Mexico: Mexico Tender Round 2.1: Shallow Water Oil Sells Big

On June 19, 2017, the Comisión Nacional de Hidrocarburos (CNH) completed the Presentation and Opening of Bid Proposals for the First Tender of the Ronda Dos ("Round 2.1"), which was first announced on July 20, 2016. Round 2.1 attracted 36 bidders: 20 individual companies and 16 consortia, including Petroleos Mexicanos, DEA Deutsche Erdoel, Talos Energy, Noble Energy, Chevron, Shell, Total and ConocoPhillips.

Round 2.1 included 15 contract areas with an estimated four billion BOE of dry gas, wet gas, light oil, heavy oil and extra heavy oil located in the shallow waters of Veracruz, Tabasco and Campeche.

Despite "lower for longer" oil prices, the auction was quite competitive compared to previous shallow water tenders in Mexico. For instance, only nine bidders competed in Rounds 1.1 and 1.2, and only five contract areas were awarded. In contrast, Round 2.1 had 36 bidders and awarded 10 contract areas. Many blocks received multiple bids and one block had to be decided by the tiebreaker bonus. The aggressive nature of Round 2.1 compared to the prior rounds is indicative of the strong potential that the international energy industry sees in Mexico.

CNH evaluated the bids based on proposed state participation and investment factor. The results of the bidding process are shown in the following chart:

License Area Winner Surface (km2) Projected Volume (MMboe) Minimum Work Program Units Well Value in Work Units1 State Participation Economic Proposal Investment Factor (x)
Tampico Misantla 1 No bids 544 23.1 57,100 29,000 - - -
Tampico Misantla 22 PEMEX/ DEA Deutsche Erdoel 549 44.1 76,200 23,000 57.92% 63.49% 1%
Tampico Misantla 3 No bids 546 62.2 78,500 29,400 - - -
Tampico Misantla 4 No bids 557 79.4 72,100 31,000 - - -
Veracruz No bids 825 35.6 55,000 34,200 - - -
Cuencas del Sureste 13 Petronas-Ecopetrol 559 36.4 39,500 27,800 65.19% 71.18% 1%
Cuencas Sureste 24 ENI/ Cairn Energy/ Citla 591 7.1 46,400 35,000 75% 84.83% 1.50%
Cuencas Sureste 3 PEMEX/ Ecopetrol 586 18.8 40,800 25,800 20.10% 20.10% 0%
Cuencas Sureste 45 Cairn Energy/ Citla 562 56.2 43,200 27,000 75% 84.83% 1.50%
Cuencas Sureste 56 ENI 533 30.9 41,500 27,000 75% 84.83% 1.50%
Cuencas Sureste 67 Repsol/ Sierra Perote 533 101.9 67,500 39,000 62.28% 62.28% 0%
Cuencas Sureste 7 Lukoil 521 73.8 61,100 31,000 75% 81.55% 1%
Cuencas Sureste 8 No bids 565 45.5 69,000 51,000 - - -
Cuencas Sureste 9 ENI/ Citla 466 40.5 80,200 31,000 37.27% 37.27% 0%
Cuencas Sureste 10 Total/ Shell 972 16.2 53,800 33,400 30.11% 30.11% 0%

Footnotes

1. Value per working unit is tied to the price of Brent crude. For comparison, when Brent is $40 per barrel, the value of a working unit is approximately $949. When Brent rises closer to $50 per barrel, the value per working unit rises to approximately $1,030.

2. ENI and Lukoil came in at second place with state participation of 55.14 percent, an additional investment factor of 1.5 percent and an economic proposal of 63.261 percent.

3. Murphy Sur, Talos Energy and Ophir Mexico placed a bid with state participation of 64.75 percent, an additional investment factor of 1 percent and an economic proposal of 50.150 percent.

4. Repsol, Premier Oil and Sierra Perote placed a bid with state participation of 69.58 percent, an additional investment factor of 1 percent and an economic proposal of 75.819 percent.

5. ENI lost in a tie, and placed a bid with state participation of 75 percent, an additional investment factor of 1.5 percent and an economic proposal of 84.825 percent. ENI offered a $20.5 million bonus, but the winner offered a cash bonus of $30 million.

6. DEA and Diavaz placed a bid with state participation of 68.73 percent, an additional investment factor of 0 percent and an economic proposal of 68.73 percent.

7. CNOOC placed a bid with state participation of 35 percent, an additional investment factor of 0 percent and an economic proposal of 35 percent.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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