PW Español




PW Live



Very usefull links



PW
Bookstore





Institutional
links


OPEC







PW
Business Partners

 


IRAQ OIL THE FORUM

 


Blogspots

The Global Barrel

Tiempo Cultural

Gustavo Coronel

Iran Watch.org

Le Blog des
Energies Nouvelles

News Links

AP

AFP

Aljazeera

Dow Jones

Reuters


Bloomberg

Views and News
from Norway

 

 

 


Editorial/Opinion

 

Jeremy Martin and Alexis Arthur: Why Mexico's
historic Round One
Oil Bidding wasn't a complete flop



Blue blocks: Awarded; Yelow Blocks: No bids presented; Red Blocks: Bids rejected

Mexico's first private oil bidding did not pan out as those eager to invest had hoped, write Jeremy Martin and Alexis Arthur of the Institute of the Americas. But the uninspiring results are only the beginning, not the end, of Mexico's historic energy reform.

July 15 will not replace March 18 the date in 1938 when Mexico seized foreign oil assets as property of the government as the most momentous day in Mexico's storied oil history. The results of the country's first private oil bidding are in and it clearly is not the start that the Mexican government had sought, nor did it pan out the way those eager to invest had hoped.

By most metrics, including those established by the government, awarding merely 2 out of 14 blocks on offer is a failing grade. But there is more to the story than just the letdown in terms of the number of bids. Indeed, a useful question to pose is how can the government regain momentum for its energy reform agenda?

Fair or not, there is no doubt that the uninspiring results of the July 15 bid round only serves to increase the pressure on the Peña Nieto administration and its energy and finance team. Specifically, the outcome ups the ante in three ways.

First, it increases the burden on the government to improve competition and the fiscal and contractual attractiveness for future tenders, in particular the highly-anticipated deepwater bidding. Long touted as the jewel in the crown of Mexico's oil and gas potential, the deepwater opportunities are considered the real prize of the new energy landscape in Mexico. The bidding process should reflect such a narrative.

Secondly, the spotlight and pressure on the government and state-owned Pemex to further develop and deliver on the pending farm-out opportunities with the national oil company has now been greatly elevated. The proposed farm-outs will offer significant oil and gas reserves and include large investment price tags across a wide range of opportunities onshore and in deepwater.

Finally, the question remains what the government will do with the 12 blocks that were not awarded. Many of the blocks drew interest but were not tendered on fiscal grounds. Several of the blocks could be conceivably conflated into a smaller number for future tender.

Mexico's government is surely disappointed with the outcome of the shallow water bid, the first auction as part of the nation's historic Round One. Energy Secretary Pedro Joaquín Coldwell had already lowered the government's expectations to between 30 and 50 percent of blocks but with just 14 percent of blocks awarded, there will be implications and hopefully lessons learned for future phases.

During the pre-qualification period, 25 firms were granted access to the bid process and a data room. However, several companies pulled out in the lead up to the July 15 tender and public bid opening ceremony and only nine formally participated.

 

Not surprisingly given the volatility in international oil markets, there was much speculation over what-could-have-been in a more favorable oil price environment. But, the July 15 results point more toward the minimum bid requirements and the floor established by the Mexican government, and specifically the Finance ministry, that was the real game-changer for the tender.

The 14 shallow water areas comprised an estimated 3.8 billion barrels of oil equivalent (BOE) of 3P reserves, which should have been more attractive to investors. Block 2 was awarded to Mexico-based Sierra Oil & Gas in consortium with Talos Energy and Premier Oil. Second place went to Hunt Overseas Oil Company. Block 7 was the most contested of the auction, with the same consortium presenting the winning bid and Statoil coming in second. Hunt Overseas and ENI International also participated, the latter in a consortium with Casa Exploration.

The National Hydrocarbons Commission (CNH) rejected bids for four blocks that did not meet the minimal financial threshold set by the Finance Ministry. Eight blocks received no bids at all.

