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Mexico Launches Round Two Auction in Shallow GOM

Seven months after holding its most successful auction for oil and natural gas lease blocks, the Mexican government began the process for its second round of tenders, this one for 15 offshore exploration blocks in the shallow Gulf of Mexico (GOM).

On Tuesday, Mexico's Comision Nacional de Hidrocarburos (CNH) said the offshore blocks combined total 3,439 square miles and contain 1.59 billion boe of "prospective resources." Eleven blocks (2,592 square miles, 1.1 billion boe) are in the GOM's Cuencas del Sureste and Veracruz regions, while the remaining four blocks (848 square miles, 479.7 million boe) are in the Tampico-Misantla region.

"In accordance with international practices, the tender procedure is designed to ensure that firms interested in operating in the shallow GOM under contract have proven ability and experience," CNH said according to a translated statement. "For that, we have defined technical, financial, safety and environmental requirements consistent with the highest international standards.

"As in previous auctions, the bidding process will be carried out under the principles of transparency, maximum publicity, equality, competitiveness and simplicity."

CNH said the contracts would have an initial duration of 30 years, with two possible five-year extensions. The agency added that the state-owned oil company -- Petroleos Mexicanos (Pemex) -- may propose that Mexico's federal government include other fields in the shallow GOM migrate to contracts, something that Pemex had also proposed in the fourth bidding session of the Round One auction.

"[Pemex] views this as an opportunity to seek partners who can transfer technology, participate in financing requirements and share in the risks of project development," CNH said, adding that Pemex "is always looking for a suitable development of fields to benefit the country."

Parties interested in bidding on the offshore blocks must register by Dec. 15. The winners of the auction will be announced on March 22, 2017.

CNH launched its first auction for 14 blocks in the shallow GOM in December 2014 and invited international oil and gas companies to participate (see Daily GPI, Dec. 11, 2014). But the results were disappointing; less than half of the companies qualified to bid in the auction elected to do so, and several blocks received no offers (see Daily GPI, July 15). Other bids failed to meet the minimum threshold for profit sharing with the government.

Mexico's second auction fared better than the first, after CNH sold three blocks to international firms for a combined $3.1 billion over the next 25 years (see Daily GPI, Oct. 2).

The lease sales are part of sweeping energy reforms submitted by President Enrique Pena Nieto and enacted by Mexico's Congress in 2014 (see Daily GPI, Aug. 14, 2014; Aug. 7, 2014). The reforms opened the country to foreign investment in the oil and gas sector but also allowed Pemex to hold on to the majority of its currently producing oil fields.

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