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Mexico Oil Drilling Rights Yields $3 Billion Investment

08 October, 2015

The second part of Mexico’s Round One tender included the auction of leases to explore oil blocks in the Gulf and was a resounding success,reported the New York Times. According to the report,the Mexican government placed five production blocks up for bid this time and actually awarded oil contracts for three of them in an outcome that is better than expected.

“Investors were attracted by relaxed rules and by the characteristics of the blocks,which hold probable oil and gas reserves,” reported the New York Times. 

Italian national oil company Eni International won the most popular block by bidding more than twice the Mexican government’s asking price,while an Argentine-led consortium that includes partners Fieldwood Energy from the U.S. and BP won the second block and another consortium – this time involving Fieldwood and Mexico’s Petrobal – happened to be the only bidder on the third block.

“Another auction,set for the middle of next year,is likely to attract the most interest,” reported the New York Times. “Those are for deepwater areas in the Gulf of Mexico,just south of American waters where international oil companies have found large reserves of oil and gas.”

The first auction took place in July and marked the first time Pemex – Mexico’s state-run oil and gas company – has offered production-sharing agreements for private investments. Still,the regulations were relaxed for the most recent second round of bidding,and the type of blocks being offered were inherently more attractive,leading to increased interest.

“Juan Carlos Zepeda,head of Mexico’s oil regulator,which ran the auction,had said he expected three of the five contracts to be awarded,” writes Rigzone.com. “He estimated such an outcome would eventually add up to 45,000 barrels per day (bpd) of new crude output,and attract about $3 billion in investment over the life of the contracts.”

 Another onshore auction is currently scheduled for December of this year,followed by the much-anticipated deep-water fields in 2016. 

“There’s no question that there’s a ton of opportunity in Mexico,” writes Investing.com “With over 10 billion barrels in proven reserves,oil is a major component of Mexico’s future.”

In a recent interview with U.S. News & World Report,Mexico’s Energy Undersecretary María De Lourdes Melgar Palacios said “oil companies want to go to Mexico,” citing its status as a NAFTA country and the fact that it is a fully operational democracy.

“There is interest from companies,serious companies,that want to come to Mexico for the long run,not just for today,” stated Palacios.

In August,the El Paso Times reported the undersecretary of the Mexican Secretariat of Energy,César Emiliano Hernández Ochoa,met in Juárez with El Paso businessman Paul L. Foster and Christopher Wilson,who serves as deputy director of the Mexico Institute at the Wilson Center,taking part in a panel on Mexico’s energy reforms.

“Recent energy reforms in Mexico will create opportunities for oil and gas production for Chihuahua,New Mexico and Texas,” shared Foster,who founded Western Refining. “There are unbelievable opportunities of oil drilling in the north of Mexico and it will change not only the energy outlook of Mexico,but the overall economic outlook for the region.”

In addition to Mexico’s oil and gas industries,the reforms also opened up Mexico’s electricity market,which had previously been run by state utility company CFE. 

According to recent findings by the Jackson School of Geosciences at the University of Texas at Austin,Texas could wind up being one of the biggest beneficiaries other than Mexico of the historic energy reforms,with BBVA Compass predicting that the overhaul could lead to massive economic growth on both sides of the border. 

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