Shell takes nine of 19 blocks awarded in Mexico oil auction

Royal Dutch Shell won nine of 19 Gulf of Mexico oil and gas blocks awarded in Mexico's bid round 2.4 on Wednesday.

Offshore staff

MEXICO CITY - Royal Dutch Shell won nine of 19 Gulf of Mexico oil and gas blocks awarded in Mexico's bid round 2.4 on Wednesday, according to a Reuters report.

The auction raised an estimated $93 billion in investment for Mexico and was the biggest since the country's energy sector opened to foreign firms in 2014.

With oil prices at a three-year high, conditions were better for this auction than any of the previous eight sales in Mexico since 2015, lending weight to Mexican President Pena Nieto's argument that opening up the sector would bring the investment needed to turn around a dilapidated state-run oil and gas industry.

Mexican officials called the auction a success. Ahead of the bid round, the government had said it expected only seven of the 29 blocks on offer to be awarded. In the end, nineteen were awarded. Shell secured participation in nine, Malaysia's state oil firm Petronas secured six, and Qatar Petroleum won five in consortia that included other firms.

The results would not give Shell too high a share of Mexico's energy sector, Deputy Energy Secretary Aldo Flores said. "We have to recognize Shell's enthusiasm in this round," Flores was quoted by Reuters to say after the auction. "We have a diverse oil sector . . . I don't believe this means a concentration."

Mexico estimates oil firms will invest $93 billion to develop energy reserves in the blocks, said Flores. Previous auctions have already drawn investment pledges of $61 billion from winning firms.

The government estimates over $600 billion is needed to return the country to record production levels reached in 2004.

The blocks auctioned on Wednesday could pump over 1.5MMb/d of crude and 4 Bcf/d of gas by 2032, Flores added. Mexico currently produces around 1.9 MMb/d.

Even though there was little competition for some of the blocks, the winning bids offered a high percentage of profits to Mexico, said Juan Carlos Zepeda, the head of the country’s oil regulator CNH. The government take would be up to 67% of the profit, he said, comparing that to the 55% oil firms pay in the United States.

Mexico also received $525 million in cash from the companies than won blocks, which will be transferred to a government fund.

Shell focused on blocks in the Perdido and Salina basins, which were expected to be the most competitive of those on offer. Perdido is close to US waters where oil firms already operate.

Shell won four blocks as a lone bidder, four more in a consortium with Qatar Petroleum and another in a consortium with Mexican state oil firm PEMEX.

Shell would spend more than the minimum investment it pledged in the bids, de la Fuente said.

PC Carigali, a unit of Malaysia's state oil firm Petronas, won two blocks alone and four in consortia. Carigali also participated in winning bids for two deep water fields in an earlier auction.

Ten blocks received no bids, and so were not awarded.

02/01/2018

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