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Global Energy Advisory - 30th March 2018

Mexico

In what could be the last major oil tender in Mexico for the foreseeable future, supermajors Shell, BP, and Total, along with Eni, Repsol, Lukoil, and German Deutsche Erdoel rushed to snap up shallow-water blocks offered early this week.

The international companies are evidently eager to get their production-sharing contracts signed before the Mexican elections in July, when expectations are for the left wing Morena party to win. If this happens, the next president of the country will be Andres Manuel Lopez Obrador, who has stated he will put an end to oil tenders if elected.

Obrador has also repeatedly warned that all oil contracts signed by the current administration will be reviewed and the country’s oil wealth will be returned in the hands of its people.

Despite the worrying implications of such statements, the supermajors’ willingness to take on more exploration projects offshore Mexico suggests the extent of concern may be overrated. Still, if Obrador stays true to his vow to stop the tenders, it would make sense for the oil companies to take this last chance of growing their booked reserves and future production. If we’re talking expropriation, that’s another story entirely. But tough talk is for the campaign trail, not real life.

Since 2013, when the government launched a sweeping energy industry reform stripping Pemex of its monopoly position on the local market, the National Hydrocarbons Commission has sealed more than…

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