Shell Snaps Up Nine Blocks In Mexico Oil Tender

Shell emerged as the top bidder in Mexico’s second offshore oil and gas block licensing tender since the start of its energy reform in 2013, media reported today, quoting Mexican officials.

The Anglo-Dutch supermajor won the exploration rights to 9 of the 29 blocks put up for tender. For four of the blocks, Shell bid jointly with Qatar Petroleum and for the fifth one it acted in partnership with Pemex. The five blocks that it will explore with partners are in the Perdido Fold belt—very close to a block in the U.S. section of the Gulf of Mexico, where Shell also yesterday announced a significant oil discovery.

Mexico’s authorities considered the tender a success since 19 blocks found suitors versus expectations for only seven to be awarded. Officials estimate that the 19 blocks could see some US$93 billion investments poured into them, after the successful bidders paid a combined US$500 million for the exploration rights. The country will also benefit from a 19-percent royalty rate.

For Shell, the successful bids are part of its expansion in Latin America, but also a signal that even if the party of incumbent president Enrique Pena-Nieto doesn’t win the presidential elections this summer, things won’t change dramatically in the energy industry. That counters growing worry about the rise of resource nationalism in Mexico in case the frontrunner for the presidential office in the next elections—leftist Andres Manuel Lopez Obrador—wins.

Mexico has two more oil and gas auctions lined up for this year—one in June and one towards the end of the year—but the chances of all blocks finding suitors are mixed in light of the abovementioned political worries after Obrador said he will review and very likely revise the contracts that Pena-Nieto’s government signs with foreign oil companies. Recently, however, Obrador’s rhetoric has softened, observers note, suggesting that Shell is wise in expanding its presence in the Mexican sector of the Gulf.

By Irina Slav for Oilprice.com

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