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Mexico's Energy Reforms Still on Fast Track, Says Pena Nieto

Mexico has no plans to slow its energy reforms, despite lower commodity prices, and the country will move forward with an offshore auction late this year, President Enrique Pena Nieto said Monday at IHS CERAWeek.

Pena Nieto unveiled a new auction, the fourth since energy reforms were enacted, which is scheduled for December, allowing producers to bid for oil and natural gas leases in the deepwater Gulf of Mexico.

"The world is trusting and investing in Mexico," Pena Nieto told the audience. "Now is not the time to stop. It is the time to move forward."

Mexico has to "maintain the rhythm in the bids...Just like I committed myself to achieve the energy reform at the moment, now I am committed to accomplish its full, effective and timely implementation."

Regardless of the price downturn, "Mexico decided to have the technological, financial and risk management capability that the global oil industry has already developed for this type of large-scale project."

The deepwater round is expected to draw a lot of interest, in part because it would include four blocks in the Perdido Fold Belt, already an attractive target on the U.S. side of the maritime boundary. Leases also would be offered in the Cuenca Salina area. In 2012, Mexico's state-owned Petroleos Mexicanos (Pemex) struck oil in its first deepwater discovery in the Perdido near the Mexico-U.S. maritime boundary (see Daily GPIAug. 31, 2012). The Trion I discovery well, drilled in 8,250 feet of water about 24 miles south of the maritime boundary, was estimated to contain 250-400 million bbl of proved, probable and possible reserves.

On the U.S. side of the boundary in the Perdido, a unit of Royal Dutch Shell plc operates the Perdido Development, a floating production facility with a host spar in Alaminos Canyon Block 857 that began operating in 2010 (see Daily GPI, April 5, 2010). Other big producers, including ExxonMobil Corp., also have secured leases recently in the boundary area (see Daily GPIMarch 19, 2014).

Mexico's auction to be held late this year would follow three other rounds for leases onshore and offshore, all which have drawn progressively more interest. The first round of was launched in late 2014 (see Daily GPIDec. 11, 2014). The second, for shallow water blocks last year, resulted in sales of a combined $3.1 billion (see Daily GPI,Oct. 2, 2015;May 26, 2015). Mexico’s third round held late last year attracted 40 operators, and all 25 of the onshore areas offered were awarded bids that totaled $1.1 billion (see Daily GPI,Dec. 16, 2015).

Mexico plans to implement the "highest standards of transparency and accountability" for its leasing program to ensure there is "total certainty" for investors, Pena Nieto said.

"With this purpose, we will maintain a competitive and stable tax framework, while the Mexican authorities shall continue to work with total openness and disposition to continue improving their processes."

Mexico also is ahead of schedule to open up the market for liquid fuel sales. Reforms have broken up a monopoly on downstream marketing and sales held by Pemex. Last month gasoline stations not owned by Pemex were permitted to open in the country. Beginning in April, private investors also may begin to import and sell fuel in Mexico, including diesel and gasoline, Pena Nieto told the audience.

Mexico also has accelerated a plan to entice outside companies to invest in the power grid. The first tender would be to build a 372-mile transmission line to carry wind and hydropower from the Isthmus of Tehuantepec to Central Mexico. The project would involve an investment of about $1.2 billion. Mexico's goal is to generate 25% of its power supply from renewables by 2014, increasing it to 40% by 2035.

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