When it comes to deepwater exploration in the Gulf of Mexico (GoM), Royal Dutch Shell (NYSE: RDS.A) has proven it has a big appetite undeterred by the lingering bitter offshore market outlook and push for short-cycle returns.

The major dominated Mexico’s deepwater round Jan. 31, emerging as the high bidder for nine of the 19 areas awarded either as a single bidder or jointly with partners. The Netherlands-based company and its partners came out on top for five of the nine areas offered in the Perdido Basin, home on the U.S. side of the GoM to the Shell-operated Perdido platform and the Great White, Silvertip and Tobago discoveries. In recent days, Chevon Corp. and Shell have announced large discoveries in the U.S. GoM.

Chevron said Jan. 30 it had discovered a 670-ft pay zone about three miles from its Blind Faith platform.

Shell’s latest discovery, Whale, was announced by the company Jan. 31. Shell said it has added more than 1 billion barrels of oil equivalent resources through exploration in the last decade in the GoM.

“Shell focuses on areas with the best exploration potential and strategic fit into our portfolio,” Shell spokesperson Kimberly Windon told Hart Energy in a statement. “As per the contract, we intend to conduct exploration activities within the first four years after approval of our exploration plans by the government.”

Maria Cortez, Latin America upstream research manager for Wood Mackenzie, said bidding was competitive, with Shell the most aggressive, “taking nearly half of all blocks awarded. In the Perdido Area, the company won five of six awarded blocks.”

The majors appeared to be using the round to stock up on some of the most attractive deepwater areas in the world, Cortez added.

Round 2.4 made 29 deepwater blocks available to international players wanting to explore and produce hydrocarbons in the Perdido, Mexican Ridges (10 blocks) and Saline Basin (10 blocks) areas. Mexico’s deepwater round was eagerly anticipated by global oil and gas companies hoping to replicate the U.S. GoM successes they’ve enjoyed on the Mexico side, where little deepwater exploration has occurred with state-owned Pemex at the helm.

The round took place as Mexico, which has battled dwindling oil production, continues on its energy reformation journey four years after opening the sector to foreign investors.

Aldo Flores Quiroga, underminister of hydrocarbons for Mexico’s energy ministry, said $93 billion worth of investment has been committed. Companies awarded areas committed to 23 wells, he added.

“Mexico has not only opened its doors to foreign direct investment but has also made a point of listening to industry and learning from each round. One measure of success is the number and quality of companies now active in Mexico’s offshore,” Cortez said. “The corporate landscape is very diverse.”

In all, more than 65% of the blocks offered—19 of 29—received bids. Eleven companies from 10 countries participated.

“The results today speak for themselves,” Quiroga said. “We achieved today remarkable results for our oil sector.” If production starts in all of the areas awarded, peak production could reach 1.5 million barrels per day by 2032 with first production appearing in 2028, he added. “This has been a great step forward in the consolidation of the reform in Mexico and a clear expression of trust in the short, medium and long term.”

Round 2.4 marked the second time Mexico has offered deepwater acreage. The first was in December 2016, and results from the latest round show improvement, according to Juan Carlos Zepeda, president of Mexico’s National Hydrocarbons Commission.

He pointed out that eight areas were awarded with 10 bidders for the 2016 deepwater tender, compared to 19 bidders and 19 contracts awarded Jan. 31. He attributed the positive showing to good decisions made by the energy ministry, favorable tax terms and regions offered that are very prospective. Zepeda also noted that the state profit from the Jan. 31 round was between 64% and 67%, compared to 59% during the 2016 round.

Shuqiang Feng, upstream director for Stratas Advisors, agreed that the round was a success, pointing out the number of participants and the number of blocks awarded. However, he was surprised by a couple of things—the intensity of Shell’s bidding and PC Carigali’s bids.

Of the three areas, interest was greatest for the 10 blocks offshore Veracruz and Tabasco in the Saline Basin. Nine of the 10 blocks offered received bids, with Shell being the high bidder for four, PC Carigali for two with three consortia—Chevron, Pemex and Inpex; Eni and Qatar Petroleum; and Repsol, PC Carigali and PTTEP —rounding out the list. The latter submitted the round’s highest extra bonus at more than $151 million.

Interest was also high in the Perdido Area, where Mexico offered nine blocks spanning nearly 18,758 sq km near U.S. territory. The Shell and Qatar Petroleum consortium was the high bidder for four blocks. Shell teamed up with Pemex to win another block, and Pemex was the sole bidder in the remaining block. No bids were submitted for three blocks in the Perdido area.

“PC Carigali was all over the place,” Feng told Hart Energy after reviewing the list of winning bidders. The company was the winning bidder, either as a single bidder or with a partner, for six areas total in the Mexican Ridges and Saline Basin. Feng was particularly surprised that PC Carigali didn’t partner with another company for two of these areas.

The Petronas subsidiary has deepwater experience, mainly offshore Malaysia, but not as much as larger IOCs like Petrobras, he added.

The results for the Perdido and Saline Basin were not as surprising, considering the two are prospective for light and heavy oil, respectively, and there is already development in the Perdido Fold Belt, Feng said.

The Mexican Ridges area appeared to be the least attractive with only half of the 10 blocks offered garnering winning bids.

The Mexican Ridges area is largely prospective for gas, which could explain bidders’ apathy. “I think companies are looking more for liquid prospects,” Feng said.

The blocks, located off the coast of Veracruz, span more than 24,328 sq km. Winning bidders were Repsol, PC Carigali and Ophir; PC Carigali, Ophir and PTTEP; Repsol and PC Caligari; and Pemex.

Velda Addison can be reached at vaddison@hartenergy.com.

Offshore