contract and second places will step up." He also noted the "great diversity" among the participating companies.

Auction’s ‘big winners’

Alvarez said the “big winners” are Compania Petrolera Perseus SA de CV, Servicios de Extraccion Petrolera Lifting de Mexico SA de CV, Canamex Dutch BV, Diavaz Offshore, SAPI de CV, Roma Energy Holdings LLC, and Grupo Diarqco SA de CV, all from Mexico; and Renaissance Oil Corp SA de CV and Strata Campos Maduros SAPI de CV, both from Canada.

Of the Mexican firms mentioned by Alvarez, Perseus was awarded Tajon A and B fields in Veracruz and Fortuna Nacional field in Tabasco; Lifting was awarded Cuichapa-Poniente in Veracruz in close proximity to Canamex’s awarded Moloacan; a former service provider for Pemex, Diavaz was awarded Barcodon in Tamaulipas and Catedral in Chiapas; Roma was awarded Paraiso in Tabasco; and Diarqco was awarded Mayacaste and Calicanto in Tabasco.

Of the Canadian firms mentioned by Alvarez, Renaissance was awarded Mundo Nuevo A and B, Topen, and Malva, all in Chiapas; and Strata was awarded Pena Blanca and Carretas in Nuevo Leon, and Ricos in Tamaulipas.

A Geo Estratos SA de CV consortium from Mexico led all with four contracts awarded: Ponton, Tecolutla, La Laja, and Paso De Oro A, B, and C, all in Veracruz.

Next up is the highly anticipated fourth phase, comprising 10 deepwater areas in the Gulf of Mexico. Six of those exploration blocks reside in the Salina basin and four in the Perdido fold. CNH says it will announce those awards during third-quarter 2016 at latest.

Contact Matt Zborowski at matthewz@ogjonline.com.

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