On June 19, Mexico's second oil tender kicks off with 36 players, 20 individual companies and 16 consortia trying to snag the best deal.
After interest waned in the country's first-ever shallow water tender, Comisión Nacional de Hidrocarburos (CNH) is looking to turnaround past experiences and reel in newcomers. With 15 shallow water areas up for grabs in the first phase of round two, the government expects a success.
The areas are off Veracruz, Tabasco and Campeche states within the Tampico-Misantla, Veracruz and Cuencas del Sureste basins. The three basins are Mexico's top oil-producing regions.
Oil giants like Shell, Chevron and Repsol, as well as other IOCs and medium-sized players, are expected to participate in the auction. Total investment expected for all of the areas is set at US$11.2 billion, each with an average of US$750 million, according to the Ministry of Energy.
Pemex has registered along with three consortia: Chevron and Inpex; Ecopetrol; and Dea Deutsche. Other renowned consortia include Total and Shell; Eni and Lukoil; Eni, Capricorn Energy (Cairn) and Citla Energy; Eni and Citla Energy; Capricorn Energy (Cairn) and Citla Energy; Repsol, Premier Oil and Sierra Oil & Gas; Repsol, Sierra Perote E&P; Premier Oil and Sierra Perote E&P; Noble Energy, Petronas Carigali and Ecopetrol; Noble Energy and Talos Energy; Petronas Carigali and Ecopetrol; Murphy, Talos Energy and Ophir; Dea Deutsche and Diavaz.
"Historically, when a consortium pre-qualifies in Mexico, it means they will present an offer even though they are not obligated to do so. If we assume this, then there are companies that will be bidding in the country for the first time: Cairn, Noble, Ecopetrol and Repsol," said Pablo Medina, Latin America upstream analyst at Wood Mackenzie.
"And if we also consider that there are companies in multiple consortia, we can understand that they will not be able to bid for the same block through different consortiums—it's a rule," he says. "The strategies that companies are taking are interesting, and we can infer that their interest will probably be high."
Apart from the companies participating in consortium—most have also registered individually to bid—there are others that will be participating, including China Offshore Oil Corp., ConocoPhillips, Hunt Overseas, LLC RN-Shelf-South, ONGC Videsh and Pan American Energy.
Low exploratory risk and decades of offshore development in the region will usher enticing conditions for medium to major companies alike. Out of the 15 areas, 10 are deemed for exploration and five for production. And their size is significantly larger than the previously auctioned shallow water blocks in Round One.
Blocks 1, 2, 3 and 4 in Tampico-Misantla offer a total of 796 million barrels of oil equivalent (boe) of unrisked, prospective P50 resources. The areas contain mostly light oil and dry gas.
As for Block 5 in Veracruz basin, it is a wet gas-bearing area with 215.6 MMboe of unrisked P50 resources.
Blocks 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 are located in Cuencas del Sureste off the coast of southern Veracruz and Tabasco and together offer 1.5 Bboe of unrisked P50 resources, which range from light to heavy oil as well as one wet gas (block 15).
According Medina, Tampico-Misantla blocks could yield more offers when compared to gas-bearing blocks, which "are unlikely to attract much attention.”
"We believe that most of the round's attention will focus on blocks 6 to 11 as well as 1 to 3," he said.
He also expects that deeper horizons could hold additional opportunities.
"We expect a successful tender this coming Monday. We consider that at least 10 of the 15 blocks will be auctioned," Medina said. "The government did a good job of listening to the industry's area nominations and the Ministry of Finance made the adjustments to the fiscal regime in order to keep the economic feasibility of the blocks. Mexico is doing a good job to attract capital in an international, competitive market."