Mexico's hydrocarbon auction round 3.1 for shallow waters saw mixedresults Tuesday, as oil companies competed for all the blocks offered inthe Cuencas del Sureste basin, but mostly overlooked the gas rich blocksat the Burgos and Tampico-Misantla-Veracruz (TMV) basins.
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* Awarded blocks expected to produce 235,000 b/d
* Blocks near Amoca, Zama highly contested
Mexico's National Hydrocarbon Commission (CNH) awarded a total of 16blocks out of 35 blocks available. No bids were submitted Tuesday for the17 blocks holding gas resources in the Burgos and TMV basins as companiesfocused on areas suspected to hold oil.
Mexico was auctioning a total of 8.2 billion boe of prospectiveresources. It awarded 2.23 billion boe of prospective resources with 780million boe coming from Cuencas del Sureste and over 760 million boe inTMV's Marine Golden Lane.
CNH expects production from the awarded blocks to start in 2022, with oilproduction peaking at 235,000 b/d by 2025 , and natural gas outputpeaking at 220 MMcf/d.
Analysts had expected companies to submit bids in the prolific Cuencasdel Sureste basin. The region holds over three quarters of Mexico'scurrent oil production, which was 1.95 million b/d in 2017.
Seven highly contested oil-rich blocks were awarded in the Cuencas delSureste basin which received a combined 27 offers. As a result of theauction, seven wells will be drilled in this region.
The Mexican government received $124 million in cash payments for thethree most highly contested blocks -- 28, 29 and 30. Bidders andgovernment officials at the auction said activity was so high because theblocks lie north of the prolific Zama and Amoca discoveries, which areestimated to hold up to 1.8 billion boe of oil in place.
Block 30, located in the Cuenca Salina Basin, was the most contested inthe auction, with Germany's DEA Deutsche, Premier Oil and Sapura Energyoutbidding Eni and Lukoil with a cash payment of $51.15 million.
An Eni and Talos consortium found the Zama and Amoca discoveries afterbeing awarded blocks in a prior auction. Eni has said Amoca will beginproduction next year and have a peak production of 90,000 b/d.
Other companies that won adjacent blocks in the previous deepwater andshallow water auctions were bidding in Tuesday's auction, includingShell, Total and Lukoil.
Mexico's state oil company Pemex was the largest winner of the auctionoverall, getting six blocks in joint bids and one in a solo bid.
US companies were absent, as ExxonMobil and Chevron submitted no bids inthe auction.
PEMEX WINS TMV BLOCKS
Bidding was thin for the TMV basin blocks, with CNH awarding just fourout of 13 blocks offered.
Pemex won three TMV blocks, with partners, in the auction.
Pemex was partnered with DEA Deutsche, Mexico's Citla Energy and Spain'sCEPSA, while British company Capricorn and Mexico's Citla won one blocktogether
The blocks awarded are in the northern area of theTampico-Misantla-Veracruz region near the Port of Tuxpan, where the onceprolific Marine Golden Lane trend is located.
The trend, discovered in 1963 by Pemex, is over the El Abra formation. Itreached a peak production of 390,000 b/d in 1970 from 12 discoveredfields.
Analysts told S&P Global Platts they were not very confident many blockswould be awarded in the region due to expected gas resources.
In the southern portion of this region lies the Cordilleras Mexicanasbasin, where Pemex has discovered a series of prolific deepwater gasfields such as Lakach, Kunah, Piklis, which have over 3.25 Tcf of 2P gasreserves.
In the previous shallow water auction Round 2.1, Pemex and partner DEADeutsche were the only companies to win one block.
REPSOL, PREMIER SOLE BURGOS WINNERS
Operators were generally uninterested in the marine Burgos region asRepsol and Premier each won two blocks from the 14 offered by the CNH.
Repsol won blocks five and 12, with 400 million boe of combinedprospective light oil and wet gas resources. Premier Oil won blocks 11and 13, with 190 million boe of combined prospective resources
Repsol won in previous Mexico auctions a shallow water block and threedeepwater blocks.
Premier to date has only won two shallow water blocks in a consortiumwith Sierra Oil & Gas and Talos.
Tim Davies, Premier's group exploration manager, told S&P Global Plattsthe British company seeks to expand its presence in Mexico.
"What we wanted to do this time was to be an early mover into a newbasin," he said.
Premier won both blocks uncontested, offering low equity to the state of29% for Block 11 and 34% for Block 13. Davies said the low equity offeredto the state is a reflection of the high exploratory risk involved inthis new basin.
Davies said Premier will approach Repsol with a proposal to develop theBurgos blocks together.
This was the first time Mexico has opened to private operators the Burgosmarine region to private operators.
Analysts previously told Platts that this play has not been verysuccessful north of the US-Mexico border, and its prospectively could below. It is an unexplored region with a handful of exploratory wellsdrilled by Pemex over several decades. No fields have been discovered yetin the region.
The onshore portion of the Burgos region has been historically a prolificdry gas producing area, peaking at 1.46 Bcf/d in 2010.
Mexico Round 3.1 auction results: Block 5, light oil and wet gas, 175million boe, Repsol; Block 11, light oil and wet gas, 110 million boe, PremierOil; Block 12, light oil and wet gas, 229 million boe, Repsol; Block 13, lightoil and wet gas, 71 million boe, Premier Oil; Block 15, light oil and wet gas,161 million boe, Capricorn, Citla Energy; Block 16, light oil, 134 millionboe, Pemex, DEA, CEPSA; Block 17, light oil, 130 million boe, Pemex, DEA,CEPSA; Block 18, light oil, 341 million boe, Pemex, CEPSA; Block 28, lightoil, 100 boe, Eni, Lukoil; Block 29, light oil, N/A, Pemex; Block 30, lightoil, 85 million boe, DEA, Premier Oil, Sapura; Block 31 light oil, heavy oil,wet gas, 173 million boe; Pan American; Block 32, heavy oil and dry gas, 245million boe, Pemex, Total; Block 33, ultra light oil, 104 million boe, Pemex,Total; Block 34, wet gas, 34.7 million boe, Total, BP, Pan American; Block 35,extra heavy oil, 40 million boe, Pemex, Shell.
(This story has been updated with additional results)
--Daniel Rodriguez, newsdesk@spglobal.com
--Edited by Jeff Mower, newsdesk@spglobal.com