With much anticipation, the opening bids in Mexico’s first E&P round resulted in only two contract awards. Out of a total of 14 blocks available for auction, eight blocks failed to receive bids and four blocks received bids below the government’s minimum price.

Although government officials acknowledged their disappointment in the bid round’s results, they reaffirmed their commitment to Mexico’s on-going and anticipated bid round processes. Presently, there are bid rounds for producing shallow water blocks and another on-going bid round for on-shore conventional exploration blocks. The deadlines for final bids in these processes are currently scheduled for September 30, 2015 and December 15, 2015, respectively. Government officials have also indicated that they expect to announce the terms of a deep-water bid round later this summer.

Nonetheless, the critical question left unanswered by Mexican government officials is whether the disappointing results of this first bid round will cause them to reevaluate their required fiscal and contracting terms and make corresponding improvements to make them more attractive to industry.

Summary of E&P Bid Round Results

Block 1 (light and heavy oil): Received no bids.

Block 2 (dry gas and light oil): Awarded to the consortium bid of Sierra Oil & Gas, Talos Energy, and Premier Oil, which offered a 55.99% pre-tax profits interest to the government. Hunt Overseas Oil Company was the only other bidder for the block, and it offered a 54.55% pre-tax profits interest to the government.

Blocks 3 and 4 (light and heavy oil): Received single bids from the consortium of Murphy Worldwide Inc. and Petronas Carigali International E&P B.V. for a 35% pre-tax profits interest to the government; however, both bids were disqualified because they failed to meet the government’s minimum pre-tax profits interest requirements of 40%.

Block 5 (light oil): Received no bids.

Block 6 (light oil): Received a single bid from India’s ONGC Videsh for a 20% pre-tax profits interest to the government; however, the bid was disqualified because it failed to meet the government’s minimum pre-tax profits interest requirement of 40%.

Block 7 (light oil): Awarded to the consortium bid of Sierra Oil & Gas, Talos Energy, and Premier Oil, which offered a 68.99% pre-tax profits interest to the government. Other bidders in this block were Statoil E&P Mexico S.A. de C.V., Hunt Overseas Oil Company, and the consortium bid of Eni International B.V. and its partner CASA Exploration L.P. The consortium bid from E&P Hidrocarburos y Servicios and Pan American Energy was disqualified because it failed to meet the government’s minimum pre-tax profits interest requirement of 40%.

Block 8 (heavy and extra heavy oil): Received no bids.

Block 9 (heavy oil): Received no bids.

Block 10 (light and heavy oil): Received no bids.

Block 11 (heavy and extra heavy oil): Received no bids.

Block 12 (heavy oil): Received a single bid from India’s ONGC Videsh for a 20% pre-tax profits interest to the government; however, the bid was disqualified because it failed to meet the government’s minimum pre-tax profits interest requirement of 25%.

Block 13 (extra heavy oil and dry gas): Received no bids.

Block 14 (wet gas): Received no bids.