Mexico's Oil Regulator Awards First Onshore Contract At Auction

Reuters

MEXICO CITY, Dec 15 (Reuters) - Mexico's oil regulator awarded the first five onshore contracts up for grabs at Tuesday's auction, a tender aimed at boosting relatively new Mexican oil companies following a historic sector reform finalized last year.

Results so far have already met the government's own modest expectations for the auction.

Mexican firm Diavaz Offshore, a longtime service provider to state-owned oil company Pemex, and Canada's Renaissance Oil Corp, were among the early winners.

Competing alone and in consortia, some 80 mostly Mexican companies pre-qualified for the onshore auction run by the National Hydrocarbons Commission (CNH).

But only half registered to bid on the contracts, amid a 70 percent plunge in the price of Mexico's mostly heavy crude export mix to less than $28 per barrel since last year.

Part of the so-called Round One tender, the auction features 25 license contracts.

Under the circumstances, Mexican officials have said they would consider the auction a success if at least five contracts are assigned. The CNH awards contracts based on which bidder offers the biggest share of pre-tax profits to the government via a weighted formula that also includes an investment commitment.

The share of profits is 90 percent of the formula, while the investment commitment accounts for the rest.

The fields on offer include a mix of mature onshore fields, most of which feature ongoing production and others that have been underdeveloped or abandoned, with combined proven and probable reserves of about 49 million barrels of oil equivalent.

Mexican brokerage Accival estimates that new crude output from the developments would reach as high as 126,000 barrels per day (bpd) by 2018, and provide state coffers with of as much as $200 million annually.

Mexico's CNH forecasts potential future output from the 25 onshore fields more conservatively, at about 36,000 bpd.

The onshore auctions follow two previous offshore auctions in July and September, in which a total of five of 19 contracts on offer were successfully tendered.

The energy reform ended national oil company Pemex's monopoly on crude production and aims to reverse a decade-long slide in output by luring new expertise and private investment.

(Reporting by David Alire Garcia; Editing by Andrew Hay)

Copyright 2016 Thomson Reuters. Click for Restrictions.

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