Pemex Resigned To Hold Auctions For Just 7, Not 160 Oil Projects

Pemex will seek offers for the tender of just seven onshore areas, according to an announcement by Mexico’s regulator, the National Hydrocarbons Commission.

The auction, scheduled for October 31, will leave Pemex with a 45-percent stake in each project.

The seven blocks up for grabs is a significant stepdown from its more ambitious plans from mid-2017, where it was considering putting 160 onshore/offshore areas on the block. But that plan turned out to be a bit too ambitious, and had disappointing turnouts.

In October 2017, the farm-out auction for Ayin-Batsil shallow water in the Gulf of Mexico, being offered as a 50:50 JV, didn’t attract any offers. In December, another farm-out auction for Nobilis-Maximino deepwater—also in the Gulf of Mexico—was canceled due to lack of interest, despite its super-light variety. Pemex had even offered to lower its stake in that project to 40 percent, down from 49 percent. Breakevens from that project were expected to be around US$27 per barrel.

These farm-outs for joint venture projects with state oil firm Pemex were part of Mexico’s efforts to attract foreign investors to its oil and gas sector after it broke Pemex’s monopoly that lasted until 2014.

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A month ago, Mexico held a slightly more successful auction, with at least some projects finding takers, including Repsol and Premier Oil. Still, interest in tie ups with Pemex has been lackluster, with presidential elections looming on 1 July, and expectations high that Andrés Manuel López Obrador, head of the newly created National Regeneration Movement (MORENA), will win the poll, after incumbent Enrique Peña Nieto barred from running.

Obrador—a key figure who has emerged as a defender of the rights of Mexico’s indigenous peoples—threatened to review more than 90 contracts signed since Mexico opened its oil market up to foreign investment. If elected, he has vowed to cancel the remaining auction plans.

By Julianne Geiger for Oilprice.com

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