For the first time in decades, Mexico’s upstream business is accessible to foreign companies. A panel of experts discussed the implications at this week's CERAWeek conference in Houston and found that, with three bidding rounds planned and data rooms open for scrutinizing, the global industry seems eager to partner with Mexico to boost development of its oil and gas resources — low oil prices notwithstanding.
As a result of its new open-door policy, Mexico is undergoing a fundamental institutional change, said Carlos Pascual, senior vice president for IHS. The country has moved from theory to action with the two bidding rounds under development and a third bidding round on the drawing boards.
Many companies are interested in the bidding opportunities, said Lourdes Melgar, deputy secretary of energy for hydrocarbons for the Ministry of Energy in Mexico. Many companies have already submitted a request to visit the data room and to participate in the bidding process, including companies from Asia.
The first bid round award date is scheduled for 15 July 2015, and about 49 companies have indicated interest, 42 have requested access to data rooms, and 34 are signed up for that round. The second bid award date will be on 30 September 2015, and already 21 companies have expressed an interest, 20 have requested access to the data room, 17 are approved, and six have signed up.
The Ministry wants to attract newly created Mexican companies as well as well-experienced international companies. Also, the country would like to see many of the companies already doing business in Mexico to move from being technical partners to being operating companies with production-sharing agreements.
“We want to incentivize and promote competitiveness,” said Miguel Messmacher, undersecretary of revenues for the Ministry of Finance for Mexico. “We have a philosophy that we have to provide this base to promote competition.”
The fiscal terms will be determined during the bidding process, but Mexico will set minimum fiscal terms beforehand, according to Messmacher. This will allow Mexico to be competitive on the international stage. He would like to see risk-sharing between the state of Mexico and the international oil companies, while understanding that “higher risk must bring higher returns.”
On a separate panel regarding the same topic, Emilio Lozoya Austin, chief executive officer of Petroleos Mexicanos, or Pemex, said that he is looking forward to creating strategic partnerships and joint ventures “just like any other JV partner.” He admitted that Pemex needs a new corporate structure to cut bureaucracy and to cut costs. “We need to monetize assets, such as pipelines,” said Austin. “We are implementing energy reforms. We will not be subsidizing energy in Mexico.”
Deepwater, shallow water, and onshore unconventional opportunities will all be subject to foreign investments and developments, he said. “These are exciting times. It is the most important time for Pemex since its inception.”
Image: Pemex's Emilio Loyoza Austin at CERAWeek 2014. Photo by Audrey Leon/OE.