From Reuters

MEXICO CITY (Reuters) – Royal Dutch Shell (RDSa.L) snapped up nine of 19 Gulf of Mexico oil and gas blocks awarded in a Mexican auction on Wednesday, as the global oil major raised its big bet on Latin America’s deep waters.

Mexican officials estimated the auction, the most important since the country’s energy sector opened to foreign firms in 2014, could bring $93 billion in investment to the country as oil firms develop the areas they won.

The stakes were high for Mexican President Enrique Pena Nieto and his struggling party, which wants to showcase the results of its energy liberalization ahead of a presidential election in July.

With oil prices at a three-year high, conditions were better for this auction than any of the previous eight sales in Mexico since 2015, lending weight to Pena Nieto’s argument that opening up the sector would bring the investment needed to turn around a dilapidated state-run oil and gas industry.

Shell bid aggressively despite fears that Pena Nieto, who will not run in July, could be succeeded by a leftist leader who may revise the terms of energy contracts.

The company also won blocks in Brazil’s Atlantic waters just three months ago, which require heavy investment.

Both Mexico and Brazil have benefited from a revival in interest from the world’s top energy firms in big-ticket deepwater projects, as the industry emerges from a three-year recession.

“We wanted a presence in both countries,” said Alberto de la Fuente, president of Shell Mexico. “We are a big player in deep water worldwide. This is excellent news for Mexico and is a strong commitment for Shell in Mexico.”

The higher oil price helped Shell put together solid bids, de la Fuente said to reporters at the auction.

Mexican officials called the auction a success. Ahead of the bid round, the government had said it expected only seven of the 29 blocks on offer to be awarded. In the end, nineteen were awarded.

Aside from Shell, the biggest winners were Malaysia’s state oil firm Petronas [PETR.UL], which participated in six winning bids, and Qatar Petroleum [QATPE.UL], which participated in five. Some firms bid alone, and others in consortia.

The results would not give Shell too high a share of Mexico’s energy sector, Deputy Energy Secretary Aldo Flores said.

“We have to recognize Shell’s enthusiasm in this round,” he told reporters after the auction. “We have a diverse oil sector … I don’t believe this means a concentration.”

Mexico estimates oil firms would invest $93 billion to develop energy reserves in the blocks, Flores said. The firms have not made their investment plans public, but may have shared preliminary estimates with Mexican authorities.

Previous auctions have already drawn investment pledges of $61 billion from winning firms.

The government estimates over $600 billion is needed to return the country to record production levels reached in 2004.

The blocks auctioned on Wednesday could pump over 1.5 million barrels per day (bpd) of crude and 4 billion cubic feet per day of gas by 2032, Flores added. Mexico currently produces around 1.9 million bpd.

Even though there was little competition for some of the blocks, the winning bids offered a high percentage of profits to Mexico, said Juan Carlos Zepeda, the head of the country’s oil regulator. The government take would be up to 67 percent of profit, he said, comparing that to the 55 percent oil firms pay in the United States.

Mexico received $525 million in cash from the companies that won blocks, which will be transferred to a government fund.

SHELL FOCUS

Shell focused on blocks in the Perdido and Salina basins, which were expected to be the most competitive of those on offer. Perdido is close to U.S. waters where Shell and other oil firms already operate.

The proximity to existing infrastructure on the U.S. side of the maritime border could speed development in the Mexican waters because companies can build clusters of projects.

“It’s only natural for Shell to pursue opportunities in Mexico,” said Lysle Brinker, analyst at consultancy IHS Markit. “It’s near an area where Shell is already producing.”

Shell won four blocks as a lone bidder, four more in a consortium with Qatar Petroleum and another in a consortium with Mexican state oil firm Pemex [PEMX.UL].

Shell would spend more than the minimum investment it pledged in the bids, de la Fuente said.

PC Carigali, a unit of Malaysia’s state oil firm Petronas, won two blocks alone and four in consortia.

“We’re in, we want to explore and we want to find oil and gas,” said Faisal Bakar, Carigali’s country manager in Mexico.

Ten blocks received no bids, so were not awarded.


