OREANDA-NEWS. March 28, 2018. Mexico awarded 16 of the 35 shallow-water blocks on offer today in the Gulf of Mexico, generating potential investments of $8.6bn throughout the lives of the contracts.

Mexico's state-run Pemex was the top winner today with seven new contracts, six of which it won as part of various consortia, and one individually.

France's Total, UK Premier Oil and Germany's Deutsche Erdoel (Dea) all tied for second with three contracts each.

The 35 production-sharing contracts spread across three maritime regions: 14 in Burgos, 13 in Tampico-Misantla-Veracruz and eight blocks in the southeast basin.

Production from all 16 contracts is expected to reach a peak of 280,000 b/d in 2025, with initial production in 2022, said Juan Carlos Zepeda Molina, president of the country's oil regulatory commission (CNH).

Additional royalties going to the Mexican state averaged 45.8pc, but rise to 72pc when adding base royalties and other taxes.

Prior to the auction, the finance secretary had set a minimum and maximum range for additional royalties. For all but two blocks in the Southeast basin, bidding companies had to respect a 22.5–65pc range.

"This is higher than what we are seeing in other countries that are also awarding offshore contracts such as the US and Brazil," Zepeda said.

Overall companies committed to drilling nine additional exploration wells, on top of their minimum required work program.

"This brings us to a total of 138 exploration wells," Zepeda said. "From now on, more than 50pc of exploration efforts in Mexico will be coming from contracts awarded in bidding rounds."

The Mexican government started awarding contracts to companies other than Pemex in 2015, in the wake of a sweeping energy reform that ended the state-run long-held monopoly.

Energy secretary Pedro Joaquin Coldwell said he was satisfied with today's 46pc allocation rate.

"I think that one of the most important achievements … is that we are opening to exploration two oil provinces that were practically unexplored," Coldwell said after the event.

The Burgos and Tampico-Misantla-Veracruz maritime regions are considered frontier areas that come with higher risks. They also included higher natural gas prospects, less profitable than crude given current prices.

Out of the 18 bidders registered for today's auction — both individually and as part of a consortium — few decided to make a bid on the two regions and none included any additional drilling investment, which can be for up to two additional wells.

In the Burgos region, Mexico awarded only four of the 14 shallow-water blocks on offer.

Spain's Repsol won blocks 5 and 12, offering additional royalties to the state of 56.2pc and 48.17pc, respectively. Repsol already has four contracts in Mexico — one shallow-water and three deepwater contracts — awarded in previous tenders.

UK's Premier Oil took the two other contracts, blocks 11 and 13, with 29.43pc and 34.73pc, in additional royalties. The oil and gas firm won two shallow-water contracts in the Gulf of Mexico's southeastern basin in a 2015 auction.

"We have been consistent with our strategy, which is staying in shallow water," said Tim Davies, Premier Oil's exploration manager. "What we saw in Burgos is the opportunity to be an early mover into a new place, before everyone else comes piling in."

Mexico awarded another four blocks in the Tampico-Misantla-Veracruz region.

Two went to a consortium led by Dea, with Pemex and Compania Espanola. The consortium offered additional royalties of 24.3pc and 35.51pc for blocks 16 and 17, with no additional investment.