UPDATE 3-Failed Pemex oil field auction ups pressure on Mexico to reform
POZA RICA, Mexico, July 11 (Reuters) - Mexican state oil monopoly Pemex got a dismal response to an auction of contracts at one of its main oil fields on Thursday, turning up pressure on the government to open up the industry to more private capital with an imminent reform.
Most bidders in the Chicontepec basin auction signaled they wanted a higher fee per barrel than Pemex would pay for the private contracting scheme to turn around part of the massive field, which has consistently fallen short of expectations.
Pemex only successfully contracted half of the six blocks put out to tender, part of Mexico's efforts to find more investment to boost flagging crude output.
The two biggest blocks, Pitepec and Amatitlan, did not even attract bidders, the company said.
The lack of interest led to immediate calls for President Enrique Pena Nieto to push for a reform that will make Mexico's oil industry more attractive for private investors when the government presents its planned overhaul by early September.
"The process in this round has been a failure," said Luis Miguel Labardini, a partner with Mexico City-based energy consultancy Marcos and Associates.
"This shows the new administration that what is really required in Mexico is a deeper reform."
Pemex, meanwhile, hailed the tender as an success.
"We see the result very positively as we were able to assign three blocks at very, very attractive prices," said Carlos Morales, head of Pemex's exploration and production arm.
The three successful tenders obligate Pemex to pay each of the winning companies less than $1 per barrel produced plus full reimbursement of production costs. Mexico's crude oil exports currently fetch as much as $109 per barrel.
Pemex failed to attract any bids from multinational oil producers. While oil majors BP and Royal Dutch Shell both purchased project specifications, neither ultimately sought to qualify for the auction.
"That shows you that the big oil companies are looking for commercial opportunities on the scale to which they're accustomed, but they didn't find any," said George Baker, the publisher of Mexico Energy Intelligence, an industry newsletter.
Among the auction's winners, U.S. oil services giant Halliburton won the contract to operate the Humapa block, which contains 341 million barrels of oil equivalent (boe) in proven, probable and possible (3P) reserves spread across 49 square miles (128 sq km).
And Mexico's Grupo Diavaz got the nod for the Miquetla block, which contains 248 million boe in proven, probable and possible reserves spread across 43 square miles.
Pemex said it will launch a new auction for the three blocks that failed, Amatitlan, Pitepec and Miahuapan, the company said. It did not provide further details.
The Chicontepec auction marks the third round of the country's fee-per-barrel private contracting scheme, fruit of a 2008 reform aimed at revitalizing aging oil fields and attracting long-term private investment.
The six blocks constitute about 15 percent of the basin's total reserves, or about 3.2 billion barrels of crude equivalent, and cover 368 square miles.
Sixteen companies, nearly all oilfield service companies, pre-qualified for the auction.
Pemex's Morales added that a fourth round of contracts, including up to five blocks, will be auctioned by October in southern Mexico, but he did not offer further details.
The Chicontepec basin, discovered more than 80 years ago, is located in the east-central states of Veracruz and Puebla and is home to about 40 percent of Mexico's certified hydrocarbon reserves, or about 17 billion boe.
Last year, Chicontepec produced an average of 74,800 barrels per day (bpd). Despite heavy investment, Pemex has failed to meet production targets at the geologically complicated basin, where millions of barrels of oil are scattered across many small deposits, a feature that makes production costly and slow.
Boosting output is one of the chief aims of the government's energy reform, which will be a major political challenge.
The Mexican constitution mandates that only the state can own and commercialize the country's oil and gas resources, but Pena Nieto has promised a major overhaul of the industry to attract new investment from private oil companies.
His Institutional Revolutionary Party (PRI) must break with years of tradition to go down that path, and will need support from other parties in Congress, where it lacks a majority.
Pemex has been a symbol of Mexican self-sufficiency since the oil industry was nationalized by the PRI in 1938.
While details of the reform have yet to be revealed, a formal proposal is expected by Sept. 8.
Mexican crude oil production has fallen to just over 2.5 million bpd from a peak of 3.4 million bpd in 2004.
- Carnage at U.N. school as Israel pounds Gaza refugee camp |
- EU and U.S. announce new sanctions on Russia over Ukraine |
- U.S. Senate bill proposes sweeping curbs on NSA surveillance
- Obama says strains over Ukraine not leading to new Cold War with Russia
- Putin may have passed point of no-return over Ukraine