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Gulf of Mexico oil auction falls short

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Oil rigs are seen from the Pemex Ku-S oil processing center, part of the Ku-Maloob Zaap complex, in the Gulf of Mexico, off Ciudad del Carmen, Campeche.
Oil rigs are seen from the Pemex Ku-S oil processing center, part of the Ku-Maloob Zaap complex, in the Gulf of Mexico, off Ciudad del Carmen, Campeche.

Mexico’s first oil auction fell short of expectations Wednesday, with only two of 14 blocks in shallow Gulf water selling.

Nearly 80 years after kicking foreign energy companies out of Mexico, the government began taking bids on areas worth an estimated US$17 billion.

The auction follows last year’s passage of historic energy reforms that reopen the industry to foreign investors, despite cries from the left that the nation was giving up a symbol of national sovereignty.

Representatives of 18 companies and seven consortiums handed sealed envelopes with their offers to officials of the National Hydrocarbon Commission in an event broadcast live online.

The government had played down expectations of a big sale, predicting that between a third and a half of the 14 blocks would be awarded. In retrospect, that would have been a huge victory, but unsold blocks received either no bids, or offers that fell below the minimum price.

One theory holds that Tuesday’s nuclear deal between Iran and world powers, which would  eventually lift sanctions on Iran’s oil exports, weakens Mexico’s negotiating power.

Only nine companies took part in the auction, fewer than the 25 originally planned. ExxonMobil and Chevron dropped out of bidding before it began. Both contracts awarded Wednesday went to a consortium made up of Mexico-based Sierra Oil & Gas, Talos Energy of the U.S. and the British firm Premier Oil.

The companies bid without knowing beforehand the minimum percentage that the government will want to earn for each project.

New bidding takes place in September.

Source: Wire services

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