Regions

Mexico auctions oil blocks to increase production but failed to attract giant international companies

July 20
7:31 AM 2015

Mexico kicked out foreign companies 77 years ago, but just last Wednesday the tables seem to turn as its government auctioned 14 exploration blocks to attract international energy companies, which will hopefully redeem the country's dwindling production.

Oil and Natural Gas Corp (ONGC) lost out on a bid for two of the shallow water areas offered. Their bids were rejected by the upstream regulator of the Mexican government because they didn't reach the required 25 to 40 percent profit-share. According to Mexico's national Hydrocarbons Commission, ONGC was the sole bidder for the Area 6 and 12 and were rejected as it was considered too low.

The move wasn't very successful, as only two blocks were auctioned, while giant energy companies seem to not want to be part of the Mexican oil block auction. One of the reasons why international energy companies didn't participate is that the oil price is only half of what it used to be last year. Oil prices now are around $50 a barrel. 

For almost 8 decades, Mexico's state-owned oil company Pemex monopolized oil exploration in the country. The July 15 oil auction marked the end of the monopoly and signaled the start of the foreign investment era.

There were nine foreign companies that took part in the auction, seven submitted bids for some of the blocks. Most of the blocks received no offers, and the rest of the blocks had bids that didn't reach the minimum requirement for profit-sharing with the Mexican government.

The Mexican government was optimistic that auctioning the exploration blocks in the Gulf of Mexico would usher the modernization of its energy industry. The country wants to be as accommodating this time in contrast to how they hated foreign investors almost 80 years ago. National Hydrocarbons Commission and regulator of the auction Carlos Zepeda said he has placed transparency as top priority, adding that there were no "zero zoom" for favoritism.

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