Mexico Sells 60% of Blocks in Second Auction, Compared to Just 14% in the First Round
Mexico’s National Hydrocarbon Commission heard plenty of criticism following its first oil auction in July, in which only two of the 14 available offshore blocks were sold. Its second go-’round was much more successful.
The country’s latest oil auction, conducted on September 30, 2015, sold three of five blocks. Eni International (ticker: E) secured one of the blocks after coming up empty-handed in opening round, despite submitting a handful of bids. Other successful winners included Pan American Energy of Argentina and Fieldwood Energy of the United States – both of which are involved in separate consortiums.
A Step in the Right Direction
Ricardo Garcia-Moreno, Partner for Haynes & Boone, dismissed the notions of a first round “failure” in a presentation made at EnerCom’s The Oil & Gas Conference™ 20 in August. “All of this is new and has occurred within the last two years, so it’s been very fast and there are some growing pains,” he said, referring to Mexico ending its hydrocarbon nationalization that had been in place since 1938. “They’re making great strides to get the blocks out, and I anticipate there will be much greater interest when the deepwater blocks are auctioned off.”
The Commission took initiative after the first sale, changing certain terms and adjusting financial guarantees to lure investment. Some companies still submitted staggering bids in order to lock down their desired blocks. Eni, for example, offered to pay 83.75% of the operating profit from the field while investing 33% above the required minimum. Pan American offered 70% of operating profits and double the required minimum investment.
Petroleos Mexicanos, the country’s state-owned oil company, has not submitted bids for either round. Regulators believes production from the latest blocks can begin in late 2018 and reach a combined peak rate of 90,000 BOPD.