Consortium Signs Contracts Awarded in Historic Mexico Oil Auction

Latin American Herald Tribune: The consortium that won two shallow-water exploration blocks in July’s first phase of Mexico’s historic Round One oil auction has signed the corresponding contracts with the government, officials said.

John Ashland Shepherd and Bill Moss, representatives of Houston-based oil company Talos Energy; Timothy Lloyd of Britain’s Premier Oil; and Salvador Beltran del Rio and Ivan Sandrea of Mexico’s Sierra Oil & Gas inked the contracts Friday on behalf of the consortium.
The head of the National Hydrocarbons Commission, Juan Carlos Zepeda, who signed on the government’s behalf, said a new stage will now begin in which the regulator will seek to ensure the companies comply with all their commitments.

Over the next 90 days, the consortium must conduct environmental and socioeconomic surveys at the blocks to establish a baseline that authorities can use in determining potential adverse impacts in future studies, Zepeda said.

The consortium also has 120 days to present its exploration plan and risk management system to authorities.

The July 15 first phase of Round One was the first oil auction in Mexico since a 2013 energy sector overhaul ended state-owned Petroleos Mexicanos’ 75-year-old monopoly.

But it ended in disappointment, with the two blocks snapped up by the consortium made up of Sierra Oil & Gas, Talos Energy and Premier Oil the only ones awarded out of 14 on offer.

Mexico’s government is looking to the overhaul to attract tens of billions of dollars in investment and reverse a roughly 30 percent decline in Mexico’s oil output, which peaked at 3.38 million barrels per day in 2004 and currently stands at roughly 2.3 million bpd.

Mexico is starting small with its offer of shallow-water fields and onshore blocks this year and saving the big prizes – deep-water fields in the Gulf of Mexico – for later tenders.

Because of the disappointing results of the first phase, Mexico has sweetened the terms of the second phase of Round One, in which up to five shallow-water blocks are to be awarded on Sept. 30.

Among the changes, successful bidders are to receive additional exploration and production rights beyond previously discovered reserves and a $2.5 million bid security guarantee will cover all contracts a bidder is awarded and will not need to be provided for each separate block, as was the case in the first phase.