Mexico is about to undergo its first subsea land rush.

International energy producers that sat out Mexico’s historic oilfield auction this week will be among the fiercest competitors for potentially massive deepwater prospects that go up for sale as soon as next month, said Ivan Cima, Wood Mackenzie Ltd.’s head of Latin American upstream research. 

Unlike Wednesday’s government auction, which involved 14 close-to-shore fields holding at most a few hundred million barrels of crude each, the tranche of prospects Mexico is expected to offer in August includes more promising geologic structures, Cima said in an interview on Thursday. 

The blocks are near the line that divides U.S. and Mexican waters of the Gulf of Mexico and close to some of the most significant discoveries of the past 15 years on the U.S. side, Cima said. 

“Those are capital-intensive projects that are certainly geared to the larger operators,” he said. 

One of the prospects is about 50 kilometers (31 miles) from Royal Dutch Shell Plc’s Great White field, a 2002 discovery that began pumping oil as part of the Perdido project in 2010. Major U.S. and European oil producers form a small group with the financial might and offshore technical expertise to find crude in such challenging conditions and bring it to market, Cima said. 

If Mexico announces which deep-water assets are up for sale next month, foreign companies probably would be given about six months to study the offerings, Cima said. That would mean bid openings sometime during the first half of 2016. 

Opting Out 

On Wednesday, Mexico’s first oilfield sale for foreigners since the country nationalized its energy industry 77 years ago failed to attract bids from so-called supermajor operators such as Exxon Mobil Corp., Chevron Corp. and Total SA. Analysts cited the relatively small size of the reserves likely to be found in those fields, and faulted Mexican authorities for demanding too big of a cut of the profits. 

Only two of the 14 shallow-water blocks offered received qualifying bids. The 14 percent success rate was less than half the 30 percent to 50 percent goal that the government said would be its minimum for judging the event a success. 

Spokespeople for Exxon and Chevron declined to comment on Thursday. Both referred to statements they issued after Wednesday’s auction in which the companies pledged to remain engaged and interested in future Mexican oilfield offerings. 

Mexico desperately needs investment and the expertise of the biggest international explorers to reverse a multiyear plunge in crude output, Cima said. 

“The country has had a significant decrease in production over the last 10 years,” he said. “The outlook doesn’t get any better without the participation of industry players with more deepwater expertise. Mexico needs strong, external industry participation.”

Source: FuelFix -