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Mexico's Energy Industry Round 2 Farmouts: PEMEX Finds New Partners

Author:Mr Steven Otillar, Dino E. Barajas and Eduardo Canales
Profession:Akin Gump Strauss Hauer & Feld LLP
 
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Key points

Mexico's second farmout bid round to find partners for PEMEX oil and gas development yielded mixed results, with 2 onshore licenses awarded and 1 shallow water PSC vacated with no bids Egyptian company Cheiron Holdings wins Cardenas Mora block with 13% additional royalty and $41,500,000 bonus German company DEA Deutsche Erdoel wins 4-way tie for Ogarrio block with 13% additional royalty and $213,870,000 bonus Mexico's Energy Industry

Round 2 Farmouts: PEMEX finds new partners

On October 4, 2017, the Comisión Nacional de Hidrocarburos (CNH) completed the Presentation and Opening of Bid Proposals for Strategic Associations with Petroleos Mexicanos ("PEMEX") for the Ogarrio, Cardenas Mora and Ayin-Batsil contract areas ("Farmouts"). Today's bid round was the culmination of proposals first announced on May 2, 2017. The Farmouts attracted international and domestic companies, such as DEA Deutsche Erdoel, Petrobal, Sierra Oil and Cheiron.

The Ogarrio and Cardenas Mora blocks are onshore development plays that are currently producing, and they were offered under a license contract model. The Ayin-Batsil block is a shallow-water contract area offshore Tabasco state, which was offered under a production-sharing contract model ("PSC"). The key difference between licenses and PSCs is that PSCs provide for cost recovery before the parties split an agreed share of profit oil. The auction yielded mixed results:...

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