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Global Oil Firms Enter High Stakes Mexico Bidding Round

26 January, 2015

Exxon Mobile Corp. and Royal Dutch Shell are just two of the many international oil firms that have expressed interest in the first round of bidding for rights to exploratory oil and gas blocks located in Mexico-owned shallow waters of the Gulf of Mexico,which officially went up for grabs in mid-December of last year. All told,seven international oil companies have already been granted authorization to enter the online data rooms created by the Mexican government to provide seismic details and other data about the areas,including Chevron Corp.,Ecopetrol SA and BG Group PLC,while 30 companies in all have shown interest in the process.

“The shallow-water round is in an area of the Gulf of Mexico where there is already significant oil production and where costs are less than $20 a barrel,making them attractive even in the current environment of depressed prices,” shared Juan Carlos Zapeda,head of Mexico’s National Hydrocarbons Commission (NHC),with Nasdaq earlier this week.

The commission is reportedly overseeing the first round of bidding on Mexico’s considerable oil and gas resources after passing historic energy legislation last year that ended a 76-year monopoly on oil exploration and production,which was previously restricted only to the country’s national firm,Petroleos Mexicanos,or Pemex. Later in 2015 a second round of bidding will involve opening up more costly production opportunities in shale rock formations.

“A later phase of the bidding round this year involving shale-rock formations and so-called tight oil that is complicated and expensive to extract will be trimmed back to include only the most attractive areas,” Zepeda stated.

Zapeda also confirmed that the most highly anticipated bidding phase,for exploratory blocks in Mexico’s mostly unexplored deep water areas of the Gulf will go forward toward the end of 2015. It is expected to take approximately eight years for oil and gas production in Mexico’s deep-water fields to become a reality,and prices are bound to have stabilized by that time.

Earlier this week Mexico’s NHC also announced that it will reveal the next set of tenders by March or April of 2015,including the number of shale fields and other oil and gas deposits that will be up for grabs. According to Reuters,Zapeda said the cost of production of shale must be taken into consideration,and the number of blocks that is opened up for exploration later this year will be revised and adjusted accordingly.

Despite the fact that international oil prices have fallen about 60 percent since their peak in June of 2014,the plunge “appears not to have affected” the current phase of bidding on Mexico’s shallow-water fields; a trend that is expected to continue with the following rounds thanks to the country’s sharp handling of its available resources and the overwhelming amount of opportunity that is available in Mexico’s deep water fields.

Finally,Bloomberg reports that Mexico forecasts private investment in its energy sector will hit upwards of $50 billion by 2018 in oil exploration and natural gas projects alone,as international companies seek to tap into the nation’s 13.44 billion proven barrels of reserves.

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