Shell was a big winner at yesterday's auction. Shell was a big winner at yesterday's auction.

Oil tender pulls in nearly $100 billion

19 of 29 deepwater oil and gas blocks were sold, exceeding government expectations

Mexico’s biggest oil and gas auction since opening its energy sector to foreign companies in 2013 attracted potential investment of almost US $100 billion yesterday.

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A total of 29 deepwater oil and gas blocks located in the Gulf of Mexico were on offer and 19 were sold, exceeding government expectations.

Royal Dutch Shell was the biggest winner, securing nine contracts — four on its own, four in a joint venture with Qatar Petroleum and one in partnership with Mexican state oil company Pemex.

News agency Reuters reported that Shell bid aggressively despite fears that leftist leader Andrés Manuel López Obrador could win the presidency and attempt to revise the terms of energy contracts.

However, analysts say that rolling back the energy reform — introduced by current President Enrique Peña Nieto — would be virtually impossible and in any case, changes would not apply retrospectively.

The president of Shell Mexico said that its investment would have a positive impact on the economy by creating new employment.

“This will translate into real and effective work for Mexico — we are all winners,” Alberto de la Fuente said, adding that uncertainty surrounding the future of the North American Free Trade Agreement (NAFTA) was not a concern for the company.

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“We are a big player in deep water worldwide. This is excellent news for Mexico and is a strong commitment for Shell in Mexico,” he remarked.

Energy Undersecretary Aldo Flores said that the US $93 billion secured in yesterday’s tender was 1.5 times the total investment attracted in nine previous tenders.

“This is a vote of confidence in Mexico,” he declared. He also said the dominance of Shell in yesterday’s auction did not translate into an excessive overall influence in the industry.

“We have to recognize Shell’s enthusiasm in this round,” he told reporters. “We have a diverse oil sector . . . I don’t believe this means a concentration.”

Securing the full US $93 billion amount, however, is dependent on the blocks sold yesterday becoming commercially successful.

If that happens, they could add an additional 1.5 million barrels of oil a day by 2032, National Hydrocarbons Commission head Juan Carlos Zepeda said. That would almost double the current output, which stands at 1.9 million barrels daily.

Projections are similarly optimistic for gas. Zepeda said that an additional 4 billion cubic feet of gas could be added to the current daily production of 5 billion cubic feet.

Mexico will receive tax income of between 63% and 67% of profits, higher than deepwater blocks in Brazil and the U.S., Zepeda said.

Mexico also had a significant windfall yesterday, receiving US $525 million in cash from successful bidders who together paid the amount to secure their blocks.

There are now more than 60 companies that have committed to investing and developing in the Mexican hydrocarbon sector.

The Mexican energy sector opened up to foreign and private investment in 2013 for the first time in nearly 80 years. Former President Lázaro Cárdenas nationalized all petroleum reserves in 1938.

Other winners from yesterday’s auction included Malaysia’s state oil company Petronas which participated in six winning bids, United States company Chevron, Inpex of Japan and Italian multinational Eni.

Pemex also won two blocks on its own and two — including the partnership with Shell — in alliances.

That surprised some observers because a central goal of the energy reform was to attract outside investors to develop oil fields that Pemex doesn’t have the ability or experience to exploit.

“In 20 years [exploring in the Perdido], Pemex has not produced a single barrel of oil in deep water,” said oil analyst George Baker, referring to one region of the Gulf of Mexico that went under the hammer.

The state oil company’s production is currently at its lowest levels in four decades while oil prices — currently at around US $65 a barrel — are at a three-year high.

Source: Financial Times (en), El Economista (sp), Reuters (en)

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  • WestCoastHwy

    Holy Sh*t, beware of never ending Banda Parties that last for days or until the money is gone!

  • From South of the Border

    Pemex should step out of the way and allow competent companies drill for the oil, so that Mexico can benefit from its oil wealth. Pemex is either incompetent or corrupt! Here is something that some Mexicans won’t like me saying, but someone has to tell the truth! Cardenas and every other president since then has stolen billions of dollars from Pemex! With all the oil Pemex has produced over the years where are the results from the money from Pemex, I don’t see new highways schools and many other things that have been needed for decades here in Mexico instead the presidents and other politicians have been stealing the Mexican people blind! That is why governments shouldn’t control oil companies ie Pemex or a utility company like CFE corruption is the only thing that can come from government control of such companies. Stealing is the stock and trade of the average Mexican politician why would you let them near oil and electricity companies. Pemex and CFE should be privitized immediately. I don’t expect this to happen, because the politicians would lose half of their stolen revenue!! Good Luck, Mexico!!!

  • alance

    Mexico imports gasoline because it only has six refineries in the entire country, the same number as the state of Alaska. Pemex also lacks adequate security to protect its pipelines from massive theft. President Enrique Peña Nieto deserves credit for energy reform.

  • David Nichols

    Note to all Mexican politicians:
    $525,000,000usd now immediately available for theft–move fast before PRI gets it all…!

    • Charles

      Note to David–The Mexicans got the money out of the country after the US politicians skimmed all they could.

      • David Nichols

        Note to Charles—Since all the money paid to Mexico for these concessions came from the oil companies doing the bidding, and since Chevron is the only US company who obtained a concession, and since Royal Dutch Shell, a European company, was the big winner, I confused as to how you think that “the US politicians” skimmed these transactions…

  • Toni Roberts

    No mention is made of the environmental impact on the planet or the fact that Mexico has lots and lots of sun shine. Just say’in.

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