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Mexico Opens Bidding on Oil Exploration to International Companies

14 December, 2014

Last Thursday marked the official start of the new bidding process for oil exploration rights in 14 Mexican-owned regions of the Gulf that are now open to bids from both international and domestic corporations as the nation officially ended a more than 70-year monopoly on its petroleum industry.

According to the ABC News, bidding will continue until July 15,2015 and companies that wish to participate must meet a specific set of requirements, as detailed in the highly anticipated guidelines unveiled last week. The historic reforms are bringing a new oil boom to Mexico as firms get ready to drill.

“It represents, without a doubt, the coming of a new era in energy in our country; it will be for the good of Mexico,” stated Mexico’s Energy Minister Pedro Joaquin Coldwell at an event that outlined the bidding process. “Mexico will reincorporate the world energy market with more strength and security.”

Beginning this Monday, companies are allowed to file applications for access to data on the 14 new shallow-water oil fields that are opening up in the Gulf of Mexico, which collectively cover an area of 4,222 square meters, or roughly one acre. Corporations that are interested in participating will then have between January 15 and July 15,2015 to prepare their bids.  Legislators have pledged to be transparent throughout the process, which will culminate with an auction during a public session of the National Hydrocarbon Commission that will be broadcast live online July 15.

“Mexico is betting a lot on this opening and will conduct itself with the highest international standards of fairness and transparency,” Coldwell stated. “The Mexican government’s commitment to transparency is crucial.”

In order to qualify for a contract, companies must show at least $1 billion in capital, but for corporations that are part of a consortium the minimum for the head firm is $600 million, Business Insider Reports. In addition, bidding companies must hold assets that are worth at least $10 billion and must have also participated in at least three comparable worldwide exploration projects in the past.

“These restrictions guarantee the participation of solvent and healthy companies,” stated Juan Carlos Zepeda, who leads the National Hydrocarbon Commission.

According to Zepeda, the parcels that are up for bid are located in shallow water that is less than 500 meters (1,640 feet) off the coasts of Mexico’s Gulf coast states of Veracruz,Tabasco and Campeche. Experts reportedly estimate that at least 687 million barrels of oil are located in these areas, and have predicted production capacity of at least 80,000-100,000 barrels per day.

The shared production contracts will be set up to run for 25 years, during which time exploration is permitted to take up five years, with the remaining 20 years dedicated to production. Also, no company may bid for more than five of the 14 available blocks, and must pay $363,000 in good faith for access to detailed data about each of the parcels, which is available online. Once finalized, all contracts will be made public to avoid any chance of corruption.

The greater exploration technology that will be available from outside corporations is expected to boost daily production to at least 3 million barrels a day by 2018 and is expected to hit at least 3.5 million by 2025, when analysts estimate that Mexico’s oil industry could reach upwards of $15 billion per year.

Topics: Investment Industry