- DAILY GPI
- MEXICO GPI
- SHALE DAILY
Mexico's upstream regulator has awarded oil and natural gas marketing services contracts to Trafigura Group Pte Ltd. and CFEnergia.
The contracts replace a short-term marketing agreement with PMI Comercio Internacional for hydrocarbons that the Mexican government receives from the production sharing agreements (PSA) it signed with private and foreign oil and gas operators as a result of the 2013-2014 energy reforms.
The contract with PMI, a subsidiary of national oil company Petroleos Mexicanos (Pemex), expires Sunday (Dec. 31), with the new services agreements taking effect on Monday (Jan. 1).
CFEnergia, a fuel marketing and trading unit of federal power utility Comision Federal de Electricidad, was assigned a two-year marketing contract for natural gas. Trafigura is to market oil and condensate production under a three-year agreement, according to reports.
"The contract is for CFEnergia to market the gas that the Mexican government is getting paid in kind from producers that have been assigned exploration blocks in the recent auctions in Mexico," CEO Guillermo Turrent told NGI. "The contract encompasses gas paid in kind in the Gulf of Mexico in an area called Ek Balam and in the states of Tamaulipas and Tabasco."
The regulator, the Comision Nacional de Hidrocarburos (CNH), awarded the contracts on behalf of the Mexican sovereign oil fund, which receives output from the PSAs, as well as royalty payments from Mexico’s license contracts.
"CFEnergia earns a fee per MMbtu if the gas is marketed," Turrent said. "Gas may be sold directly to Pemex processing plants or to end users when it complies with the Mexican gas norms."
CNH last week said it had directly awarded the services contracts after two unsuccessful attempts to hold a competitive tender.
The first auction in November piqued the interest of at least four companies. BP plc, Trafigura, the trading arm of Royal Dutch Shell plc and PMI Comercio Internacional submitted questions during a comment period, but none made offers. CNH then rescheduled the tender for early December.
In the second round, Trafigura and PMI presented bids for the oil contract that were invalidated because of submission errors. No offers were made for the natural gas contract.
The regulator then determined it would assign the contracts to marketers offering the best economic terms for the government. Trafigura’s bid of 18 cents/bbl bested PMI’s offer of 21 cents/bbl, and was 28% below the 25 cents/bbl fee cap set in the original bidding terms.
For the natural gas contract, CNH conducted a market study, which led to the selection of CFEnergia. The company’s offer of 2 cents/MMBtu was 20% below the price cap.
To date, Mexico has signed 17 PSA contracts, including 15 for shallow water blocks in the Gulf of Mexico, where the government’s production stake ranges from 20-84%. These offshore assets include the 1.4-2 billion boe Zama discovery, operated by Talos Energy LLC and its partners, and Eni SpA’s Area 1 block, where the company recently lifted the estimated oil in place to 2 billion boe.
Neither of the discoveries is yet producing, although Eni has said it expects commercial oil in the first half of 2019.
The other two PSA contracts are for blocks that the government assigned to Pemex after the energy reforms began in 2013, with an option to migrate to the new legal regime.
The state oil company moved the offshore Ek Balam block to a PSA contract in May. Output from this field during September averaged 34,561 b/d of crude and 6.3 MMcf/d of gas, according to CNH.
Pemex this month also migrated the first of its 22 pre-reform oilfield service (OFS) contracts. The contract, with London-based Petrofac, is for two mature onshore fields in southern Mexico.
The migration to a PSA model is expected to unlock new investments in these mostly onshore OFS contracts, which Pemex estimates to hold more than 2 billion boe in combined proved plus probable reserves.
Production from the two fields on the Petrofac contract -- Santuario and El Golpe, both in Tabasco state -- currently averages about 6,000 b/d, but Pemex said it expects the new PSA contract will allow it to hit a peak of 31,000 b/d by 2027.