3 Blocks awarded in 2nd phase of Mexico oil auction

The second phase of an oil auction stemming from Mexico’s historic energy sector overhaul was a much bigger success than the first one, with three of the five shallowwater Gulf of Mexico production blocks on offer being awarded on Wednesday.

The first contractual area, which covers three fields (Amoca, Mizton and Tecoalli) and sparked interest from numerous bidders, was awarded to Italy’s ENI International.

A consortium made up of Argentine companies Pan American Energy and E&P Hidrocarburos y Servicios won the second block, which comprises the Hokchi field.

Lastly, the fourth block, which covers the Ichalkil and Pokoch fields, was awarded to a consortium made up of Houstonbased Fieldwood Energy and Mexican private oil company Petrobal, the lone bidder.

No bids were made for the third block, which contains the Xulum field, or the fifth block, which covers the Mision and Nak fields.

Heavyweights Chevron Corp. and Royal Dutch Shell were among the 14 prospective bidders including individual operators and five consortia that had prequalified for the second phase of the auction, which was held under a challenging scenario of low global oil prices.

In awarding the productionsharing contracts, the National Hydrocarbons Commission, or CNH, Mexico’s oil regulator, took into account what each individual operator or consortium offered in terms of additional investment (expressed as a percent increase over the minimal work program) and the government’s share of operating profits.

The first phase of Round One which was held in July and was the first oil auction in Mexico since a 2013 energy sector overhaul ended stateowned Petroleos Mexicanos’ 75yearold monopoly ended with only two of 14 shallowwater exploration blocks in the Gulf of Mexico being awarded.

As opposed to the first phase, the second phase offered bidders blocks where oil and gas had already been confirmed.

Pemex had obtained 83 percent of the country’s proven and probable reserves and 21 percent of its potential resources in a socalled “Zero Round” of noncompetitive bidding last year.

It did not participate in either of the first two phases of Round One.

After the disappointing first phase, Mexico’s oil regulator unveiled more attractive rules for the second phase.

Among those changes, the CNH said a $2.5 million bid security guarantee would cover all contracts a bidder was awarded and would not need to be provided for each separate block.

The CNH also announced the minimum required bid before the auction began, so that companies would not offer the government a share of pretax profit in a block that fell just short of the acceptable level.

Mexico’s government is looking to the energy overhaul to attract tens of billions of dollars in investment and reverse a roughly 30 percent decline in Mexico’s oil output, which peaked at 3.38 million barrels per day in 2004 and currently stands at roughly 2.3 million bpd.

Mexico is starting small with its offer of shallowwater fields and onshore blocks this year and saving the big prizes deepwater fields in the Gulf of Mexico for later tenders.