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Latin America Plans Record Number Of Oil Auctions In 2018

Many Latin American countries have changed regulations to welcome foreign capital to their oil sectors, and now those countries combined are set to hold this year the highest number of oil auctions in history, aiming to attract international companies to bid on a total of 1,100 oil and gas blocks.

Mexico plans an onshore bidding round on up to 37 areas in July, and nine unconventional blocks in September. The country also hopes to hold an auction in the Gulf of Mexico’s shallow waters for heavy oil reserves, according to Reuters data.

Brazil has been seeking to reduce the local content requirements for its oil auctions that have been previously seen as deterring foreign investment. This year Brazil is planning to host yet another large offshore auction, following last week’s auction in which ExxonMobil snapped up eight exploration blocks, leading Big Oil’s aggressive move on acreage next to the coveted pre-salt layer that resulted in a record-high signature bonus proceeds for the government, as oil majors were eager to get into the area ahead of presidential elections later this year.

Both Brazil and Mexico will hold presidential elections this year, and both leading leftist candidates have said they could review some of the current relaxed rules. Most analysts and oil executives who have recently spoken to Reuters said that they did not expect Brazil or Mexico to fully reverse oil reforms, but many say that contract term changes or slower oil auction calendars are possible.

Related: An Oil Price Rally Is Likely

Elsewhere in Latin America, Colombia plans a round to award 15 areas this month and to start offering up to 25 onshore and offshore blocks in a permanent auction similar to Brazil’s permanent offering. Uruguay is expected to announce the results of its third offshore round in late April. In Paraguay, state-run Petroleos Paraguayos (Petropar) wants to re-launch this quarter a previously failed auction to find partners for two areas. Argentina will announce the terms of its first offshore round in July, with results expected in December.

“Latin America’s upstream sector enters 2018 with strong momentum as recent investor-friendly regulatory changes have enticed operators back to the region,” Wood Mackenzie said earlier this year, adding that Latin America is poised to buck the global exploration trend this year.

“However, investors face some trepidation as highly uncertain presidential elections in Brazil, Mexico, Colombia and Venezuela could slow the region’s pace of upstream development,” WoodMac noted.

“Although there is some political uncertainty ahead, the immense exploration and development opportunities available in the region will keep optimism high,” said Horacio Cuenca, Research Director for Latin America at Wood Mackenzie.

By Tsvetana Paraskova for Oilprice.com

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