Little Interest in First Mexican Shale Auction
As of June 21 – with only a month left to register – no independent or international companies have signed up to participate in Mexico’s first-ever shale auction.
This is not what the government anticipated.
Mexico, which holds some of the world’s most prolific untapped natural gas basins, hoped that the final auction of the current administration would be a rousing success.
The government announced earlier this year it would lease development rights in nine areas in the Burgos basin near the country’s northern border with the US for unconventional shale gas and oil development. The auction will be the final of the current government and the energy secretary forecast billions of dollars in potential investment.
It appears the auction will fall well short of expectations. To date, only one company – state-owned Pemex – has requested access to the data rooms that contain geological and seismic information about the areas up for auction. Three companies have shown interest in the September 27 auction, according to the National Hydrocarbons Commission (CNH), though with less than one month remaining to register, none have taken the required steps to formally qualify to participate.
The shale bid round is scheduled to be held on the same day as an auction of 37 conventional oil and natural gas development areas. To date, only six companies have registered to participate in that auction, among them DEA Deutsche Erdoel of Germany, Tecpetrol of Argentina, and Mexican upstart producer Jaguar Exploración y Producción.
On June 19, the CNH established minimum and maximum bid offers for the conventional onshore auction, which will offer license contracts to winning bidders. Companies that participate in the auction must bid a minimum royalty of at least 2.5% to 5% to compete for the areas auctioned, while maximum royalties permitted range from 25% to 40%.
“In this auction, we have 15 companies interested and six companies that are already registered,” Martín Álvarez, legal director of the CNH, said in a June 19 webcast. As many as 12 companies have been authorised to register in the auction, he added.
The September auctions will be the final bid rounds held under the administration of president Enrique Peña Nieto, who passed legislation to end the state-owned oil and natural gas production monopoly held by Pemex in 2013. Nine auctions have been held in Mexico since 2015, and the country has awarded more than 100 contracts to major oil and gas producers, such as Chevron, ExxonMobil and Anglo-Dutch major Shell.
The tepid interest in the final auctions could be a result of the uncertainty surrounding the July 1 presidential elections. Front-runner Andrés Manuel López Obrador, whose lead in recent polls has exceeded 25 percentage points, has vowed to review the oil and natural gas contracts awarded since 2015 for corruption, and has said he will temporarily halt future auctions if elected.