Mexico’s Energy Commission Delays Bidding Rounds

Mexico’s state oil and gas regulatory commission, the CNH, said July 18 it will delay two bidding rounds for on-shore conventional and shale blocks, originally scheduled for September 27, until February 14, 2019.

Round 3.2 (nine shale blocks in the Burgos basin) and Round 3.3 (37 conventional blocks in the Burgos, Tampico-Misantla-Veracruz and Cuencas del Sureste areas) were postponed at the request of Sener, Mexico’s energy secretariat, and the industry.

“Sener requested the CNH to modify the dates of the calendar so that the act of presentation and opening of proposals takes place in the first two months of 2019, in order to promote the participation of a greater number of bidders,” CNH said. Also delayed was a plan to farm-out certain blocks currently operated by state-owned Pemex.

Only Pemex has registered to participate in the shale round, while only six companies have registered for the auction of conventional blocks. Most observers suggest the lack of interest stems largely from uncertainty surrounding the July 1 election of new leftist president Andres Manuel Lopez Obrador, known as Amlo, who will take office December 1.

“The uncertainty generated by the 2018 electoral campaign negatively impacted the interest in these three rounds,” said Adrian Lara, senior oil and gas analyst at GlobalData. “In particular for Round 3.2, there should have been more interested companies since these areas are quite similar to the successful round 2.3, but with almost three times more blocks. The farm-out round is quite important for Pemex and to date it only had six interested companies.”

Lara said the move by CNH to delay the bidding rounds should allow time for Amlo’s transition team to reassure private and foreign investors and counter fears that permeated the election campaign that a leftist administration would unwind measures taken since 2013 to open Mexico’s energy industry.

“By delaying the rounds, the agency is playing within its institutional space to secure continuity in the bidding without directly contradicting the new president’s message of reviewing upstream contracts,” Lara said. “By delaying these 2018 rounds, it allows more time to attract other companies to participate and it lets the next administration play their role if they want to review and provide feedback on the contract’s terms.”