Results of Mexico’s Shallow Water Auction – Round 3.1
18 bidders participated in the event
16 contracts were tendered to 12 bidders
On Tuesday, the opening of bids and awarding of exploration and hydrocarbons production contracts for the First Tender of Round Three Shallow Water GOM were held in a public session that included a live webcast by Mexico’s CNH.
- The tendered contracts represent an associated investment of approximately $8.6 billion dollars across the contract period.
- The Mexican government will receive, on average, between 72% and 78% of profits generated under the tendered contracts. In addition, the government will receive a total of $124 million dollars as additional bonuses from the winning bids.
- The prospective resources associated with the tendered contracts represent 513 million barrels of crude oil equivalent.
- Total investment could reach $8.6 billion – CNH
The contractual areas tendered are located in oil provinces in shallow waters in the Gulf of Mexico: Burgos, Tampico-Misantla, Veracruz and the Southeast Basin.
Given that the tendered contracts are shared production contracts, they were awarded on the basis of the percentage of operating profit offered to the State, the additional investment and the amount of cash bonus offered by the participants.
On average, the government percentage offered in the winning bids was 45.8%. The winning bidders agreed to drill 9 additional wells and to pay cash bonuses of a total of $124 million dollars.
In addition, the contractors will pay taxes via a contract fee for the exploration phase, a basic royalty, and taxes on exploration and hydrocarbons extraction activities, as well as income tax. Taking this into consideration, the State will receive on average 72% of the value of project profits.
The contracts contemplate a progressive fiscal structure so that the State will receive a greater percentage of profits, estimated at 78%, in case of favorable hydrocarbons prices, cost efficiencies, or the discovery of volumes greater than those predicted.
It is estimated that the total investment across the contract periods could reach $8.6 billion dollars.
The contract tender awards will be finalized at the latest on April 2nd of the current year, in an extraordinary session of the Board of Commissioners of the National Hydrocarbons Commission. Contract signing will occur in the 90 days following the publication of the award decisions in the Official Journal of the Federation.
The results of the event, as well as the complete tender process corresponding to Round Three, can be consulted at the website http://www.rondasmexico.gob.mx.
Statistical Summary of Exploration and Hydrocarbons Production Contracts Tendered during the First Tender of Round Three
| Area # | Total Bids Received | Winning Bid | Investment Promised (millions of dollars)1/ |
Anticipated Investment (millions of dollars) |
Maximum anticipated production (miles de BOE/D2/) |
Total percentage of profits to the State | |||
| Bidder | Government percentage (%) |
Additional Investment | |||||||
| Wells
(0, 1, y 2) |
Cash amount (millions of dollars) | ||||||||
| Burgos | |||||||||
| 5 | 2 | Repsol Exploración México | 56.3 | 0 | 0.0 | 2.3 | 451.6 | 13.1 | 79.5% |
| 11 | 1 | Premier Oil Exploration And Production Mexico | 29.4 | 0 | 0.0 | 1.2 | 451.6 | 13.1 | 64.1% |
| 12 | 1 | Repsol Exploración México | 48.2 | 0 | 0.0 | 2.3 | 793.4 | 23.2 | 75.0% |
| 13 | 1 | Premier Oil Exploration And Production Mexico | 34.7 | 0 | 0.0 | 1.2 | 451.6 | 13.1 | 67.2% |
| Average | 1 | 42.2 | 0 | 0.0 | 1.7 | 537.0 | 71.5% | ||
| Sub Total | 5 | 0 | 0.0 | 7.0 | 2,148.1 | ||||
| Tampico-Misantla-Veracruz | |||||||||
| 15 | 1 | Capricorn Energy Limited, and Citla Energy E&P | 27.9 | 0 | 0.0 | 2.7 | 568.7 | 14.6 | 62.5% |
| 16 | 1 | Pemex Exploración y Producción, Deutsche Erdoel México, and Compañía Española De Petróleos | 24.2 | 0 | 0.0 | 2.2 | 568.7 | 14.6 | 60.5% |
| 17 | 1 | Pemex Exploración y Producción, Deutsche Erdoel México, and Compañía Española De Petróleos | 35.5 | 0 | 0.0 | 2.4 | 568.7 | 14.6 | 66.8% |
| 18 | 1 | Pemex Exploración y Producción, and Compañía Española De Petróleos | 40.5 | 0 | 0.0 | 2.3 | 568.7 | 14.6 | 69.7% |
| Average | 1 | 32.0 | 0 | 0.0 | 2.4 | 568.7 | 64.9% | ||
| Sub Total | 4 | 0 | 0.0 | 9.7 | 2,275.0 | ||||
| Southeast Basin | |||||||||
| 28 | 5 | Eni México, and Lukoil Upstream México | 65.0 | 2 | 59.8 | 93.5 | 540.6 | 22.2 | 84.2% |
| 29 | 4 | Pemex Exploración y Producción | 65.0 | 2 | 13.1 | 92.6 | 540.6 | 22.2 | 81.5% |
| 30 | 7 | Deutsche Erdoel México, Premier Oil Exploration And Production Mexico, and Sapura Exploration and Production Sdn. Bhd. | 65.0 | 2 | 51.1 | 92.8 | 540.6 | 22.2 | 83.7% |
| 31 | 3 | Pan American Energy LLC | 65.0 | 1 | 0.0 | 46.4 | 473.7 | 20.3 | 80.8% |
| 32 | 2 | Total E&P México, and Pemex Exploración y Producción | 40.5 | 0 | 0.0 | 2.9 | 473.7 | 20.3 | 67.1% |
| 33 | 2 | Total E&P México, and Pemex Exploración y Producción | 50.5 | 1 | 0.0 | 47.3 | 540.6 | 22.2 | 72.7% |
| 34 | 2 | Total E&P México, Bp Exploration Mexico, and Pan American Energy LLC | 50.5 | 1 | 0.0 | 47.7 | 552.6 | 6.4 | 74.7% |
| 35 | 2 | Shell Exploración y Extracción de México, and Pemex Exploración y Producción | 34.9 | 0 | 0.0 | 2.3 | 540.6 | 22.2 | 63.9% |
| Average | 3 | 54.5 | 1 | 41.3 | 53.2 | 525.4 | 76.1% | ||
| Sub Total | 27 | 9 | 124.0 | 425.5 | 4,203.1 | ||||
| Grand Total | |||||||||
| Average | 2 | 45.8 | 1 | 7.8 | 27.6 | 539.1 | 72.1% | ||
| Total | 36 | 9 | 124.0 | 442.2 | 8,626.1 | ||||
1/ Taking into consideration the minimum work program established by the CNH and the additional investment promised.
