Mexico’s Round One Second Tender and Beyond

by Jed Bailey | October 2, 2015   

On September 30, 2015, Mexico’s Comisión Nacional de Hidrocarburos held Round One’s second tender. The tender awarded three of the five blocks on offer, each at a substantial premium to the minimum acceptable bid. More importantly, the result left a broad impression that Mexico’s Round One is back on track. Government and industry focus is now turning to December 15, 2015 when the third round will offer on-shore blocks with proven reserves. The highly anticipated fourth round that will offer deep water exploration blocks has yet to be scheduled.

Implications for future tenders

Although it is tempting to extrapolate the experiences of the first two tenders, it is important to remember that each tender is unique. The tender parameters, contract terms, and fiscal requirements changed significantly between the first two rounds, and will likely continue to evolve. Indeed, the third tender will be based on license concessions rather than production sharing agreements used in the first two. In addition to the above ground factors, each tender focuses on specific below ground characteristics and each block being offered has its own distinct geology, geography, and potential. Each new round is therefore a new experience; only so much can be inferred from the results to date.

As government officials prepare for the next two tenders, it is important to keep these differences in mind. Most importantly, officials should bear in mind the competing opportunities for the specific blocks and investor profiles that are targeted for each tender.

From a competitive perspective, each tender has also presented a largely unique set of competitors. There was relatively little overlap among the companies in the first and second tender, and even less expected with the third and fourth. Efforts to gauge competitors’ bidding behavior from past actions will therefore be difficult.

 

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