Shell ahead in Mexico oil auction, wins five blocks

Updated: Wed, Jan 31, 2018
11:05 pm
Reuters
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Royal Dutch Shell won five of the first six oil and gas blocks in Mexico`s prized deep waters in the Gulf of Mexico, making the early running in the country`s biggest auction since the energy sector was opened to international oil firms.

The stakes are high for Mexican President Enrique Pena Nieto and his ruling party, which is keen to showcase the results of the liberalisation ahead of a presidential election in July.

Shell, in a consortium with Qatar Petroleum, won four of the first nine blocks on offer in the Perdido basin which is close to U.S. waters where oil firms already operate and have infrastructure.

The Anglo-Dutch company won one block in consortium with Mexican state oil firm Pemex. Pemex won one block, and three blocks were not awarded because they received no bids.

Competition for the basin was expected to be fierce, but a consortium of Shell and Qatar Petroleum was the sole bidder on three blocks.

"Mexico is the winner here," said Alberto de la Fuente, president of Shell Mexico. Shell would spend more than the minimum investment it pledged in the bids, he said, but declined to give further details.

Shell won a block in an earlier auction in Mexico`s shallow waters in 2017. The company also has a chain of 30 gas stations in Mexico, he said.OIL PRICE HELPS

The world`s top energy firms have lobbied for decades for access to Mexico`s oil and gas reserves. State oil giant Pemex, whose 75-year monopoly over the energy sector ended under Mexico`s 2013 reform, lacked the cash and the expertise to extract oil and gas from the rock below the country`s deepest waters.

With oil prices near a three-year high, energy firms are emerging from a recession. They have more cash now than any time since 2014, so conditions are better than they were for any of the eight auctions Mexico has held since 2015.

The higher oil price helped Shell to put in solid bids, de la Fuente said.

Shell was also a big winner in an oil auction for blocks in Brazil`s deepwater in October, snapping up three blocks in the presalt region in the country`s Atlantic waters.

Mexico faces stiff competition from regional rivals keen to attract cash from global oil majors. Brazil, Argentina, Uruguay and Ecuador are also auctioning oil and gas fields this year.

The wide-ranging energy reform was Pena Nieto`s highest profile economic initiative, aimed at attracting hundreds of billions of dollars of investment to turn around a state-run oil industry in decline. The results of previous auctions to attract foreign investment were mixed.

Firms that won in the previous auctions have pledged investment of $61 billion. But Mexico needs 10 times that much to raise oil output back to 2004 levels, the country`s Energy Secretary Pedro Joaquin Coldwell said on Tuesday.

The southeastern portion of the Salina basin should also see strong interest, oil executives and industry executives said. (Graphic on the blocks: http://tmsnrt.rs/2DGpgnB)

Some of the firms that won in previous auctions have made big finds, adding over 2 billion barrels of oil equivalent to reserves.

Mexico is expected to hold its first shale oil and gas auction by the end of 2018, the head of the country`s oil regulator said on Wednesday, potentially opening up one of the world`s top reserves of unconventional energy.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

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