Mexico optimistic about Monday’s offshore oil auctions

offshore oil

On Monday, Mexico will conduct an auction of 15 offshore oil and gas blocks along the southern coastal waters of the Gulf of Mexico. 

Robust interest from oil majors in upcoming offshore oil auctions

Mexico is guardedly optimistic about the coming round of offshore oil auctions on Monday after a number of oil majors showed strong interest in the shallow-water tenders.

According to Reuters, Mexico will conduct the auctions of 15 oil and gas blocks along the southern coastal waters of the Gulf of Mexico on Monday.

In 2013, Mexico undertook a reformation of its energy industry and opened it up to foreign companies and investment to address years of declining output.

In December 2013, Mexico’s Congress changed the constitution to end Pemex’s 75-year production and exploration monopoly.

Companies prequalified to compete for the tenders are Chevron, ConocoPhillips, Eni SpA, Repsol SA, Royal Dutch Shell Plc, Total SA and China National Offshore Oil Corporation (CNOOC Ltd).

Reuters reports 20 companies signed up to take part on an individual basis, with 16 consortia on the list.

Mexico’s Energy Minister Pedro Joaquin Coldwell is hoping that at least 35 to 40 per cent of the blocks would be awarded.

“The pleasing thing about this auction is the high number of consortia taking part, which is a sign there will be plenty of bids,” he told Reuters on Friday. “There wouldn’t be much point in forming a consortium and then not making an offer.”

Coldwell added the number of blocks sold on Monday would depend on if bidding focused on a few areas or many.

Monday’s auction will be the fifth since the energy reform, including one deep-water and two previous shallow-water tenders.  Energy Ministry data shows the past auctions resulted in 39 signed contracts with a forecast investment over the lifetime of the contracts of $48.8 billion.

 

Juan Carlos Zepeda, head of the oil regulator known as CNH which oversees the auction, said he also saw the number of equity tie-ups among oil companies as a positive sign.

Zepeda added “a bit more than the international benchmark of 30 percent” could be assigned.

The blocks up for auction are located between the coastal waters of the Gulf states of Veracruz, Tabasco and Campeche.  The average size of the blocks is 594 square kilometres.

CNH estimates the blocks could yield production of up to 200,000 barrels per day (b/d) in five years.

Total crude production in Mexico is currently at 2.01 million b/d, down from a peak of 3.380 million b/d in 2004.

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