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Mexico's bleak Round One ends

Written by  Wednesday, 15 July 2015 08:22

Mexico’s National Hydrocarbons Commission (CNH) opened the first public tender process early this morning (15 July) in the country's historic and disappointing Round One that offered Mexico's upstream opportunities to international companies for the first time in decades. 

Mexico's Round One opens.  Images from CNH.

The process took about three hours, in which the only winner of two areas, the consortia of Sierra Oil Gas, Talos Energy, and Premier Oil, was awarded Area 2 and Area 7, in the 14 shallow water areas off the coast of Mexican cities Veracruz and Tabasco, respectively.

Round One did not have the drive CNH expected. One of its main objective is to award contracts that are in the best interest of the state, not just to award contracts to award contracts, Juan Carlos Zepeda, president of the CNH said at a press conference in Mexico City following Round One.

According to Lourdes Melgar, Mexico's Undersecretary for Hydrocarbons, CNH believes that international oil prices and the lack of growth of oil companies deterred bids for Round One. CNH also believes companies are waiting for chances to bid in future rounds.

The first of five public tenders offered 14 shallow water exploration blocks covering nine fields with an estimated 356 MMboe of 2P reserves.

CNH opened the presentation for bids for Round One at 10:15 a.m. CST, as representative of prequalified companies approached clear plastic boxes one-by-one to deposit their bids in corresponding boxes for each shallow water area. 

CNH began bid qualifications around 8 a.m. on the morning of 15 July in an event that had been hyped for nearly two years.

Bids were received from several international companies individually, in addition to several consortia.

Individual companies included: Norwegian giant Statoil, India’s ONGC Videsh, Hunt Overseas Oil Co., Atlantic Rim Mexico, and Cobalt International Energy.

The consortia that placed bids included: Italian giant Eni, with CASA Exploration; Mexico’s Sierra Oil & Gas with partners Talos Energy and Premier Oil; E&P Hidrocarburos e Servicios and Pan American Energy; and Murphy Worldwide with Malaysia’s Petronas Carigali.

Bids for Round One included: 

  • Area 1: No bids received for shallow water Area 1 offshore Veracruz with a total area of 195sq km at 29m water depth with expected recovery of light and heavy oil. 
     
  • Area 2: Winning bid goes to the consortia of Sierra Oil Gas, Talos Energy, and Premier Oil for a total area of 194sq km off Veracruz at 31m water depth with expected recovery of dry gas and light oil received two bids. Hunt Overseas Oil Co. came in second place. No other bids were placed.
     
  • Area 3: No winning bids were accepted for a total area of 233sq km, off Veracruz at 53m water depth with expected recovery of light and heavy oil.  Only one bid from Murphy Worldwide, with partner Petronas was presented, however, it was rejected due to a bid that was considered too low. The area will be abandoned.
     
  • Area 4: No winning bids were accepted for a total area of 233sq km, off Veracruz, at 70m water depth with expected recovery of light and heavy oil. Once again Murphy Worldwide, with partner Petronas placed a bid that was deemed too low. The area has been declared as deserted. 
     
  • Area 5: No bids received. The area has been declared as deserted. 
     
  • Area 6: No winning bids were accepted for a total area of 466sq km, off Tabasco at 88m water depth with expected recovery of light oil. Only one bid from India's ONGC Videsh was received, however, it was rejected due to a bid that was considered too low. The area will be abandoned.

  • More than halfway through Mexico's Round One.

    Area 7: The winning bid goes to the Sierra Oil, Talos Energy and Premier Oil consortia for a total area of 465sq km off the coast of Tabasco at 142m water depth, with expected recovery of light oil. Statoil came in second place.

    Losing bids were made from Hunt Overseas, and from the consortia of Eni and partner CASA Exploration. E&P Hidrocarburos y Servicios and partner Pan American Energy’s low bid was rejected. 

  • Area 8: No bids were received for a total area of 116sq km, off Tabasco at 283m water depth with expected recovery of heavy and extra heavy oil. The area is declared as deserted.

  • Area 9: No bids were received for a total area of 116sq km, off Tabasco at 216m water depth with expected recovery of heavy oil. The area has been declared as deserted.

  • Area 10: No bids were received for total area of 232sq km off the coast of Tabasco at 161m water depth, with expected recovery of light and heavy oil. The area has been declared as deserted.

  • Area 11: No bids were received for a total area of 309sq km off the coast of Tabasco at 349m water depth, with expected recovery of extra heavy and heavy oil. The area has been declared as deserted.

  • Area 12: No bids were awarded for a total area of 397sq km off the coast of Tabasco at 120m water depth with expected recovery of heavy oil. India’s ONGC’s low bid was rejected. The area has been declared as deserted. 

  • Area 13: No bids were received for a total area of 501sq km off the coast of Tabasco in 183m water depth, with expected recovery of extra heavy oil and dry gas. The area has been declared as deserted. 

  • Area 14: No bids were received for a total area of 310sq km off Campeche in 17m water depth, with expected recovery of wet gas. The area has been declared as deserted. 

Mexico's next rounds

Mexico still has four rounds to go after its disappointing Round One.

According Melgar, the next round is scheduled for 30 September. Round Two will also be shallow water, however, it will be different than Round One. Round Two consists of five contracts with five fields with 2P reserves. It also comes with lower risks and more competition is expected, Melgar said.

Round Three’s public tender process is expected to be 15 December. Its design is still in the process of being assessed.

Round Four will include areas in the deepwater Gulf of Mexico, with heavy crude areas.

Round Five will consist of nonconventional areas, which are still being analyzed due to current low oil prices.

Companies bail out of Round One 

Last week, five international companies: Mexico’s national oil company Petróleos Mexicanos (PEMEX), Noble Energy, Glencore E&P, Colombia’s Ecopetrol, and Thailand’s PTTEP dropped out of the running for Round One, leaving a total of 18 individual companies and seven consortia with prequalifications to bid.

The 18 prequalified individual companies included: Chevron, ExxonMobil, Atlantic Rim Mexico, BHP Billiton, Cobalt Energy, Spain’s CEPSA, Hess, Hunt Overseas, Russian giant Lukoil, Maersk Oil, Marathon, Nexen, India’s ONGC Videsh, Canada’s Pacific Rubiales, Plains Acquisition Corp., Premier Oil, Statoil and Total.

The seven prequalified consortia included: BG Group alongside Galp Energia; Italy’s Eni along with CASA Exploration; Murphy Worldwide along with Petronas; Pan American Energy along with E&P Hidrocarburos y Servicios; Talos Energy along with Sierra Oil and Gas; Tullow along with Petrobal; and Woodside Energy along with Diavaz Offshore and Pluspetrol.

Round One was set in motion in December 2014, allowing international oil companies to explore for oil for the first time since oil nationalization in 1938.

Mexico's energy reform, passed on 20 December 2013, opened up all areas of the Mexican energy industry to direct private investment and to competition. It also ended the exclusive tenure of PEMEX in oil and gas exploration and production. 

Read more:

PEMEX bows out of Round One

Four exit Mexico’s Round One

Mexico’s new era

Reform lifts Mexico’s energy prospects

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