Mexico’s National Hydrocarbons Commission (CNH) this week signed exploration and extraction contracts with bid round winners from June's shallow water Round 2.1 (see our Law Now here). Round 2.1 was considered a success, with 10 out of 15 blocks awarded to 20 companies (individually or as consortia) from 15 countries, including Colombia, Malaysia and Germany, as well as Mexico’s state-owned Pemex.

The Productions-Sharing Contracts (PSCs)

The PSCs can be viewed freely online (in Spanish) and contain the following key features:

  • Term of 30 years
  • Two possible extensions, each one for a period of 5 years
  • Contractors have 180 days from the date of signing (25 September) to present CNH with an Exploration Plan for each area

The PSCs cover a total area of 5,872 square kilometres from which Mexico’s Energy Minister, Pedro Joaquín Coldwell, expects a total investment of around US$8 billion and maximum production of 170,000 boe/d during the lifetime of these 10 shallow water blocks. If successful, he anticipates the creation (directly or indirectly) of around 82,000 new jobs.

Pemex subsequently revealed that the new blocks are located near to existing shallow water fields, which should allow for efficiencies in exploration and development, as well as allowing it to take advantage of existing infrastructure.

The winners in Round 2.1 are as follows:

Click here to view table.

Farm-outs

Bidding will also soon open on farm-out opportunities offered by Pemex. Partnerships with Pemex are available for three fields: Ayin-Batsil, Cardenas-Mora and Ogarrio. Four consortia have been formed by interested bidders including Murphy Oil from the US, which is teaming up with Mexican Sierra Nevada. Several individual bidders, including Germany’s DEA, have also registered.

Outlook and Round 2.4

Pedro Joaquín Coldwell reaffirmed the importance of continuing with ‘business as usual’ following the earthquakes which hit Mexico earlier this month. The signing of the PSCs demonstrates that Mexico is able to offer certainty to the markets, even during times of emergency.

With the winners of Rounds 2.1 – 2.3 already announced, the highly-anticipated deepwater Round 2.4 is ongoing. Interested parties have until 10 November to submit prequalification documents, with the auction due to take place in late January.

CMS’ market-leading Oil & Gas practice, both in the UK and in Mexico City, is well-placed to advise E&P companies looking to participate in the Mexico Oil & Gas licensing rounds.