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Mexico deepwater auction deemed a success

Bnamericas Published: Wednesday, December 07, 2016

Mexico auctioned eight of the 10 deepwater areas up for grabs on Monday, while Pemex procured a partner for the Trión block, but two areas received no bids and royalty payments vary widely.

Pemex hailed the partnership with BHP Billiton on the Trión block as a success, the first time it has partnered in deepwater, an area in which the state oil company has no previous experience. The NOC described the auction as "historic."

And according to Rodrigo Domínguez, co-head of law firm Orrick's Latin America group, the bidding process was indeed a complete success.

"This bidding round represents a referendum on the long-term commitment to the nascent Mexican oil and gas industry by some of the major global players in the industry," he told BNamericas.

"We expect these results to set a very good precedent for the upcoming bidding rounds. Having some of the majors already in Mexico sends a very positive message to the market and other potential bidders that stayed on the sidelines to watch how this first round unfolded. Now with the initial round successfully completed, we expect the industry to start taking shape and attract additional capital and investors."

The deepwater auction ushered 11 foreign oil firms into Mexico for the first time, with contracts awarded to a consortium comprising Total E&P Mexico and ExxonMobil, a consortium made up of Statoil, BP and Total, one featuring PC Carigali and Sierra Oil & Gas and another made up of Chevron, Pemex and Inpex.

In addition, China Offshore Oil Corporation was awarded two areas in the Perdido belt.

BUSINESS PRAISE

Mexican business association CCE also welcomed the success of the auction.

"It is difficult to exaggerate the importance of the success and the transcendence it signifies," CCE said in a statement.

The tender is evidence of the importance of the energy reform passed in 2013 as a lever for the renovation of Mexico's energy sector, and will bring in more than US$41bn in investment over the next 35 years, the group said.

Pemex can now continue with greater security with its financial restructuring and corporate streamlining without sacrificing the country's priority to increase its oil output, one of the main aims of the reform, the statement added. Oil production in Mexico has been in steady decline for the last decade.

Monday's deepwater auction was the fourth of Round One. The first tender of Round Two for shallow water fields was launched in July and an onshore auction will be held in April.

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