The historic tender for shallow water blocks in the Gulf of Mexico will allow for private and foreign investment in Mexican oil and gas for the first time in almost 80 years.
On July 15, Mexico’s National Hydrocarbons Commission (CNH) announced the results of the Round One first tender, culminating the first step of a bidding process that began in December 2014. The historic tender for shallow water blocks in the Gulf of Mexico will allow for private and foreign investment in Mexican oil and gas for the first time in nearly eight decades. Nine bidders—four consortia and five individual companies (out of the seven consortia and eighteen individual companies that prequalified)—elected to participate in the bidding process. Notably, most of the majors decided not to participate in the first tender.
Fourteen blocks were offered in the tender, but only two were awarded. Eight of the blocks received no bids at all, and four did not receive a qualifying bid. Both awarded blocks went to the consortium of Sierra Oil Gas, Talos Energy, and Premier Oil. The consortium has until August 21 to execute contracts for the blocks.
This first tender did not attract as much participation from international bidders as some expected, in part due to current oil prices, stricter than expected contract terms around governmental rescission, and a focus on deep water blocks by many market participants that the government plans to auction next year. The proximity to large, successful developments on the US side of the Gulf of Mexico and the relatively limited access to similar large prospects in other parts of the world make deep water prospects more attractive to international players.
Four tender processes remain for Round One. The next tender will cover nine additional blocks in shallow waters, and bids are expected on September 30, 2015. The third tender will cover 26 onshore blocks with a due date for bids of December 15, 2015. The tenders for deep water and unconventional blocks have not been announced yet, but CNH has indicated its plans to launch those processes in early 2016.