Some observers argued that in addition to the profit-sharing and investment requirements, the $6 billion corporate guarantee was too onerous. The Mexican Government responded that the purpose of the guarantee was to ensure companies entering the Mexican market are solvent and experienced. In this regard, Colombia's experience in bid rounds after its reforms are

illustrative. While greatly successful in terms of blocks awarded, in many cases investment, drilling and certainly production did not flow in a commensurate fashion.

But in at least one way, the tender bore some fruit. One of the main goals of energy reform is to open Mexico's energy sector to new entrants. Nine international and Mexican firms participated in the bid round and two blocks were awarded to Mexico-based Sierra Oil & Gas in a consortium with Talos Energy from the US and Premier Oil from the UK.

That is to say that the big winner yesterday was a consortium that included British and US companies, led by a company established in Mexico specifically to go after these new opportunities; that should be noted if not celebrated.

The success of Mexico's historic energy reform measures will not be determined by the first tender of 14 blocks in shallow water. Though knocked back on their heels, the government still has time to prove itself. To borrow from the current cycling action underway in France, July 15 in Mexico City was not the final stretch down the Champs-Elysees in Paris. There are plenty of hills and legs still to race for Mexico. But they cannot hope to regain momentum merely by drafting.

Success with Pemex's farm-outs and the deepwater tender would be important shots in the energy reform agenda's arm and boost momentum a new.

 

 

Jeremy Martin is director of the energy program at the  Institute of the Americas , a policy center focused on Western Hemisphere Affairs based at the University of California, San Diego. Alexis Arthur is an energy policy associate at the institute. Petroleumworld does not necessarily share these views.

Editor's Note: This commentary was published by The Christian Science Monitor, on July 17, 2015. Petroleumworld reprint this article in the interest of our readers

All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld. All comments expressed are private comments and do not necessary reflect the view of this website. All comments are posted and published without liability to Petroleumworld.

Use Notice:This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of environmental and humanitarian significance. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.

All works published by Petroleumworld are in accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.Petroleumworld has no affiliation whatsoever with the originator of this article nor is Petroleumworld endorsed or sponsored by theoriginator.

Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law.

If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. Internet web links to http://www.petroleumworld.com are appreciated

Copyright© 1999-2009 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ stories by anyone provided it mentions Petroleumworld.com as the source. Other stories you have to get authorization by its authors.Internet web links to http://www.petroleumworld.com are appreciated

Petroleumworld welcomes your feedback and comments,
share your thoughts on this article, your feed. back is important to us!

Petroleumworld News 07/18/2015

 

We invite all our readers to share with us
their views and comments about this article.

 

Follow us in : twitter / Facebook

Send this story to a friend

Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8 +/ 800x600 pixels



 

 


29-30 September,
Cartagena, Colombia


TOP

Editor & Publisher:Elio Ohep F./Contact Email: editor@petroleumworld.com

Contact:
editor@petroleumworld.com/ phone: Office (58 212) 635 7252,
or Cel (58 412) 996 3730 / (58 414) 276 3041 / (58  412) 952 5301


CopyRight © 1999-2010, Elio Ohep F.- All Rights Reserved. Legal Information

- CCS Office Tele
phone/Teléfonos Oficina: (58 212) 635 7252

PW in Top 100 Energy Sites


Technorati Profile


CopyRight © 1999-2010, Elio Ohep F. - All Rights Reserved.
This material may not be published, broadcast, posted online, rewritten or redistributed by any type of means, except with permission of the author/s

The information in this web site is proprietary and is protected under United States and International Copyright and Trademark laws. No part of this web site may be reproduced or transmitted in any form by any means whatsoever, except with permission of the author/s..

Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law. If you wish to use copyrighted material from this site for purposes of your own that go beyond
'fair use', you must obtain permission from the copyright owner.
Any use of this site or its material, in any form, without the express prior written consent of the author, is prohibited by law and is subject to legal action. Legal Information

Top 100+

Technorati Profile
Fair use notice of copyrighted material:

This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from Petroleumworld or the copyright owner of the material.