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Mexico Announces Preliminary Rules For Offshore Bidding

Fresh from enacting historic energy market reforms, Mexico on Wednesday announced preliminary rules for oil and gas companies to bid on 14 offshore exploratory blocks in the shallow waters of the Gulf of Mexico (GOM), with the first round of bidding scheduled to take place in 2015.

According to reports, data rooms for the first blocks will be available by Jan. 15. Mexico's Comision Nacional de Hidrocarburos (CNH) has set a June deadline for bids and plans to award contracts by July. The commission has dubbed the first round of bidding as "Round 1."

"Round 1 must ensure that every contract is awarded to the bidder that offers the best economic conditions to Mexico," CNH said in a translated statement posted on its website. The commission added that Mexico's national oil company, Petroleos Mexicanos (Pemex), would also be allowed to participate in the bidding, either independently or in association with other oil and gas companies.

"This will make our national oil company a more competitive contender as it will be able to access better technologies and increase its financial resources and investment capacity," CNH said. "Throughout the next year, Pemex will establish 10 partnerships to develop 14 fields under a joint venture scheme as part of the farm-out process. The partner companies will be selected through a competitive bidding process [see Daily GPI, Aug. 14]."

CNH said 69 blocks would be tendered during Round 1, including 109 exploration areas and 60 production fields.

Last May, Mexican President Enrique Pena Nieto introduced legislation to reform his nation's energy policies, including providing incentives for foreign investment in oil and gas exploration and production, and breaking some of the monopolistic controls held by Pemex (see Daily GPI, May 2). Lawmakers passed the legislation this summer.

During the past 76 years, Mexico's energy sector has been dominated by Pemex and its electricity monopoly, the Comision Federal de Electricidad. Some foreign investment in Mexico has already started, as evidenced by the country's agreement with Australia's BHP Billiton Ltd. in September (see Daily GPI, Sept. 26).

According to the U.S. Energy Information Administration (EIA), Mexico's oil production is projected to decline from 3 million b/d in 2010 to 1.8 million b/d in 2025 and then struggle to hold at 2.0-2.1 million b/d through 2040 (see Daily GPI, Aug. 25). But the EIA added that with the reforms, production could stabilize at 2.9 million b/d through 2020 and rise to 3.7 million b/d by 2040.

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