Pemex fails to attract strong interest for Chicontepec oil contracts


Pemex fails to attract strong interest for Chicontepec oil contracts


MEXICO CITY -- Pemex has failed to attract strong interest by oil-service companies for bids on a new round of production contracts at the geologically difficult Chicontepec onshore fields near the Gulf of Mexico, assigning contracts for the three areas with the least oil reserves among the six areas up for bid.

Pemex canceled the tenders for the three sites with the largest oil reserves due to a lack of interest.

The bidding was closely watched because Pemex was offering a new contract model created after a 2008 energy overhaul, in which contractors are paid on a per-barrel basis plus some of their costs. The new "integrated" contracts were supposed to draw more private investment in the state-dominated industry without taking the politically sensitive step of allowing shared-risk contracts or payment with oil.

The government of President Enrique Pena Nieto, who took office Dec. 1, is now pushing a much more aggressive energy overhaul designed to be more attractive to oil majors given Pemex's falling production over the last eight years.

David Shields, who runs the Mexican oil industry magazine and website Energia a Debate, said the lack of interest in the Chicontepec contracts was a perfect example of why Mexico's energy sector has to be opened up.

"It's a good argument for an energy reform, isn't it?" Mr. Shields said in an interview.

The lack of bidders for the second-largest Chicontepec site in terms of oil reserves, Amatitlan, caused surprise and confusion among Pemex officials carrying out the process, who first suggested a new round of bidding next week, but later declared the tender deserted.

Amatitlan has estimated reserves of 993 million barrels of crude-oil equivalent using the broadest measure of proven, probable and possible reserves, or 3P, according to Pemex.

The largest site up for a production contract was Pitepec, with more than a billion barrels of 3P reserves, and the third area that failed to draw bidders was Miahuapan, with 431 million barrels of 3P reserves.

A total of 16 companies had met Pemex's qualifications to submit bids, but most of them sent letters excusing themselves from the process, including Spanish oil major Repsol (REPYY).

Among the three contracts that were assigned by Pemex, the Mexican unit of Halliburton won the rights to drill at one of the smaller sites, Humapa, with 341 million barrels of 3P reserves. Pemex was offering a maximum of $6.50/bbl at the site plus some production costs under a complicated formula, and Halliburton beat out two other bidders for the contract.

Services company Operadora de Campos DWF won the contract for the Miquetla area of Chicontepec, which has reserves of 248 MMbbl, and Petrolite de Mexico offered the winning bid for the Soledad area, which has the lowest estimated reserves at 134 MMbbl. Pemex's maximum payout for the sites was $6.50/bbl and $6/bbl, respectively.

Pemex's Chicontepec project has been politically controversial since it began several years ago because the oil company spent several billions of dollars in investment while widely missing production targets.

Pemex originally estimated that the sprawling area near the Gulf of Mexico coast could produce as much as 600,000 bopd by 2021, but it is now estimating much less. Currently, Chicontepec accounts for about 65,000 bopd of Pemex's total crude-oil output of around 2.5 MMbopd.

Pemex estimates the area has up to 40% of Mexico's oil reserves, but also describes it as containing rock formations that made it difficult to extract oil and require thousands of wells with relatively low output.

Dow Jones News Services

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