Mexico Approves Auction Terms for 15 Offshore Oil Areas

Reuters

MEXICO CITY, July 19 (Reuters) - Mexico's oil regulator on Tuesday approved contracts and auction terms for 15 shallow water areas in the southern Gulf of Mexico, set to be bid out early next year as part of a rolling series of tenders following a sweeping energy overhaul.

The first phase of the so-called Round Two tender will feature 30-year production sharing contracts, the regulator known as CNH said, adding that winners will be announced on March 22, 2017.

The areas up for grabs are located along the coasts of Veracruz, Tabasco and Campeche states, where most of Mexico's oil production occurs.

Mexico's Congress finalized a historic energy reform in 2014, ending the decades-long monopoly enjoyed by national oil company Pemex and paving the way for private producers to operate on their own.

The reform was aimed at reversing a prolonged slump in crude output, which is down by a third since peaking at 3.38 million barrels per day (bpd) in 2004. However, that has been complicated by a steep fall in crude prices over the past two years.

To pre-qualify for the auction, firms or consortia must be able to document technical capability from at least three exploration and production projects between 2011-2015, or total investments of at least $1 billion on such developments.

Eligible bidders must also have experience either as an operator or financial partner in a development in either shallow or deep waters.

The CNH set minimum capital requirements for potential individual bidders at $1 billion. If the bidder is a consortium, the operator must have $600 million while the financial partners must have $400 million.

Alternatively, eligible bidders can document assets worth at least $10 billion.

Contracts will be awarded on the basis of which bidders offer the largest government take, based on a formula that includes the share of pre-tax profits companies offer the state plus an additional proposed investment.

Local content procurement requirements range from 15 percent to 35 percent of goods and services over the life of the contracts.

The 2017 auction will follow three auctions that began last year, covering both shallow water and onshore blocks. In addition, the first deep water auction is scheduled to take place in December.

The three Round One auctions to date have met with mixed success, with several shallow water fields receiving no bids while all onshore blocks on offer late last year attracted winning bids.

($1 = 18.5716 Mexican pesos) (Reporting by David Alire Garcia and Adriana Barrera; Editing by Tom Brown)

Copyright 2016 Thomson Reuters. Click for Restrictions.

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