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Mexico's E&P Auction Process Regains Momentum

Firm Thought Leadership

Two and a half months after a sobering initial bid round, Mexico's Round One E&P auction processes regained some positive momentum. Wednesday's bid round resulted in a 60% success rate in which winning bid terms were well in excess of the minimum government take requirements published earlier this month; however, the trend of blocks not receiving offers continued as two blocks failed to receive bids.

Summary of E&P Bid Round Results

Block 1 (2P reserves of 107 MMbbl light oil and 69 Bcf natural gas): Awarded to Italy's Eni International, which offered an 83% pre-tax profits interest to the government (the minimum government take requirement was 34.8%).

Block 2 (2P reserves of 61 MMbbl of light oil, and 29 Bcf of natural gas): Awarded to the consortium bid of Pan American Energy and E&P Hidrocarburos y Servicios, which offered a 70% pre-tax profits interest (the minimum government take requirement was 35.9%), and a 100% increase in investment.

Block 3 (2P reserves of 17 MMbbl of light oil and 2 Bcf of natural gas): Received no bids (the minimum government take requirement was 30.2%).

Block 4 (2P reserves of 68 MMbbl of light oil and 92 Bcf of natural gas): Awarded to the consortium between Fieldwood and Petrobral, which offered a 74% pre-tax profits interest (the minimum government take requirement was 33.7%).

Block 5 (2P reserves of 44 MMbbl of light oil and 103 Bcf of natural gas): Received no bids (the minimum government take requirement was 35.2%).

Future Processes

The next phase of Round One's auction processes involves onshore conventional resources and contract awards are scheduled to occur on December 15. Final contract terms for this bid process are scheduled to be announced on November 10 and this process will be the first instance in which licensing contracts will be used, as opposed to the production-sharing contracts that have been used in the bid processes to date. The highly-anticipated process for deepwater assets remains in development but expectations remain for that process to be launched sometime this year with contract awards expected to occur in mid-2016.

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