Mexico reveals Round Two details

Mexico's energy ministry (Sener) has published the bidding rules and contract terms for Round Two as well as details on the oil and gas fields up for grabs in the first auction.

The first auction of Round Two will be for 15 exploratory shallow water blocks, of which four are located in the Tampico-Misantla basin, one in the Veracruz oil region and 10 in the southeastern basin.

The total surface area of the blocks is 8,908km2, with about 1.58Bboe of prospective resources and an original volume of around 869Mboe.

The four blocks in the offshore portion of the Tampico-Misantla basin cover an area of around 2,196km2, with some 480Mboe of prospective resources and an original volume of approximately 220Mboe.

The block in the Veracruz oil region covers about 824km2 and contains around 133Mboe of prospective resources.

The 10 blocks in the offshore portion of the southeastern basin cover about 5,887km2 and contain around 973Mboe of prospective resources and a remaining original volume of approximately 649Mboe, the ministry said.

As will occur with the fourth auction of Round One, due to be held in December for deepwater fields, Pemex could propose to the government that contracts for shallow water fields already under development are migrated as part of this auction so that companies can seek partners to share technical know-how and procure financing for the fields' development. Such contract migration would allow for risk sharing, Sener said.

The contract terms for the first auction of Round Two provide for shared production, in which the contractor will carry out exploratory work and have the right, once the field enters production, to receive a portion of the operating profit it generates and recover its costs.

The contract is for 30 years and may be extended twice, each time for a five-year period. The operator will be given an initial four-year period for exploration work, which may be extended by up to two years, an evaluation period of up to two years post-discovery, and a development period of between 22 and 32 years.

Local content requirements for the contract will be between 15% and 35%, depending on the maturity of the project.

The auction process was designed to ensure that companies awarded blocks in shallow waters in the Gulf of Mexico have the requisite skills and experience. To that end, technical and financial requisites must be met, as well as those relating to health and safety and environmental protection, according to the ministry.

The full terms and conditions for the auction are available here, in Spanish.