PEMEX wins seven contracts, while DEA Deutsche, CEPSA, Premier Oil and Total take three contracts each

 

 

The Process

 

 

Mexico’s NOC, PEMEX, walked away from Round 3.1 with seven contracts on Tuesday, leading a pack that included DEA Deutsche, CEPSA, Premier Oil and Total with three contracts each.

The official results will be announced Monday, April 2, the same day on which contracts will be signed, said Juan Carlos Zepeda, President Commissioner of CNH.

Eighteen bidders registered for Round 3.1 seeking to win production-sharing contracts, of which five companies were lone players and 13 were consortiums (listed here according to their arrival to the process).

 

 

The prospective resources of Round 3.1 amount to 8.21 billion barrels of oil equivalent located at water depths of less than 500m.

For each area, the minimum and maximum additional royalties to be offered to the state were 22.5 and 65 percent, respectively. For more information on each specific area, the companies and consortiums as well as the licensing process, visit the Rondas Mexico website. To learn more about the results of previous rounds, take the opportunity to read our blogs on Rounds 1.1 to 2.3, and on Round 2.4.

 

The Results

 

In terms of content, the Burgos basin offered 14 areas with mostly wet gas, while area 10 has light oil. Most of the areas have a 3D seismic coverage of 100 percent, area 3 has 88, area 5 has 55, area 9 has 69, area 11 has 65 and area 13 has 73 percent coverage.

 

 

The Tampico-Misantla-Veracruz basin offered a combination of light oil and wet gas. 3D seismic coverage is lower than in Burgos, with most of the area having less than 90 percent and with area 20, 23, and 25 having less than 30 percent, and area 26 having only 12 percent coverage.

 

 

Finally, the Cuencas del Sureste basin offered a mixture of light oil and wet gas, with area 31 also having heavy oil, area 32 having heavy oil and dry gas, area 33 having only superlight oil and area 35 only extra heavy oil. 3D seismic coverage is over 85 percent for most of the areas, with area 29 having only 9, area 30 having 25 and area 35 having 37 percent. This gives area 29 the lowest 3D seismic coverage of Round 3.1.

 

 

The big winner of the Cuencas del Sureste region was PEMEX, which under consortium schemes won a total of three areas and one as a lone player. For area 29, the NOC made an upfront payment of US$13,075,075.00. This is also the basin in which the biggest competition took place, as area 30 gathered bids from seven companies, with five offering the maximum additional royalty and investment factor, plus a tie-breaker down payment.

 

Resources awarded transparently and with high value for the state

 

 

After Round 3.1 concluded, Pedro Joaquin Coldwell, Minister of Energy, highlighted the job CNH did, together with the ministries of Finance, Economy and Energy, in developing a transparent process, recognized internationally as one of the most competitive. “Sixteen contractual areas, out of 35, were assigned, resulting in a success rate of 43 percent,” Coldwell said. “The contracts are expected to bring an investment of up to US$8.63 billion and to create approximately 86,377 jobs in the awarded regions.”

CNH’s Zepeda highlighted the success of the two northern basins in Round 3.1. “The knowledge of the Burgos and Tampico-Misantla-Veracruz basins is lower due to the fact that they were not open to the industry’s participation before, making them higher risk. The fact that they also include mostly wet gas, a resource for which it is harder to find economically viable projects, makes the assignation of eight areas ever more important.” Zepeda also mentioned the fact that the average of 72 percent in revenues going to the state is higher than international averages, even higher than in countries such as the US and Brazil. The 16 contracts will result in a peak production of 280,000 barrels and 220 million cubic feet per day by 2025. Production is expected to start in 2022.

Alberto Torres, Deputy Minister of Incomes at the Ministry of Finance, mentioned that for the 16 contractual areas, the state will receive an average additional royalty of 45.8 percent. “Considering all of the other added value activities, the projects could provide up to 72 percent in revenues to the state, which is aligned with averages obtained in the previous rounds.” The figure could rise to 78 percent if production improves or oil prices fall, he said.

Coldwell concluded by stating that the country has reached a total of 107 contracts with this last round. “Thirty-seven more areas are to be placed for bid in Rounds 3.2 and 3.3. The resources of the country are being awarded in a transparent way and with the highest economic value for the state while ensuring the highest investment commitments that will generate jobs and future benefits,” he said.

 

 

For more articles on Mexico’s oil and gas industry, check out our blog here

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