Bidding in Reformed Mexico Energy Sector Could Move Ahead of Schedule

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Mexico's progress on developing secondary legislation that will shape reform of Mexico's energy sector is moving more quickly than expected, and could be ready by midweek, an analyst tells Rigzone.

Mexico’s progress on developing secondary legislation that will shape reform of Mexico’s energy sector is moving more quickly than expected, and could be ready by midweek, an upstream analyst told Rigzone.

On Aug. 1, Mexico’ Congress fully passed secondary legislation after making modifications, and sent it to the Mexican Senate for approval.

The Mexican government could announce results for Round Zero sooner than the original close date of mid-September, Pablo Medina, Latin American upstream analyst for Wood Mackenzie, told Rigzone.

Through Round One, assets will be offered which will require companies to partner with Mexico’s state energy company Petroleos Mexicanos (PEMEX). These assets will include deepwater discoveries and certain extra-heavy oil projects which PEMEX would have a difficult time developing on their own. For this round, a new fiscal regime would be applied to PEMEX.

Previously subjected to a fiscal system that was heavy on the company, PEMEX will now be subject to a modified fiscal regime that will kick in over the next five years. Instead of paying several taxes, PEMEX will now only pay three: a surface rental fee, a royalty sliding scale fee that will be determined by hydrocarbon prices, and then a portion of its profits, Medina said.

Companies interested in partnering with PEMEX can’t directly negotiate with PEMEX; instead, companies will offer a signature bonus, and Mexico’s Energy Ministry will decide on potential partners based on the size of the bonus.

The round of joint venture-related bidding could take place by year-end, and the licensing round for assets that don’t require a joint venture with PEMEX could be announced by year-end and happen in the first half of 2015. In this round, companies can form a consortium with PEMEX, but doing so is not required. Awards in this round will be made based on which company offers the most profit to the government depending on the fiscal regime, and which company or companies are willing to do the most work in terms of drilling and seismic.


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Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com

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