February 28, 2015 / 1:45 AM / in 4 years

UPDATE 3-Mexico OKs 5 shallow water areas in Round One oil tender second leg

(Adds details on contracts, dates, well and pre-qualification requirements)

By Adriana Barrera

MEXICO CITY, Feb 27 (Reuters) - Mexico has approved draft auction terms for five shallow water areas containing around 355 million barrels of oil equivalent (boe) as part of its Round One tender opening up oil fields to foreign investors, the country’s energy regulator said on Friday.

The areas, located in the southern Gulf of Mexico, are divided into nine production-sharing contracts which will be awarded to companies or consortia by late September.

The final bidding terms and contracts for the areas already in various stages of development will be published by the end of May, a couple of weeks earlier that had been envisioned, said Juan Carlos Zepeda, head of Mexico’s national hydrocarbons commission.

Mexico’s historic Round One tender includes dozens of fields grouped by basin, with the first batch of 14 contracts approved in mid-December.

The newly approved second tranche covers about 108 square miles (280 sq km) and have similar terms and conditions as the first batch, including tax and royalty payments and gradually increasing national content requirements.

Winners of the draft contracts must drill at least nine wells during the first two years of the 25-year contracts, which can be extended by two additional 5-year periods.

To pre-qualify for the contracts, operating companies must have a decade or more of offshore experience in at least three exploration and production projects that total at least $1 billion in capital investment.

The companies must also be able to demonstrate production of at least 10,000 boe since 2010.

Edgar Rangel, a CNH Commissioner, said he expected output from the fields to average 125,000 barrels per day (bpd), with the potential to rise to 150,000 bpd.

“It is a very good volume, it is good crude,” Rangel said.

Round One covers areas including the onshore Chicontepec basin and the deep water Perdido Fold Belt. The government has said it expects to attract up to $50.5 billion in investments between 2015 and 2018.

Last month, however, the government said tenders for exploration and production of shale and other more expensive oil and gas deposits could happen later than planned because of slumping oil prices, which could also hit government spending in 2016.

State-run oil company Pemex has postponed some deep water exploration projects and will cut jobs because of the slump.

Pemex is struggling to reverse a decade-long slide in crude production and exports after the historic overhaul of the domestic energy sector was finalized last year, ending its long monopoly.

Mexico is the world’s 10th largest crude producer and oil revenue makes up about a third of its budget. (With reporting by David Alire Garcia, Ana Isabel Martinez, Christine Murray and Joanna Zuckerman Bernstein; Editing by Simon Gardner)

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