Mexico Awards 19 Deep-Water Blocks in Oil Auction

01/31/18 05:25 PM EST
   By Robbie Whelan and Anthony Harrup 

MEXICO CITY--Mexico awarded exploration rights to 19 oil blocks in the Gulf of Mexico Wednesday, drawing a range of international oil investors in the second major deep-water auction since the country opened its energy industry to foreign investment in 2013.

Royal Dutch Shell PLC, the world's second-largest non-state oil company, was the most aggressive bidder, winning nine of the 19 blocks awarded, four of them alone, four in consortium with Qatar Petroleum International Ltd. and one alongside Mexican state oil company Petróleos Mexicanos.

PC Carigali, a subsidiary of Malaysia's Petronas, was involved in six winning bids, the Qatari state oil company in five, and Pemex in four winning bids.

Energy officials said investment in the 19 blocks could be as much as $93 billion if exploration is successful. That compares with around $60 billion in investments committed in the 69 blocks awarded in seven previous auctions, which included deep-water, shallow-water and onshore prospects.

"Today's results speak for themselves," said Aldo Flores, undersecretary for hydrocarbons at the Energy Ministry, at a press conference.

The first production from the blocks is expected to come in 2028, and assuming successful exploration, they could produce 1.5 million barrels of oil per day by 2032, Mr. Flores added.

State oil company Pemex produced 1.95 million barrels per day of crude oil last year, the first time since 1980 that country's output was below 2 million barrels per day.

Shell was particularly aggressive in bidding on drilling rights in Perdido, an area rich in oil and natural gas production that straddles the U.S.-Mexican maritime border in the Gulf of Mexico. It won exploration rights to five of the nine oil blocks that Mexico's National Hydrocarbons Commission offered there. Pemex won another Perdido block on its own, while three went unclaimed.

On the U.S. side, just six miles north of the border, Shell operates the Perdido Spar platform, the only rig currently producing oil in the area, which pumps oil from the Great White, Tobago and Silvertip oilfields. The company says that under nearly 8,000 feet of water, Perdido is the second-deepest oil spar in the world.

Shell produced about 99 million barrels of crude in the U.S. Gulf of Mexico in 2017, according to the U.S. Bureau of Ocean Energy Management, making it the top producer in the area.

"If you just go over the border to U.S. waters, it's already a proven producing area," said Ruaraidh Montgomery, an analyst with energy consultancy Wood Mackenzie. "From a geological point of view, it's not so much a frontier area as it is an established area ... It gives them an established position where they potentially have line of sight for being there for a number of decades."

No oil has yet been pumped from the Perdido fields on the Mexican side of the border, although in December 2016, Mexico held its first-ever deep-water oil auction, awarding rights to four large Perdido blocks and a joint-venture with Pemex to develop the nearby Trion oilfield. None of the awards in 2016 were made to Shell.

The auction coincided with the Wednesday announcement by Shell of a major exploration find from its deep-water Whale well, also in the Gulf of Mexico. The company said it had found more than 1,400 feet of oil-bearing pay underneath the well, although the amount of oil reserves at Whale aren't known.

"Deep water is an important growth priority as we reshape Shell," said Andy Brown, Shell's upstream director, in a press statement.

Shell's successful bids on the Mexican side "fit in pretty well with the Whale discovery that was just announced," said Steven Otillar, a partner at Akin Gump Strauss Hauer & Feld. "Shell's also the one that operates the Perdido spar there, so it's a perfect synergy it seems for them."

After opening up the industry, Mexico has found itself competing for oil investment with other parts of the world, especially Brazil.

"In Brazil's last bid round, Exxon Mobil went very strong, pretty much the way that Shell did here in Mexico. They [Mexico] understand that they're competing for investment dollars all over the world," Mr. Otillar said.


Write to Robbie Whelan at and Anthony Harrup at


(END) Dow Jones Newswires

January 31, 2018 17:25 ET (22:25 GMT)

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