Politics vs. Economics: Will Iran’s opening affect Mexico’s deepwater tender?
by Jed Bailey | January 22, 2016
The crowning jewel of Mexico’s Round One, the upcoming fourth tender of deep-water blocks, faces a new competitor. On January 16, 2016, Iran reopened to inter-national investment following the lifting of sanctions related to its nuclear program. Although both countries’ offerings will appeal to many global upstream companies, each brings a unique combination of geologic, economic, political, and contractual risks. Under normal market conditions, companies would likely see the two opportunities as complementary components of a larger portfolio, rather than direct competitors per se. In today’s environment of exceptionally low oil prices and great uncertainty about future market conditions, however, companies are tightening investment criteria for long lead time, highly capital intensive development projects. As such, some companies may prioritize one opportunity over the other based on a preference for economic or political risk.
Iran and Mexico’s upstream tenders are compared below across three broad categories: the physical assets themselves, political and geopolitical factors, and the proposed contractual terms.
- Iran has the larger prize on offer
- But Mexico has the better playing field
- Contracting details and the devils they bring
- How will companies respond?
- How should Mexico respond?