2/ BOE/D: barrels of crude oil equivalent per day.
In total, 26,300 square kilometers of potential oil and gas producing blocks were offered at auction by the government of Mexico in its Round 3.1 auction. The blocks are in the Tampico-Misantla-Veracruz, Cuencas del Sureste and Burgos basins.
Note: The CNH interactive map can be found here in English and Spanish. Please click on any of the images to view the full resolution.
Tamaulipas’ offshore (Burgos) region is auctioning off 14 fields for the first time, with a total of 8,400 sq. km.
According to Platts, these blocks have an average area of 602 sq. km, water depths up to 590 meters and prospective resources of 56% wet gas and 44% light oil. Ten blocks are expected to have light oil and the other four should contain wet gas, Platts says.
The Tampico-Misantla-Veracruz (TMV) will have 13 blocks up for auction with a total area of approximately 12,500 sq km. On average, each block is about 960 sq km and depths reach down to 860 meters. In the TMV blocks, seven blocks are expected to have light oil and six should have dry gas. The estimated mix is 61% dry gas, 18% wet gas and 21% light oil.
Block 15 within the TMV has two discovered light oil fields, the Tintorera and Tiburon fields. Block 21 has three fields – the Cangreja (heavy oil), Mejillon (light oil and gas) and Kosni (gas only). A CNH spokesman told Platts that new acreage was added to these blocks to make them more attractive to the industry.
Eight blocks totaling 5,350 sq km within the Cuencas del Sureste basin will be auctioned off as well. Each block is about 670 sq km and the depths go down to 880 meters. Six blocks have light oil and two blocks have heavy oil and wet gas.
Participating bidders in Round 3.1 shallow water GOM
The CNH announced the final list of individual bidders and bidding consortiums approved to present bids on March 27, 2018.
Please click on the image directly below to view the finalized list:
To be sold to the highest bidder
Mexico’s outgoing President Enrique Pena Nieto has reached his term limit, but before he leaves office completely, his administration has been auctioning off areas “like there’s no tomorrow.” Mexico has offered more than 100 permits to oil majors and has auctioned off enough areas to cover more than the state of Delaware, Bloomberg reports.
Nieto was the main driving force behind reforming Mexico’s energy industry, and the latest flurry of auctions is Nieto’s last chance to attract international investment to help the country jumpstart development of its hydrocarbon producing resources. Oil and gas production languished during several decades of underinvestment by Mexico and Pemex, the Mexican national oil company.
Since 2015 the government has hosted auctions for oil and gas blocks, allowing private companies to work with Mexican partner companies on projects for the first time in almost 80 years.
The country’s first private offshore well in 80 years, the Zama-1, found great success. Operated by Talos Energy, Sierra Oil & Gas and Premier Oil (ticker: PMO), the well discovered 1.4 billion barrels of oil in place, far beyond the 100-500 million barrels expected.
Next up: SHALE – Mexico’s first shale auction is scheduled for September 2018
The Mexican government is hoping to see similar success in onshore operations, as it is opening the Burgos basin, the Mexican portion of the Eagle Ford, to private investment. If the country is able to replicate the success of U.S. shale it may unlock significant natural gas reserves.
The oil and gas industry in Mexico, which was nationalized beginning in 1938, has suffered. Production has declined every year since 2004. Mexico’s President Enrique Peña Nieto and the government privatized the industry in December 2013 in an effort to revive Mexico’s deteriorating energy environment.
Winds of change
But Mexico’s outgoing President Enrique Pena Nieto is now term-limited, and general elections are just around the corner. Elections in Mexico are scheduled to be held July 1, 2018.
Voters will elect a new president to serve a six-year term, as well as 500 members of the Chamber of Deputies and 128 members of the Senate.
Presidential candidate front-runner, Lopez Obrador, and second-place candidate, Ricardo Anaya have been battling for the top spot. Obrador has said that he will slow down, review and/or reverse Nieto’s energy policies. However, Bloomberg reported that Energy Minister Pedro Joaquin Coldwell said, “The [auction] rounds transcend the electoral cycles,” meaning that the Government of Mexico will honor deals already sealed in ink.
Previous rounds of investment
Mexico’s auctions have been generally successful in attracting foreign oil company investment. CNH estimates the country’s auctions have generated $153 billion in contracts.
It’s been a year since Mexico’s national oil company Petróleos Mexicanos, or Pemex, and Australian-based BHP announced a deep-water drilling venture in the Gulf of Mexico. The project to develop the Trion field in the Perdido region in the Western Gulf of Mexico was the first time Pemex awarded a foreign company the right to own and operate drilling operations in Mexico since it re-opened its energy markets to foreign investment. But Pemex CEO Carlos Trevino likes the result. At CERA Week he said he wants to seek more foreign partnerships to accelerate the country’s declining oil and natural gas production. “It’s a new way of doing things.”
