Mexico to proceed with auction round for shale fields

By NAUREEN S. MALIK and ADAM WILLIAMS on 3/17/2016

MEXICO CITY (Bloomberg) -- Mexico will hold a private bidding round for the nation’s shale oil fields this year in part to cater to continued interest from U.S. drillers eyeing expansion south of the border, according to Deputy Energy Minister Lourdes Melgar.

The country’s shale auction “will be this year,” Melgar said in an interview at the Foreign Affairs Mexico Energy Future Conference in New York. Mexico temporarily suspended plans for the country’s first-ever auction of its so-called unconventional oil and natural gas fields last year amid falling international crude prices.

“Companies working on the U.S. side of the border have expressed interest in working on other side of the border,” Melgar said. The interested parties are the "usual suspects" that are producing oil and natural gas in U.S. shale fields and are “mostly independent companies that have been very successful in shale development,” she said.

The decision to proceed with the sale of shale oil and gas fields adds an extra layer to Mexico’s auction plans this year, which also include a bidding round for 10 deepwater areas in the Gulf of Mexico scheduled for Dec. 5. The sales of onshore shale and deepwater fields will be the fourth and fifth oil auctions held by Mexico since the 2014 opening of the country to foreign energy investment, breaking Petroleos Mexicanos’ previous government-held crude production monopoly of more than seven decades.

Best practices

Mexico is still working to develop regulation that assures best practices and sustainability during hydraulic fracturing, where sand, water and chemicals may be pumped deep into wells to fracture shale. The regulation, which will be approved in the upcoming months, will also determine which areas have local support and the appropriate infrastructure and economics to accommodate possible shale development, Melgar said.

“Mexico is looking at ways to develop shale in a sustainable manner and take advantage of it as it has been done in the U.S.,” Melgar said. “With the fall in oil prices some of these areas aren’t as competitive right now, so we are taking advantage of the time we have right now to develop the regulation.”

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