Copyright of the Daily Oil Bulletin 2018
Bidding Round Underway For Mexican License Contracts
Mexico for the first time is offering onshore unconventional (wet shale gas) license contracts in this year’s Round 3.3 bidding process, says the head of the regulator that oversees the auctions.
In addition, 37 license contracts are being offered for for onshore conventional oil and gas, Juan Carlos Zepeda Molina, head of the National Hydrocarbons Commission (CNH), said in an interview in Calgary where he was attending the Global Petroleum Show.
The nine contracts offered in the Burgos Basin, in the state of Tamaulipas, include one discovered unconventional gas field. The blocks have a surface area of 2,704 square kilometres with an average acreage per block of 300 square kilometres.
Total potential production is 22,000 bbls/d of oil and 290 mmcf/d of natural gas.
The licenses have 1.16 bcf of prospective unconventional resources. According to the CNH, 96 per cent of the prospective resources are unconventional and 28 per cent are wet gas.
In order to facilitate the evaluation of Round 3.3 areas, the CNH has physical samples of several wells in the area, including three unconventional wells which have been drilled.
The 37 conventional oil and gas contracts are onshore along the Gulf of Mexico. They have a total surface area of 9,513 square kilometres at an average acreage of 257 square kilometres. The contracts contain a total of 890 million boe of prospective conventional resources and 16 discovered fields. Total potential production is 85,000 bbls/d of oil and 561 mmcf/d of gas.
Of the 37 licenses, 21 are in the Burgos Basin in the states of Nuevo Leon and Tamaulipas, nine are in the Tampico-Misantla and Veracruz Basins, and seven are in the states of Veracruz and Tabasco, in the Southeast Onshore Basins.
The deadline for registration and for paying access to the data room is July 18 for both Rounds 3.2 and 3.3. Companies that want to obtain information on the licenses on offer in the bidding rounds can pay to access the CNH’s huge data bank and obtain 25-year licenses. The price depends on the size of the data.
The presentation and opening of bids is Sept. 27 with the winning bids announced Oct. 1, 2018.
In addition to the bidding round, there is an opportunity to farm in on PEMEX, the state-owned company. Seven onshore license contracts are available with a total acreage of 4,581 square kilometres. Potential production is 59,000 bbls/d of oil and 309 mmcf/d of gas.
Proposals will be opened and awarded Oct. 31, 2018.
Since 2014, when the Mexican Congress approved energy reforms, the CNH has finished 13 bidding processes and awarded 107 exploration and production (E&P) contracts on very good terms, said Molina. “So far, we have been very successful.”
The bidding process awards contracts based on a weighted average of both royalties and work commitments, with the weight on the government take, he said.
Successful bidders have committed to drill 138 exploration and appraisal wells. Those include 64 offshore wells which account for 20 per cent of the 316 exploration wells that have been drilled offshore in the history of Mexico. Most of those are in deep water.
The Mexican bidding rounds have attracted 73 companies from 20 countries, including Canada. Recently, there has been an increase in the number of Asian companies bidding on licenses, Molina noted.
The CNH head also addressed concerns that potential bidders might have about the upcoming presidential election in which polls are predicting that the current government may be replaced.
As both the energy reforms and the CNH are included in the main body of the Mexican constitution, “it’s impossible for one single political party to turn back the energy reform,” he said. “The energy reform is for the long term.”
To provide certainty to investors, the independent CNH commissioners, who provide technical advice to the energy ministry, are appointed by a two-thirds majority of the Senate and cannot be removed before their seven-year terms are up.
All the contracts already awarded are safe and the regulator will finish the current bidding process, Molina emphasized. The only thing that might change should a new administration come into power is the pace of the future bidding rounds as the number of rounds is a policy decision, he suggested.