Mexican watchdog approves new royalty rates for Round 3.2 and farmouts

Mexico hydrocarbons commission (CNH) has approved the amendment of the bidding rules for the Pemex farmouts of seven areas to be auctioned off on October 31.

Instead of the decision being based primarily on a competitive offer of additional royalties to the state, the finance ministry (SHCP) established that the additional royalties should by pre-defined and the tiebreaker will be an additional lump sum of money.

Royalties for the Artesa, Bacal-Nalash, Bedel-Gasifero, Cinco Presidentes, Juspí-Teotleco and Lacamango fields were established at 15%, while for Giraldas-Sunuapa the royalty was set at 6%.

Some 80% of the additional payment that will decide the winner of the auction will go to Pemex Exploración y Producción and 20% will go to the Mexican government.

Four companies are currently registered for the auction for the farmouts: Tecpetrol, Gran Tierra de México, Compañia Española de Petróleos and Frontera.

In the same session the CNH approved the minimum and maximum royalties for onshore licensing round 3.2, which will be held on September 27, 2018.

In the fields to be auctioned from the Sabinas-Burgos basins the minimum royalty will be 2.5% and the maximum 25%. In the fields auctioned in the Tampico-Misantla basin the minimum royalty will be 5% and the maximum will be 40%. In the fields in the Veracruz basin, the minimum royalty will be 2.5% and the maximum will be 25% with the exception of Area 27, where the minimum will be 5% and the maximum 40%. In the Cuencas del Sureste areas the minimum royalty will be 5% and the maximum 40%, except for Area 31, where the minimum will be 2.5% and the maximum 25%.

In the case of a tie the winner will be decided on the basis of an additional lump sum offered by each bidder. These royalties were established by the SHCP.