Mexico Hastens To Auction Oil Blocks Before Presidential Election

Mexico will hold three oil auctions by the end of July, offering more than 100 areas in deepwater, shallow waters, and onshore, before Mexican President Enrique Peña Nieto—who ended the state monopoly in the oil industry—leaves office.

The leader in the opinion polls to succeed Peña Nieto —who can’t seek another term by law—is leftist populist candidate Andres Manuel Lopez Obrador, who has suggested that he might review parts of Mexico’s energy reform that ended a seven-decade monopoly of state oil firm Pemex and opened Mexico’s industry to international oil majors. Obrador’s suggestions about reviewing the terms of the energy reform has had industry analysts and observers worried that foreign oil companies could face an uncertain regulatory environment if the leftist candidate wins in the presidential election in July and succeeds Peña Nieto in December.

Mexico plans to auction more than 100 areas by the end of July, in three separate auctions to be held on January 31, March 27, and July 25.

The latest auction, announced by the Mexican oil regulator CNH on Wednesday, will offer a total of 37 onshore areas in an auction on July 25. The number of areas up for grabs is the highest in an auction since the energy reform ended Pemex’s monopoly in 2013.

The other two auctions that will take place include 35 blocks in shallow waters that will be auctioned in March, and 29 deepwater blocks that will go up for an auction later this month, on January 31. Major international companies that have been pre-qualified to participate in the deepwater auction in January—including Chevron, ExxonMobil, BP, Shell, Statoil, Total, and Eni.

Commenting on the upcoming auction on January 31 amid political risks both from within Mexico and abroad, Energy Minister Pedro Joaquin Coldwell told Reuters last week: “In that context, we estimate that if we assign seven lots - seven blocks at a minimum - from there onward the auction could be highly successful.”

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Tim Duncan, president and CEO of Talos Energy—the company that is part of a private consortium that made a huge oil discovery offshore Mexico last year—told Reuters that companies may even bid for more in the January auction if they think that Mexico could somehow review or overhaul the energy reform under a new president.

By Tsvetana Paraskova for Oilprice.com

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