A roundup of Mexico's 'round one'

With the launch of a second call for bids for shallow water blocks, Mexico's "round one" for awarding oil and gas production-sharing contracts is well underway and on track, based on the energy ministry's (Sener) tender schedule.

Round one follows "round zero," in which state oil firm Pemex selected the oil and gas fields it aimed to continue or begin developing. The remainder of the fields are now up for grabs in round one.

In round zero, Pemex was granted 83% of Mexico's proven and probable (2P) reserves. But it was awarded only 21% of prospective resources, or 67% of what it had requested.

Pemex's round zero spoils is acreage totaling 90,000km2 with a production potential of 20.6Bboe, equivalent to 15 years' production and 5 years of exploration at an output rate of 2.5Mb/d, which is a little above Pemex's production average.

In total, round one will comprise 169 oil and gas blocks, 109 of which correspond to projects already in development and 60 to hydrocarbon extraction projects that will be put out to tender in stages this year, according to (Sener).

Sener expects round one to attract US$12.6bn in investment annually over the coming years.

Round one kicked off in December with the launch of tenders for 14 shallow water blocks in the Gulf of Mexico. Last month the second phase was announced: five blocks comprising a total of nine shallow water fields that Sener expects will result in US$4.5bn in investment being made over the next three years.

Mexico's shallow water reserves are considered the most attractive to investors, given their proximity to land and infrastructure – and because production costs are estimated at around US$20/b.

The shallow water tranche is due to be followed by tenders for extra-heavy oil fields in August, the onshore Chicontepec basin and non-conventional blocks in September and November, and deepwater acreage in December.

Energy minister Pedro Joaquín Coldwell said in December that some blocks may be withdrawn from the bidding process in the light of low oil prices.

"With regard to deepwater, we will probably make a small adjustment, though it shouldn't have much bearing since we're talking about long-term investments," he said.

However, Sener is expected to press on as scheduled as boosting Mexico's declining oil output is the backbone of the energy reform, and this will only be possible with participation of the private sector.

Pemex will have a minimum 20% stake in border areas, which include its terrestrial and maritime boundaries with the US, terrestrial boundaries with Belize and Guatemala, and, potentially, its maritime border with Cuba.

Contracts signed between private firms and Pemex before the energy reforms will be "migrated" to reflect the new fiscal, shared revenue and shared production terms established by the new hydrocarbons law.

Mexico's national hydrocarbons commission (CNH) provides full details of the round one bidding process in English on its website.

BNamericas will host its 3rd Mexico Oil & Gas Summit on April 15-16, and its 3rd Mexico Electric Power Summit on May 13-14, both in Mexico City.