Just three days after the successful R1-L3 that oversaw the allocation of no less than 100% of the 25 fields tendered, government officials and experts voice their hopes and concerns over the results.


Lourdes Melgar, Undersecretary of Hydrocarbons at the Ministry of Energy (SENER), explained that the design of the tenders was consciously thought out to allow small and medium companies to enter the industry as operators with relatively small-scale yet profitable projects at hand. She indicated that the aggressive offers put forth by the companies demonstrated a strong appetite to participate in the market independently of PEMEX, particularly given the fact that most of these companies had been, or still are, contractors of the NOC. Melgar also announced that despite the low oil price environment, winning companies were expected to begin operations shortly.

Many of fields awarded were previously owned by PEMEX, but the NOC did not have the resources to capture their value properly. Luis Ugalde, Director of the Income Unit of the Finance Ministry (SHCP), trusts that the winning firms will successfully tackle these fields from a different perspective to that of the parastatal, taking advantage of their more adequate cost structure and efficient corporate side to reach lower production costs. Nonetheless, Pablo Medina, analyst at Wood MacKenzie remains skeptical on the gains that companies will attain with these fields, given the high taxing involved. Whether making profits or losses, companies are under obligation to pay the contractual fee for the area, and the exploration and production of hydrocarbons. Taking the example of the Moloacán field, where Canamex and the other companies involved in the consortium offered state share of 85%, and considering the Hydrocarbons Law will claim 7.5% of the operators’ income, these will only retain US$3 with a crude barrel standing at US$30. This leaves little room to pay for costs, fiscal royalties, and further taxes. Although this is not different to similar schemes around the globe, it might make reinvestment a challenging undertaking for these companies.


Geo Estratos

The consortium formed by the Mexican firm Geo Estratos and the British one MXOil were among the main winners of the round, taking away four fields within close distance of each other. As rightly predicted by Lourdes Melgar, production will not be delayed much longer, as the group hopes to obtain the first production batch in March 2016, just four months after winning the contract. Vicente González Dávila, Director of Geo Estratos, expects it to amount to 200 b/d before reaching 1000 b/d by the end of 2016 thanks to a refurbishing of the fields. This figure should be further raised to 6000 b/d at least after a predicted investment of US$200 million in 2019.


Renaissance Oil Corp

The Canadian company, Renaissance Oil Corp, has been experiencing losses amounting to nearly US$2 million for a period of 9 months. Despite the year-long interruption in income flows, the company passed the filters set by CNH and SENER for the prequalification stage of the third phase of Round One. The winning of three fields could be seen as a sign of recovery, but Lourdes Melgar explained that these were relatively small fields, unlikely to contribute significantly to the firm’s revival.


Sources: Reforma Newspaper


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