The first round of auctions to award important works of oil exploration and production in Mexico will begin early next year, with 169 blocks covering an area of 28,500 square kilometers to tender as a result of extensive reforms introduced last year to open industries electricity and gas to private investment.
The initial conditions for the "round one" will be announced in December, although a sharp drop in oil prices has led to speculation that Mexico could alter your auction because of the high costs associated with some of the deepwater blocks and unconventional. Some of these blocks have higher extraction costs and therefore its viability will depend on global oil prices.
The auction process was scheduled to begin in January, giving potential bidders access to information on 109 geological exploration blocks and 60 production blocks, while the first shallow water contracts would be awarded in May. However, the energy secretary, Joaquin Coldwell said in December that the auction block, representing an annual investment of about USD 8.5 billion over the next four years could be postponed. "Around July at the latest," he said, according to a quote from the Financial Times.
Energy reform is the strong point of the President's plans to modernize Enrique Peña Nieto Mexico, which amended its constitution in December last year to enact reform. It approved 21 secondary energy legislation in August, which ended the vertical monopoly Petroleos Mexicanos (Pemex) and opened the way to greater competition and lower prices in the energy sector.
The laws also seek to attract private and foreign investment to access oil reserves, which would be substantial. This comes amid a decline in oil production from Pemex, after a maximum of 3.4 million barrels per day (bpd for its acronym in English) in 2004. Production was 2.6 bpd last year.
According to the Energy Information Administration of the United States (EIA for its acronym in English), the country had oil reserves of 10.3 billion barrels in 2013 and natural gas reserves by 17.2 trillion cubic feet. It is estimated that Mexico also has considerable reserves of deepwater and shale, but lacks the technical capacity and capital to access them.
Reforms are expected to have a positive impact on the overall economy, particularly 2016 onwards. Recently, the growth projections for this year were revised between 2.1% and 2.6% lower, although according to an estimate of the Mexican Institute for Competitiveness (IMCO) reforms that GDP will grow by 1.5% and 1.7% annually on average from 2017-2030.
The new contracts will focus on oil exploration licenses, although there will be service contracts and production sharing and profits, depending on the nature of oilfield auction. Licensing agreements allow oil companies operating the fields that the government assigned independently. Firms will keep the crude extract and royalties paid by production.
The auctions will be conducted by the National Hydrocarbons Commission (CNH) and Pemex may bid independently or in partnership with other companies. Pemex said that next year will develop partnerships to make competitive offers in order to develop 14 geographically complex fields.
The state will have enough reserves to maintain current oil production levels, reaching 2.5 million bpd, for more than 20 years after that in August the Ministry of Energy (SENER) granted Pemex their entire request 83% proven and probable reserves of Mexico, as well as 21% of reserves prospecting.
Analysts have applauded the measure to subcontract to Pemex and conducting Round 1 at the same time, which would generate about $ 50 billion in new investments in 2018. However, the success of the auction remains to be seen. "We believe that successful outsourcing of Pemex and Round 1 will be determined by the fiscal terms that define the Ministry of Finance and the Ministry of Energy for each asset class (bonds signing of contract and / or additional royalties, for example ), "said analysts at Credit Suisse in August. "Such details will be disclosed when bids will formally begin," they added.
The success of the reform will also be determined by the degree to which raise the competitiveness of the manufacturing sector, led by exports, reducing electricity prices. The reform ended the monopoly of state-owned Mexican Federal Electricity Commission (CFE), which for decades had absolute control over the electricity grid and electricity production.
Although under the new legislation the network is still owned by the CFE, private companies can now generate and sell electricity competitively, with the likely effect of pushing prices down and improve efficiency in the industry. Qualified users can purchase power on the wholesale market or directly to a vendor. However, the CFE will keep control over the transmission and distribution of electricity to basic users, at regulated prices.
A major concern for private energy companies entering the Mexican market, however, the risk to security, especially in the north. Cordon facilities to isolate organized crime could impose additional costs, while the availability of security services for private companies is still unclear.
Mexico prepares for first round of major oil tenders
The first round of bidding for major oil exploration and production works in Mexico will start early next year With 169 blocks covering an area of 28,500 sq km to be tendered, the outcome of comprehensive Reforms last year to open the oil and electricity industries to private investment .
