Despite Low Oil Prices, #mexico's #onshore Oil #auction Beats Expectations #ep #fielddevelopment

By 16th December 2015 Industry News No Comments

“This is a triumph for Mexico,” the president of Mexico’s oil regulator, Juan Carlos Zepeda, said following Tuesday’s onshore oil auction. The tender, the third installment of Mexico’s Round One oil auctions, awarded all 25 contracts on offer, beating expectations despite the plunge in oil prices.

Juan Carlos Zepeda

Mexico’s Energy Minister Pedro Joaquin Coldwell said in a tweet after the auction that peak oil output from the 25 onshore fields will reach 77,000 bopd and attract $1.1 billion in investment. Prior to the tender, Mexican officials said they would have considered the event a success if at least five contracts were awarded.

There were a dozen small Mexican oil companies among the 14 consortia with winning bids. This marks a significant shift for an energy sector that’s been dominated by state-run Pemex since 1938. The IOCs were absent from the auction, which tendered relatively small onshore fields where Pemex has drilled before.

The tender’s biggest winner was the Mexican consortium led by Geo Estratos, which won four contracts. Canada-based Renaissance Oil Corp won three deals, and Strata Campos Maduros, a Mexican start-up, also claimed three. A longtime domestic service provider to Pemex, Diavaz Offshore, landed two contracts.

Pablo Christlieb, Renaissance Oil’s lawyer, was quoted by Reuters as saying, “What we like about Mexico is that it’s a place where there will be big opportunities going forward.”

The auction was designed to enable Mexican oilfield service providers the chance to operate fields independently, which is allowed under energy reform. Competing both alone and in consortia, about 80 mostly Mexican firms pre-qualified for the onshore tender. Only half registered to submit bids.

Mexico’s Energy Minister Pedro Joaquin Coldwell

The fields offered in the auction included several mature onshore fields. The majority of these have ongoing production, while others have been abandoned or underdeveloped. The fields hold combined proven and probable reserves of approximately 49 million barrels of oil equivalent.

Total output from 19 of the 25 fields now is around under 20,000 bpd.

Mexico’s oil regulator, CNH, awards contracts based on which bidder offers the largest share of pre-tax profits to the government. This is assessed via a weighted formula that also includes an investment commitment, Reuters reported.
The share of profits comprises 90% of the formula, while the investment commitment represents the remainder.

The winning bids ranged from 10.56% of pre-tax profits for the San Bernardo field won by Mexican firm Sarreal, to 85.69% for the Moloacan field won by a consortium led by Netherlands-based Canamex Dutch together with two Mexican companies.

Tuesday’s onshore auction followed two previous Round One tenders- one in July and one in September- both of which were for offshore blocks.

The remaining two installments in Round One are as follows:

1Q16: Offshore Deepwater blocks and extra-heavy oilfields;
1Q16: Shale prospects

Round Two will take place next year, Round Three in 2017, and so on.