Major milestones in the energy sector
It’s been a big week for Mexico’s Energy sector. Despite the recent collapse of oil prices, Mexico managed to deliver two much anticipated Christmas presents to would-be investors.
On Tuesday 15th December Round 1.3 was conducted very successfully. Twenty-five onshore fields - including oil and dry gas fields - were put up for tender and all 25 were assigned by the Government/CNH. The fields were mostly small mature fields already developed by PEMEX, or those with technical complexities which PEMEX had decided to stop investing.
Winning bids in Round 1.3 came on the whole from newly formed Mexican companies & consortiums with a scattering of small foreign companies represented. No super-majors nor large IOCs participated - as was anticipated given the nature of the fields on offer. Prior to bidding, expectations were that perhaps only 5 contracts would be awarded. Some of the royalties offered were as high as 60–80+%. In contrast to the previous two rounds which offered production sharing contracts (PSCs), these fields were offered with tax & royalty licenses. Although the fields included in this round might not significantly contribute to Mexico’s supply situation, the success of the round will have longer term positive impact for Mexico. After 70+ years of control by PEMEX, there are now more than 30 firms in the upstream arena. Positive outcomes from the energy reform can already be observed in terms of increased opportunities for industry professionals, more opportunities in the supply chain, exchange of technology, training and access to new sources of capital.
For more information on Round 1.3, refer to http://www.cnh.gob.mx/
Following hot on the heels of Round 1.3’s success, yesterday Round 1.4, which will focus on deep water, was announced. The formal launch is on 17th December, when many details will be released. Given the larger investment levels of this round, it will be closely watched by the industry, large investors (and risk takers) and the service sector. Many observers considered that Rounds 1.1, 1.2 & 1.3 were primarily to “test drive” the bid process and contracting system. If the increasing success of these three rounds (in terms of numbers of bidders and of fields awarded, as well as contract terms is anything to go by), then Round 1.4 could attract very large investments.
Keep up to date on developments in the Energy sector by getting involved in ANZMEX’s Energy Debate Series - the next debate on ‘Who wins and why?’ takes place on 14th January, 2016.