Mexico draws nearly $100 billion from offshore auction

The government estimates the reserve potential for awarded contracts is close to 3 billion barrels.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  Feb. 1, 2018 at 6:16 AM
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Feb. 1 (UPI) -- The Mexican government said it estimates the reserve potential for 19 contracts it has awarded in its latest auction approaches 3 billion barrels.

The government said it brought in about $93 billion in investments over the lifetime of the contracts, extending over the next 35 years, in one of its most successful auctions to date. In a new era where oil prices are close to $70 per barrel, 19 of the 29 contracts on the auction block were awarded, with supermajor Royal Dutch Shell taking the lead in the tenders.

"Thanks to this tender process, our country will be able to continue developing areas with great oil potential that had not been previously exploited given the economic and technological conditions and challenges that this type of area implies," the government stated.

Mexico aims to produce around 3.5 million barrels per day by 2025. Production there has been on the decline and the 2025 goal would represent an increase of more than 1 million bpd based on a recent average.

The government said the prospective resources associated with the contracts are 2.8 billion barrels of oil equivalent.

Mexican President Enrique Peña Nieto moved through reforms to draw private investors to the state energy sector after more than 70 years of a monopoly controlled by state-run Petroleos Mexicanos, or Pemex. The reforms could bring in up to $415 billion in investments over the next 20 years as the country establishes links to the rest of the world.

Peña Nieto's six-year term ends next year and Mexico is readying for presidential elections in July, coming at a time when the country is working to set a firmer economic foundation as uncertainty brews over the fate of the North American Free Trade Agreement.

The government said the results of the auction show that international companies "of great capacity and international prestige" are investing in Mexico as its energy sector grows more competitive.

Shell, which won nine blocks in the deep waters off the coast of Mexico, said it could carry over its success from deep U.S. waters to tap new opportunities.

"We commend Mexico on a historical, successful bid round; for Shell, today's win marks a competitive, deep-water entry in Mexico," Andy Brown, the director of exploration and production at Shell, said in a statement.

Shell announced Wednesday it made a new oil discovery in the Gulf of Mexico about 200 miles southwest of Houston.

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