mexico onshore drilling energy reform bidding investments round oneMexico has announced the next phase of Round One with an offering of 26 onshore conventional fields. All are located in the Burgos, Tampico-Misantla, and Salinas-Sureste basins.

The qualification criteria are different from the shallow-water development round. This enables new Mexican E&P companies to participate in the round.

Pablo Medina, a research analyst at Wood Mackenzie, elaborates, “Unlike the previous two rounds, this round will use a license contract with bidding variables including additional royalty and work commitment. The regime has the potential to be very attractive, although it will ultimately depend on the minimum acceptable bid level that will be announced at a future date. Overall, this round could be very attractive for smaller players, but it will not lift Mexico’s oil production significantly.”

“If the objective is to allow Mexican companies to be part of the new energy landscape by offering small fields and flexible pre-qualification criteria, then it could be a success. If the objective is to attract a diversity of larger international companies with expertise in mature fields, then the round could fall short of expectations due to the small number of high-potential fields on offer,” notes Medina, adding that the competitive fiscal regime offers smaller companies a good opportunity to develop their expertise in Mexico while being able to obtain attractive returns.  Overall, this round could be very attractive for smaller players, but it will not lift Mexico’s oil production significantly.

The lack of big opportunities suggest that Pemex may not have relinquished a large number of high-potential fields in Round Zero. Either Pemex kept most of the high-potential onshore opportunities or the government has decided to license those larger onshore opportunities in later rounds with the expectation of future higher oil prices, according to Wood Mackenzie. Medina explains, “It’s important to keep in mind that Pemex could be forced to relinquish additional assets as a result of its budget cuts.”

The key opportunities for companies looking for sizable onshore fields will be the migrated service contracts and the Pemex JVs. Those fields will be the main way to increase Mexico’s oil production in the short-term.

Mexico Infrastructure Projects Forum 2015 in Monterrey Nuevo Leon