Undaunted Mexico presses deepwater auction

OREANDA-NEWS. March 01, 2016. Mexico's oil regulator CNH unveiled the agenda for a pivotal deepwater auction to be held in December, dismissing arguments that the government should slow down a historic upstream opening in the face of a prolonged oil price collapse.

CNH confirmed a 5 December deadline to present final proposals for 10 deepwater blocks. Potential bidders have until 2 December to access corresponding geological data. As in three preceding tenders that comprise a staggered first bidding round, the winners will be announced publicly on the day bids are presented.

Pre-qualification of bidders will take place between 14 June and 1 July.

The deepwater tender is the culmination of Mexico's inaugural round that started with shallow water exploration blocks in December 2014.

The upcoming tender includes six blocks in the southern swath of the Gulf of Mexico, with total prospective resources of nearly 7bn bl of oil equivalent (boe).

The remaining four are in the Perdido Fold Belt, holding combined prospective resources of 3.6bn boe.

Each block is expected to bring in an estimated \\$4.4bn in investment over the life of the 35-50 year license contracts, including up to eight years of exploration.

"The industry has showed a lot of interest, even under the current price scenario, which is why I believe the government's decision to determine a date and end with the uncertainty about bidding requirements is correct," said CNH commissioner Sergio Pimentel Vargas in today's session.

Rejecting criticism about the timing, Vargas said Mexico is competing with auctions in other countries too.

As of today, nine companies have signed up for the deepwater auction, including Shell, Total, Chevron, Statoil, Atlantic Rim, ExxonMobil, BP, BHP Billiton and Hess.

"Those numbers keep changing from day to day, as we're seeing a better dynamic," head CNH commissioner Juan Carlos Zepeda said.

Seismic projects and surface exploration in the Gulf of Mexico have drawn much interest, the CNH says. Over the past year, the CNH has issued permits for 31 surface studies, of which 12 are currently underway.

The auctions are the fruit of a sweeping energy reform enacted in 2014. The reform ended state-run Pemex's entrenched monopoly in upstream and downstream operations, encouraging the arrival of private-sector investment.

Mexico hopes the reform will reverse a more than decade-long decline in crude production, which peaked in 2004 at 3.4mn b/d.