Reuters Factbox – Companies who Bid or Won in Mexico’s Deep Water Oil Sale

MEXICO CITY (Reuters) – Royal Dutch Shell (RDSa.L) won five of the first eight oil and gas blocks in Mexico’s prized deep waters in the Gulf of Mexico, making the early running in the country’s biggest auction since the energy sector was opened to international oil firms.

Filled oil drums are seen at Royal Dutch Shell Plc’s lubricants blending plant in the town of Torzhok, north-west of Tver, November 7, 2014. REUTERS/Sergei Karpukhin/File Photo

Here are details of the fields on offer, the companies who bid for or won them, along with areas that did not receive bids.

– Block 1 is located in the Perdido Fold Belt and covers some 768 square miles (1,988 sq km). It contains an estimated 171 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders.

– Block 2 is located in the Perdido Fold Belt and covers some 829 square miles (2,146 sq km). It contains an estimated 76 million barrels of crude oil equivalent in prospective resources.

RESULTS:

Winning bidder: Shell, Pemex consortium

Losing bidders: China Offshore

BHP

– Block 3 is located in the Perdido Fold Belt and covers some 796 square miles (2,062 sq km). It contains an estimated 115 million barrels of crude oil equivalent in prospective resources.

RESULTS:

Winning bidder: Shell, Qatar Petroleum consortium

– Block 4 is located in the Perdido Fold Belt and covers some 734 square miles (1,900 sq km). It contains an estimated 40 million barrels of crude oil equivalent in prospective resources.

RESULTS:

Winning bidder: Shell, Qatar Petroleum consortium

– Block 5 is located in the Perdido Fold Belt and covers some 1,055 square miles (2,733 sq km). It contains an estimated 252 million barrels of crude oil equivalent in prospective resources.

RESULTS:

Winning bidder: Pemex

– Block 6 is located in the Perdido Fold Belt and covers some 730 square miles (1,891 sq km). It contains an estimated 171 million barrels of crude oil equivalent in prospective resources.

RESULTS:

Winning bidder: Shell, Qatar Petroleum

– Block 7 is located in the Perdido Fold Belt and covers some 760 square miles (1,968 sq km). It contains an estimated 17 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 8 is located in the Perdido Fold Belt and covers some 796 square miles (2,062 sq km). It contains an estimated 13 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 9 is located in the Perdido Fold Belt and covers some 776 square miles (2,009 sq km). It contains an estimated 92 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 10 is located in the Cordilleras Mexicanas basin and covers some 772 square miles (1,999 sq km). It contains an estimated 100 million barrels of crude oil equivalent in prospective resources.

RESULTS:

Winning bidder: Repsol, PC Carigali, Ophir consortium

– Block 11 is located in the Cordilleras Mexicanas basin and covers some 773 square miles (2,002 sq km). It contains an estimated 182 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 12 is located in the Cordilleras Mexicanas basin and covers some 1,197 square miles (3,099 sq km). It contains an estimated 215 million barrels of crude oil equivalent in prospective resources.

RESULTS:

Winning bidder: PC Carigali, Ophir, PTTEP consortium

– Block 13 is located in the Cordilleras Mexicanas basin and covers some 759 square miles (1,967 sq km). It contains an estimated 179 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 14 is located in the Cordilleras Mexicanas basin and covers some 866 square miles (2,242 sq km). It contains an estimated 180 million barrels of crude oil equivalent in prospective resources.

RESULTS:

Winning bid: Repsol, PC Carigali consortium

– Block 15 is located in the Cordilleras Mexicanas basin and covers some 788 square miles (2,042 sq km). It contains an estimated 180 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 16 is located in the Cordilleras Mexicanas basin and covers some 790 square miles (2,047 sq km). It contains an estimated 131 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 17 is located in the Cordilleras Mexicanas basin and covers some 1,162 square miles (3,010 sq km). It contains an estimated 131 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 18 is located in the Cordilleras Mexicanas basin and covers some 1,126 square miles (2,917 sq km). It contains an estimated 412 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

– Block 19 is located in the Cordilleras Mexicanas basin and covers some 1,160 square miles (3,003 sq km). It contains an estimated 281 million barrels of crude oil equivalent in prospective resources.

RESULTS: No bidders

Data from Mexico’s National Hydrocarbons Commission

 

 

 


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