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Mexico’s Comisión Nacional de Hidrocarburos (CNH) on 31 January 2018 auctioned off 19 areas out of the 29 offered in the country’s much anticipated deepwater Round 2.4. The blocks were spread out across the Mexican Ridges, Salina Basin and Perdido Fold Belt plays in the Gulf of Mexico. In the first tranche of nine deepwater blocks to go under the gavel, covering a total area of 18,757.9 sq km in the Perdido Area, Shell, in separate partnerships with Pemex and Qatar Petroleum, came out the big winner. As for the process in general, two elements made up the bid – an additional investment factor and additional royalty as a contractual value of the hydrocarbons. The additional investment factor to be added to the minimum work programme defined by the CNH is 0 if the equivalent of no additional wells is offered, 1 for one well and 2 for two wells. The minimum and maximum additional royalties for both the Perdido Fold Belt and Salina Basin blocks are 5 and 20% respectively and 3.10% and 20% respectively for the Cordillera Mexicana (Mexican Ridges) blocks.

Mexico Deepwater Bid Round 2.4 Draws in Big Names

Mexico Round 2.4 deepwater awards

Perdido Area

While no bids were made for Area 1, activity picked up at Area 2. Supermajor Shell and state-run Pemex won Area 2 with a 15.02% additional royalty payment and an investor factor of 1. That bid beat out China National Offshore Oil Corp’s (CNOOC) offer of 11.45%. The 2,146 sq km Area 2 is located in the Salina del Bravo. In Area 3, Shell teamed up with Qatar Petroleum, bidding an additional royalty payment of 10.03%. That eclipsed the additional royalty payment bid local favourite Pemex and its partner, CNOOC. Shell and Qatar Petroleum came out swinging for Area 4, beating Pemex with their 10.03% bid. Pemex offered an additional royalty payment of 5.95%. Pemex, however, walked away with the 2,733 sq km Area 5 tract in the Perdido Fold Belt. The state-run oil interest bid an additional royalty of 6.23%, with an investment factor of 1. Shell and Qatar offered an additional royalty bid of 20% and an investment factor of 1.5 for Area 6, as well as a cash (tiebreaker) bonus of US$10.03 million. Shell and Qatar later beat out a CNOOC and PC Carigali (PETRONAS) partnership for Area 7. Shell and Qatar Petroleum offered an additional royalty bid of 20% and an investment factor of 1.5. Shell and Qatar also offered a cash (tiebreaker) bonus of US$ 90.03 million. No bids were made on the wet gas-prone, 2,062 sq km Area 8 tract. Nor were any bids made on Area 9, a 2,009 sq km tract in the Perdido Fold Belt.


Mexican Ridges

A Repsol, PC Carigali and Ophir consortium beat out a joint bid from Shell and Qatar Petroleum for the 1,999 sq km Area 10 tract in the Mexican Ridges. The Repsol-led group offered an additional royalty payment of 20%, and an investment factor of 1.5, as well as US$ 30.24 million (tiebreaker) cash bonus. Coming in second place, Shell and its partner bid an additional royalty payment of 11.03% and investment factor 1. No bids were made for the 2,002 sq km Area 11 tract. In Area 12, covering 3,099 sq km, PC Carigali (PETRONAS), Ophir and PTTEP bid an additional royalty payment of 20% with an investment factor of 1. That beat out the Shell and Qatar partnership, which offered 9.03% and 1, respectively. No bids were made for Area 13, a block covering 1,967 sq km. Repsol and PC Carigali (PETRONAS) bonded to bid on Area 14, offering a 19.98% additional royalty payment for the 2,242 sq km block. That beat out Shell and Qatar, which bid an additional 5.03% royalty payment. No bids were made for the 2,042 sq km Area 15 tract. Area 16, covering 2,047 sq km and Area 17, likewise failed to draw interest. Pemex, however, scooped up the 2,917 sq km Area 18 tract with its additional royalty bid of 7.11% (with an investment factor of 1). As for the 3,003 sq km Area 19 block, no bids were made.

Salina del Istmo

As for Area 20, Shell won the tract with an additional royalty bid of 20% (investment factor of 1.5). That beat out Pemex’s additional royalty offer of 6.11%. In Area 21, competition heated up, with Shell going solo to win this block. The Royal/Dutch supermajor bid an additional royalty of 20% with an investment factor of 1.5. Shell’s tiebreaker US$ 110.15 million cash bonus won it the block, beating out an offer from a Chevron, Pemex and ONGC Videsh group, which bid the same royalty rate and investment factor. The consortium’s tiebreaker cash bonus was US$ 42.1 million. Turning to Area 22, Chevron, Pemex and INPEX won this tract with their additional royalty bid of 18.44%. This consortium also bid an investment factor of 1. That bested BHP Billiton’s offer of 6.55%. Shell picked up Area 23 after it bid an additional royalty of 10.08% with an investment factor of 1. That beat the proposed Chevron, Pemex and INPEX additional royalty bid of 13.44%. Eni of Italy and Qatar Petroleum secured Area 24 with their additional royalty bid of 9.53% and an investment factor of 1. PC Carigali (PETRONAS) won Area 25 after it bid additional royalty rate of 19.98%. PC Carigali (PETRONAS) bested a lower offer from the BP and Statoil partnership for Area 26. PC Carigali (PETRONAS) made an additional royalty bid of 20% with an investment factor of 1 for the 2,030 sq km tract. BP and Statoil bid 13.37%. No bids were made on Area 27. Shell returned to win Area 28 with its additional royalty bid of 20% and investor factor of 1.5, and a tiebreaker bonus of US$ 43.15 million. PC Carigali (PETRONAS) was the second highest bidder with an additional royalty rate of 19.98%. Area 29 saw some of the most heated competition. A consortium including Repsol, PC Carigali (PETRONAS), Sierra and PTTEP won this 3,254 sq km tract. The partners bid an additional royalty rate of 20%; with an investment factor of 1.5 and a tiebreaker bonus totaling US$ 151.25 million. The Eni, Qatar and Citla Energy group were the second highest bidders with bid an additional royalty rate of 20%; with an investment factor of 1.5 and a cash bonus of US$ 86.72 million. The CNH on 25 January 2018 approved the bidders’ conformation for Round 2.4. The final list included nine individual company bidders and 17 bidding groups or consortia. In total, 27 bidders from 16 countries were slated to participate. The list was announced during the 4th Extraordinary Session of 2018. As reported that as of 22 December 2017, 29 companies, including some of Mexico’s current operators like Eni of Italy, had prequalified to participate in Round 2.4.

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Tom Liskey