(Reuters, David Alire Garcia & Marianna Parraga, 27.Mar.2018) — Mexico awarded just under half of the 35 shallow-water blocks it tendered on Tuesday, in an auction muddied by the promises of the presidential frontrunner to review contracts awarded under a historic energy opening if he wins the July 1 election.
The country’s oil regulator awarded 16 blocks in the Gulf of Mexico to firms including Spain’s Repsol, France’s Total, Italy’s Eni, Britain’s Premier Oil and Mexico’s state-run Pemex, which was the biggest winner overall.
A final, competitive round of bidding in the Southeast Basins improved what started as a patchy showing, with little interest in fields believed to contain high amounts of natural gas.
About $8.6 billion in investment is expected from the projects to be developed in the awarded blocks, Mexico’s Energy Minister Pedro Joaquin Coldwell said, with early production starting in 2022 and a production potential of 280,000 barrels per day (bpd).
Andres Manuel Lopez Obrador, who has a comfortable lead in most polls, said that if he wins the July vote, he would review more than 90 contracts signed since Mexico passed legislation in 2013 ending Pemex’s 75-year monopoly, looking for signs of corruption.
Running for office for a third time, Lopez Obrador has also said he would hold a referendum on the future of the reform, and ask President Enrique Pena Nieto to cancel two auctions planned for the second half of the year.
Mexico’s next president takes office in December.
Despite the political uncertainty, Tim Davis, the group exploration manager for Premier Oil, said he was bullish about the future of the oil and gas opening.
“I think you could see a slowdown (if Lopez Obrador wins). But … I think they will see the benefits,” of the investment that’s coming in and the invigoration of new ideas and new companies arriving.
Repsol and Premier Oil individually claimed two areas each in the shallow-water fields offered in the Burgos basin, where less than a third of blocks were awarded. Premier won another block in a consortium with DEA Deutsche Erdoel and Sapura Energy.
Consortia made up of state-run Pemex, Mexico’s Citla Energy, Spain’s Cepsa, Britain’s Capricorn Energy and Germany’s DEA Deutsche Erdoel posted winning bids for four blocks in the Tampico-Misantla-Veracruz basin further south along the Gulf. There, around a third of blocks were awarded.
In the final Southeast Basins tender, competition was higher, and the oil regulator awarded all eight of the shallow-water blocks it tendered to consortia including Total, Eni, Royal Dutch Shell and Pemex.
“This is very high percentage (of awarded blocks),” said Coldwell.
Mexico’s government collected $124 million in cash payments from the auction, below the $525 million collected in a January deepwater auction.
The Southeast Basins areas are located in a portion of the Gulf where many of the companies that won blocks on Tuesday had already secured areas in earlier shallow and deepwater bidding rounds.
By securing neighboring blocks in the Gulf, companies are able to build clusters in order to reduce infrastructure costs.
Mexico’s Deputy Secretary for Hydrocarbons Aldo Flores blamed the weaker early interest on the quantity of natural gas areas in the auction, saying companies were more interested in finding crude.
“This will continue to be a challenge for us given the abundance of natural gas in Texas at very low prices,” Flores told Reuters on the sidelines of the auction in Mexico City.
Mexico is also competing for private companies’ interest with Brazil, which is holding its own auction this week, with another scheduled in June.
Brazil holds its own election in October, with the most likely leftist contender in the presidential race, Ciro Ferreira Gomes, warning he would expropriate energy assets bought by investors if he wins.
(Reporting by David Alire Garcia, Adriana Barrera and Marianna Parraga; Writing by Gabriel Stargardter Editing by Frank Jack Daniel, Susan Thomas and Diane Craft)
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