Initial conditions of the "round one" are September to be announced in December but a sharp drop in oil prices has led to speculation That May modify ITS tender Mexico due to the high costs Associated With Some of the deepwater and unconventional blocks. Some of These blocks Have higher extraction costs and viability will depend THEREFORE Their overall prices on oil.
The tender process was scheduled to begin in January, with potential bidders to be Given access to geological information on 109 oil exploration blocks and 60 production blocks, and the first shallow-water Contracts to be Awarded in May. However, energy minister Pedro Joaquín Coldwell Indicated in December That the tenders for the blocks - Representing an annual investment of $ 8.5bn acerca over the next four years - may now begin later. "Around July, at the latest," I Said, as quoted by the Financial Times.
The energy reform is the centerpiece of President Enrique Peña Nieto's plans to Modernise Mexico, Which ITS Amended constitution in December last year to enable the reform. It enacted 21 laws secondary energy in August, ending the upright Effectively monopoly of state-owned oil company Petroleos Mexicanos (Pemex) and paving the way for Increased competition and lower prices in the energy sector.
The laws are Also Aimed at Attracting private and foreign investment to help tap into what is thought to be substantial businesses oil reserves. This comes at a time When crude production by Pemex has-been declining after 2004 peak of 3.4m barrels per day (bpd). Production was 2.6m bpd last year.
According To the US Energy Information Administration, the country HAD 10.3bn barrels of oil reserves in 2013 and the natural gas reserves of 17.2trn cu feet. Mexico también está Believed to Have significant deep-water shale reserves and resources, but lacks the technical skills and the capital to drill them.
The Reforms are expected to have any available Broader positive impact on the economy, particularly from 2016. Growth Forecasts for esta year Were Recently cut to 2.1-2.6% but, According to an estimate by the Mexican Institute of Competitiveness (Mexican Institute for Competitiveness, IMCO), the Reforms will boost GDP by 1.5-1.7% on average per year from 2017 to 2030.
The new Contracts will be Predominantly Licences for oil exploration, Also, Although there will be Contracts for service, production-sharing and profit-sharing, Depending on the nature of the oil field Being tendered. Licence Contracts allow oil companies to operate autonomously in fields Assigned to them by the government - keep the oil companies and pay royalties They extract based on Their productivity.
The auctions will be carried interest out by the National Hydrocarbons Commission (National Hydrocarbons Commission, CNH), and Pemex will be reliable to Participate in the bidding Independently or in partnership with other vouchers companies. Said Pemex over the next year it would Establish partnerships-through competitive bidding to Develop 14 geographically complex fields.
The state company will book Have Sufficient to Maintain ITS current oil production levels of 2.5m bpd for more than 20 years, after the Ministry of Energy (Ministry of Energy, SENER) in August solicitada Pemex full STI request of 83% of Mexico's proven and probable reserves as well as 21% of the prospective reserves.
Analysts Have Welcomed the move to carry out the Pemex farm-outs and Round 1 Simultaneously, Which in full is expected to generate $ 50bn acerca in new investment by 2018. However the success of the tender is yet to be established. "We believe That the success of the Pemex farm-outs and Round 1 will be determined to by the prosecutor terms That the Ministry of Finance and the Ministry of Energy decides for each asset class (ie signature bonuses and / or additional royalties)," Said Analysts at Credit Suisse in August. "Such details will be Disclosed When the biddings are formally Launched," they added.
The reform success will Also be the Extent to Which it boosts the Competitiveness of the export-led manufacturing industry by slashing electricity prices. The reform ended the monopoly of Mexico's state electricity company Federal Electricity Commission (Comisión Federal de Electricidad, CFE), Which has-been wielding stepless control over the electricity grid and production for decades.
Though under the new legislation the grid Remains the property of the CFE, private companies can now generate and sell electricity competitively, with the likely effect of lowering prices and Improving efficiency industry. Qualified users will be reliable to purchase energy in the wholesale electricity market or Directly from a supplier. However, the CFE will Still Have Control of electricity transmission and distribution to supply basic users, at regulated rates.
One major Concern for private energy companies entering the Mexican market, however it, will be security Risks, particularly in the north of the country. Ring-fencing operations Against Organised Crime May impose additional costs, while the provision of security to private companies Remains unclear.