ON 11 DECEMBER, THE MEXICAN HYDROCARBONS COMMISSION (CNH) PUBLISHED THE TERMS AND CONDITIONS FOR THE FIRST CALL TO TENDER FOR SHARED PRODUCTION CONTRACTS1 FOR THE EXPLORATION AND EXTRACTION OF HYDROCARBONS IN THE SHALLOW WATERS OF THE GULF OF MEXICO.

The tender includes the international auction of 14 shallow water blocks, which will be auctioned among private sector companies. Thanks to the recent reform of Mexican energy sector legislation, this will be the first time that the private sector has been able to participate in the Mexican hydrocarbons sector.

The tender will be for shared production contracts and it is expected that the areas – which have total prospective deposits of 686.6 million barrels of oil equivalent (BOE) – will contain light crude.

The terms and conditions for the first call to Round 12include the details of the procedure and the content of the tender, as well as the calendar and formats for bids (non-disclosure agreement, letter of credit to secure the offer and the economic offer), the contractual areas, minimum work programme and the contractual model that will be signed with the awardee.

The tender will be coordinated and managed by the Tender Committee, consisting of public officials from the CNH – including a coordinator and a secretary – and will be conducted in Spain.

  1. Technical requirements
  2. Financial requirements
  3. Competition
  4. Transparency
  5. Timeline

1. TECHNICAL REQUIREMENTS

Companies wishing to participate in the tender must provide evidence:

  • That they have proven experience as an operator in the last four years:
    • At least in three exploration and extraction projects, or
    • With capital investments in exploration and extraction projects that, in aggregate, amount to at least one billion dollars.
  • That they have been an operator or a partner in offshore projects
    • In at least one offshore exploration and extraction project, or
    • Having participated as a partner in at least two offshore exploration and extraction projects in the last five years.
  • That the personnel proposed has the required skills and qualifications, having 10 years of experience in key positions in projects of this kind.
  • Finally, that they have experience in the management of industrial safety and environmental protection systems in the last five years.

The requirements must be met by each bidder individually; in the case of consortiums, the requirements must be met by the operator individually, not by a combination of the consortium's members.

2. FINANCIAL REQUIREMENTS

With regard to financial capability, the terms and conditions establish that the companies that participate in the auction must provide: total assets with a value of at least 10 billion dollars and also prove that they have an investment grade credit rating, or sufficient book capital, of at least 1 billion dollars. If companies participate through a consortium, they must provide evidence that they have a sufficient book capital of at least 600 million dollars, and they must prove an aggregate book capital of at least one billion dollars, which must be reached by the book capital of no more than three members of the consortium; furthermore, the operator must hold at least an economic stake of at least one third in the consortium, with no other member of the consortium being permitted to hold a stake greater than that of the operator

3. COMPETITION

  • One oil company cannot participate in more than one consortium at the same time.
  • The companies or consortiums can only participate in a maximum of five blocks.
  • "Large scale oil companies", ie, those with a production exceeding 1.6 million BOE, cannot create alliances with each other

This last restriction only applies to the shallow-water auction. Large oil companies will be able to create alliances in future tenders.

4. TRANSPARENCY

The CNH wants to prevent irregularities during the tender. To achieve this:

  • Companies shall not have any contact with the officials of the CNH.
  • Documentation will be sent electronically and the sealed offers will be opened at a public event.
  • The entire consultation and clarification process will be conducted in writing and electronically through the webpage opened for Round 1.

5. TIMELINE

  • Until March 16: applications to access Data Room.
  • Until March 16: payment for registration and pre-qualification.
  • Until March 31: submission of pre-qualification documents.
  • Until April 23: pre-qualification (review of the bidding documents by the Tender Committee)
  • April 27: publication of the list of pre-qualified bidders
  • Clarifications stage
    • Until 25 February - requirements to access the data room information
    • Until 11 March - pre-qualification
    • From 15 January to 1 June – offers and contracts
  • From 15 January to 15 July: access will be given to the data room, which contains seismic information on the 14 blocks being tendered.
  • 15 June: publication of the definitive terms and conditions.
  • 15 July: receipt of economic offers, which will take place in a public event.
  • From 15 to 17 July: awarding and execution of agreements