Mexico & Nafta - September 2016 (ISSN 1741-444X)

Despite persistently low international oil prices, take-up for Mexico’s inaugural oil sector concessions tender process under the historic 2013 energy sector reform, which opened up the sector to increased private participation in exploration and production, has been reasonably good. After some initial teething problems, the process has since run smoothly and transparently under the new regulator, the national hydrocarbons commission (CNH).

According to the deputy minister for hydrocarbons, Lourdes Melgar, as of July, a year after the CNH launched its ‘Round One’ of hydrocarbon concessions for private operators in 2015, there were 16 companies operating as producers in Mexico aside from the state-owned oil company Pemex, of which nine were already delivering oil (see sidebar) and the other seven had submitted work plans to the CNH for approval to begin drilling. In the first three auctions of ‘Round One’, the CNH offered 44 exploration and exploitation areas, of which 30 were assigned, or 68%, which was well within the regulator’s expectations. To July, 24 contracts were already signed, Melgar reported.

The nine new producers are already contributing royalties to the state. Luis Miguel Labardini, of a local energy consultancy, Marcos y Asociados, told the local daily El Financiero in mid-July that these companies pay “over 70% of their income, on average, to the national oil fund”, the Fondo Mexicano del Petróleo. Labardini declared the landmark energy reform a success in diversifying oil operations in the country, increasing income for the state and also in bringing in new knowledge and technical capacity to the sector.

A fourth phase of ‘Round One’, scheduled for December, will offer 10 deepwater exploration blocks in the Gulf of Mexico. Four are attached to the Perdido belt, with estimated reserves of over 1.3bn barrels of crude, and six in the Salina del Istmo area, with estimated reserves of upwards of 1.45bn barrels. The reserves are valued at US$10bn overall, and the government hopes that the auction will generate about US$7bn. In all, 21 major oil producers have registered to bid in the ‘Round One’ fourth phase (see sidebar). Some of these companies are already operating on the US side of the maritime border with Mexico in the Gulf and so are knowledgeable about the area. The contracts will run for up to 50 years. Bids will be accepted on 5 December.

Meanwhile the CNH has already scheduled the first ‘Round Two’ auction for March 2017. This tender comprises 15 blocks off the Gulf coastal states of Veracruz, Tabasco and Campeche. These blocks are estimated to hold the equivalent of 650m barrels of proven light crude reserves, plus undiscovered natural gas and heavy oil reserves. The first ‘Round Two’ tender offers production-sharing contracts for 30 years, extendable for a further ten. The government hopes to generate US$11bn from this auction.

The second ‘Round Two’ auction will follow quickly thereafter in April 2017. Announced by the CNH in late August, it will comprise 12 onshore blocks, nine with prospective gas resources in the northern area of Cuenca de Burgos (in the states of Nuevo León and Tamaulipas) and six with natural gas and oil potential located in the Cuenca del Sureste (in the southern states of Chiapas and Tabasco). Total prospective resources are about 643.2m barrels of oil equivalent, on Mexican energy ministry data. The blocks will be offered via 40-year licence contracts. The objective of this round is to increase domestic natural gas production and participation will therefore be limited to companies with proven experience in this. Seven of the 12 blocks already have wells containing dry and wet gas, fanning hopes that output of ethane, propane and butane could be underway by 2018. Meanwhile, two of the blocks in the south appear to have oil, but have no wells yet. Expected investment in developing these concessions is upwards of US$5bn.

• New operators and bidders

The nine new producers, most of which took over existing wells formerly operated by Pemex, are: Canamex Energy, Consorcio Manufacturero Mexicano, Consorcio Petrolero 5M del Golfo, Diavaz, Dunas Exploración y Producción, Grupo Mareógrafo, Renaissance Oil, Lifting de México and Strata. Among the 21 major oil producers that have registered to bid in the ‘Round One’ fourth phase are Chevron and ExxonMobil of the US, Royal Dutch Shell and British Petroleum of the United Kingdom (UK), Total of France, Spain’s Repsol, and Norway’s Statoil.

• Pemex output still sliding

Crude oil output at Mexico’s state-owned oil firm, Pemex, was 2.157m barrels per day (bpd) in July, the company reported. This figure is down from an average of 2.178m bpd in June. Pemex’s oil exports, however, rose by 4.37% in the month, to 1.146m bpd.