The opening of the Mexican oil market has triggered numerous opportunities for international oil companies as well as for Mexican companies willing to develop the market at its full potential. Players of all sorts, from recently created companies to enterprises that have been providing indispensable services to PEMEX over the last years are looking at the new opportunities. Even mining companies are creating subsidiaries to seize hydrocarbons fortuities. The wide spectrum of opportunities promotes a rich investment destination that welcomes different kinds of expertise. Since most Mexican companies are new to hydrocarbons production, they are incited to find the right partner to encounter and surpass the strict requirements presented by the State in terms of expertise and financial strength.
The first phase of Round One offered shallow water blocks for exploration activities. The companies awarded with the only two allocated blocks have a diversified set of expertise. Mexico’s Sierra Oil and Gas, whose CEO, Iván Sandrea, has relevant experience concerning drilling. Talos and Premier, which belong to the same consortium as Sierra Oil and Gas, have significant experience in producing crude in the US side of the Gulf of Mexico and the UK respectively, while both companies are experienced in exploration.
The second phase of Round One is offering production blocks in shallow waters, which entail the possibility of beginning production soon with fewer investments than its exploration counterpart. Several important Mexican conglomerates have great interests in presenting proposal for this biding round, but in order to comply with requirements presented by the Ministry of Energy, they are seeking the right companies to team up with. Such is the case of Monterrey-based Alfa SAB. Since the end of 2014, Alfa and US-based energy investor Harbour Energy has been trying to buy the Canadian oil company Pacific Rubiales Energy Corp for US$1.7 billion. Pacific Rubiales has most of its operations in Colombia, where it will see a decrease in the number of fields it holds, since several of its licenses expire in 2016. The loss of the concession added with a debt of US$4.5 billion represented a key opportunity for Alfa, which owns 19% of Pacific Rubiales’ shares. Within the context of Round One, it is important to notice that Mexican companies, such as Alfa, do possesses financial strength, while international oil companies, such as Pacific Rubiales, have the operational expertise to bid in the second phase. However, both companies have not reached an acquisition arrangement yet.
Alfa, which is involved in sectors such as petrochemicals, processed foods, telecommunications, and oil and gas operations, is still planning to participate in the shallow water production round, although it did not take part in the exploration phase. Alfa’s Chairman, Armando Garza Sada, said the long payback time for exploration blocks was one reason for not participating in the first tender. “An industrial company like ours does not have the deep pockets that oil companies have to stand a project in which the first positive flows could come in five or six years,” he said. “Our intention is to participate in the Mexican production segment, as the country’s geology provides great opportunities.”
Similarly, Grupo Mexico is also seeking the right opportunity. Its ambitions and prodigious expertise in drilling has incited the group to bid in the third phase of Round One, which includes onshore fields. At the same time, Grupo Mexico is considering creating a partnership with another company for the shallow water production round, even though the company has already registered for this bid.
Alfa still seeks for a joint venture with Pacific Rubiales to face coming bids, while Grupo Mexico’s financial strength will help it reach an agreement with a company interested in Mexican hydrocarbons opportunities. Both companies’ best assets is the ability and the success shown in leading profitable business in Mexico.