The release of a new five-year plan by Mexican Energy Ministry Sener could be a sign that future exploration and production (E&P) bid rounds for private sector operators are in the offing.

Mexico production

That’s according to analysis done by Mexican consultancy Talanza. 

E&P bid rounds have been frozen since President Andrés Manuel López Obrador came to power in late 2018, and this would be a sharp departure from current government policy.

On October 28, Sener published the second five-year plan for E&P bidding processes as required by the Hydrocarbons Law. The first was published in 2015 with four subsequent annual updates from 2016 to 2019, but this is the first new plan published during the administration of López Obrador.

“At the beginning of his administration, president López Obrador announced the suspension of future bidding rounds and the publication of this document raises suspicions about a possible policy change,” analysts Marco Cota and Ricardo Alcudia said. “However,” he warned, “this publication could be the outcome of a legal requirement.”

The main differences between the new plan and the previous edition are the absence of unconventional areas and the increase in block size in the offshore.

“This five-year plan brings new hopes about reactivating bidding rounds in the future, based on the fact that Sener actually worked on a new proposal increasing block size and resources per block for offshore areas,” the analysts said.

The previous plan included 187 blocks for unconventional areas covering 53,969 square km (20,838 square miles). López Obrador and Energy Minister Rocío Nahle have been adamant that hydraulic fracturing (fracking) would not be permitted during this 2018-2024 presidential term, even as regulation for the technique remains in place.

The new five-year plan formally recognizes that all rounds are suspended, and “relaunching them is conditioned to private operators’ cooperation for achieving national energy objectives,” the Talanza analysts said.               

In other words, private sector operators need to show results from the contracts awarded during the previous administration.

Mexico’s private sector organization Asociación Mexicana de Empresas de Hidrocarburos (Amexhi) is upbeat about the upstream performance of bid round winners. They said recently that E&P contracts awarded through Mexico’s 2013-2014 energy reform remain on track to reach targets.

The group is aiming for natural gas production of 355 MMcf/d and oil output of 280,000 b/d by 2024 from the contracts, which were awarded through bid rounds, farmout tenders and the migration of oilfield service contracts to E&P contracts between 2015 and 2018. 

“Practically all the oil companies in the world are cutting their investments,” the group said in an update published November 30. “Nonetheless, the commitment to Mexico is maintained.”

The group said it expects private oil production to close 2020 at 57,000 b/d, up 20% from full-year output in 2020.

“The companies that have hydrocarbon exploration and extraction contracts in the country are redoubling efforts to continue developing the industry and generate tangible benefits,” said Amexhi.

Meanwhile state oil company Petróleos Mexicanos (Pemex) is struggling to meet its oil and gas targets.

In October, Pemex oil production was 1.57 million b/d, down from 1.62 million b/d in the year-ago month. Private sector-operated production was 55,110 b/d, up from 45,199 b/d.

Amexhi comprises some 34 oil and gas companies with an upstream presence in Mexico, including BP plc, Royal Dutch Shell plc, Total SE, Eni SpA, Chevron Corp., Equinor and Pemex.

A total of 111 E&P contracts awarded through the reform are currently in effect, comprising 51 onshore, 32 in shallow waters and 28 in deep waters. Sixty-eight of the contracts are currently in the exploration phase, along with 18 in the appraisal phase and 25 in the development stage.