Mexico’s offshore bid round draws few takers

OREANDA-NEWS. July 17, 2015. Mexico's first-ever upstream bidding round drew tepid interest and no bids from majors like ExxonMobil, Chevron and Total who had registered to contend for 14 shallow-water fields.

In today's auction, Mexico awarded only two of the fields to a consortium that includes local Sierra Oil & Gas, UK-based Premier Oil and Houston-based Talos. Eight blocks received no offers from the nine contenders, while four received offers that fell below a minimum threshold.

"Without a doubt, falling oil prices have been a factor," said Juan Carlos Zepeda Molina, president of oil regulator CNH.

Some majors could have used the bidding round as practice for future offerings, deputy energy secretary Lourdes Melgar said. "It is possible they were learning the process for future rounds," Melgar said.

Mexico will not revise the criteria for the awards despite the tepid showing, deputy finance minister Miguel Messmacher said.

The initial package of acreage, launched in December 2014, covers 14 shallow water exploration blocks in the Gulf of Mexico which feature estimated production costs of around \\$20/bl.

The package was the first of five tenders in its historic first licensing round that Mexico hopes will help reverse a decade-long decline in crude production, after a peak at 3.5mn b/d in 2004. Last month, Mexico's state-run Pemex produced a record low 2.201mn b/d, down by 11pc from a year ago.

The bidding round followed a sweeping energy reform that ended Pemex's 75-year old monopoly over upstream and downstream sectors.

Pemex pulled out of the bidding in a surprise announcement on 9 July. Mexico's energy secretary Pedro Joaquin Coldwell citing the impact of lower crude prices on Pemex's budget.

Houston-based Noble Energy, Colombia's state-controlled Ecopetrol, Thailand's state-controlled PTT Exploration and Production and trading house Glencore also pulled out of the running. Only nine firms out of 25 that had passed prequalification took part in the tender.