Mexico sweetens terms for second public tender

OREANDA-NEWS. August 27, 2015.  Mexico has eased bidding requirements and contract terms for the auction of nine shallow-water development blocks, an effort to attract more investors after a disappointing first tender last month.

The nine blocks, distributed in five production-sharing contacts, are part of the country's staggered, historic licensing round, introduced by last year's ground-breaking energy reform. The bid deadline is 30 September.

Under the amended rules presented yesterday by oil regulator CNH, companies will be able to carry out additional exploration and extraction activities in their geological areas, beyond the existing fields initially put up for bid. This includes areas of greater depth, CNH said.

Mexico's finance ministry will also unveil the required minimum level of profits for each contract on 14 September, or two weeks ahead of the bid.

In last month's tender offering 14 shallow-water exploration blocks, the minimum values were made public during the auction. Only two blocks were awarded, falling short of the government's goal of awarding 30-50pc of the acreage. Three of the rejected blocks fell only 5pc or less below the government's minimum threshold.

Other modifications include a lower required bond of \\$1mn, down from \\$2.5mn, which companies will pay only once, even when bidding on various blocks.

The conditions under which the government can terminate a contract — a point of discord since the early stages of the bidding round — were also clarified.

After four rounds of back and forth between the government and the industry, CNH approved yesterday the final version of the contracts.

Overall, 20 firms pre-qualified for the tender. Nine are running individually, including Chevron, Shell, China's state-owned CNOOC, Russia's Lukoil, Norway's Statoil, India's state-controlled ONGC Videsh, Spain's Cepsa, Germany's DEA Deutsche Erdoel and US Plains.

The other 11 are part of 5 consortiums. Among them, Houston-based Talos and Sierra Oil & Gas — the winning consortium of the only two blocks awarded last month — have teamed up with Mexican billionaire Carlos Slim's Carso Oil and Gas.