Third Call For Bids Of Round 1: Exciting Results, But A Cautious Outlook Going Forward - Government - Mondaq Mexico - Mondaq Business Briefing - Books and Journals - VLEX 591262190

Third Call For Bids Of Round 1: Exciting Results, But A Cautious Outlook Going Forward

Author:Mr Esteban Sánchez De Boroboa
Profession:Rodríguez Dávalos Abogados

Last year may be the most important one of the Mexican upstream sector since the absolute nationalization of 1938, performed by President Lazaro Cardenas that initiated the 75-year state monopoly of Pemex. Throughout 2015, the National Hydrocarbons Commission ("CNH") tendered 3 sets of hydrocarbons exploration and extraction contracts. The first two Calls for Bids awarded 5 offshore, shallow water blocks to private parties, but on December 15th, 2015, all of the 25 tendered onshore blocks were awarded to a diverse group of companies, both Mexican and foreign. Indeed, as of today one may justly say that a Mexican upstream industry formed by several players exists, but whether all of these players can explore and extract hydrocarbons in a profitable manner remains to be seen.

To put the results of this Third Call into perspective, one should remember that both the First and Second Calls for Bids of Round 1 involved the participation of 9 bidders, but resulted in only 14% and 60% of the tendered blocks being awarded, respectively. For the last Call for Bids, there was an unprecedented turnout of 40 participants and 100% of the blocks were granted. This may be partly explained by the fact that the tendered blocks corresponded to onshore fields with proven reserves that had been previously exploited by Pemex, but were abandoned during the 80s, as the Mexican national oil company concentrated its efforts and investments in extracting hydrocarbons at a lower cost from the shallow waters of the Southeast region of the country. Additionally, it is worth noting that both the technical and financial prequalification criteria for this last set of contracts were less severe than those featured in the first two Calls for Bids1.

The First and Second Calls for Bids were designed to attract major international players to Mexico, while the Third Call for Bids was tailored to allow a genesis of a national, private oil industry. This last objective was reasonably met, as 20 of the 25 blocks were awarded to Mexican companies with Mexican capital, and 2 more were won by consortiums that included Mexican capital.

It is worth mentioning that the 25 tendered contracts were divided in two: 4 "Type 2" Blocks, with a remaining volume of more than 100 million barrels of liquid hydrocarbons, and 21 "Type 1" Blocks, with a remaining volume of less than 100 million barrels of liquid hydrocarbons. Not only were all of the License Contracts corresponding to the 25 blocks...

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