March 27, 2018 / 4:50 PM / 3 months ago

Final Mexico oil auction begins with uneven demand ahead of election

MEXICO CITY (Reuters) - Mexico saw patchy demand for oil and gas blocks auctioned on Tuesday under the shadow of promises by a presidential frontrunner to review contracts awarded under a historic energy opening if he wins the July 1 election.

Members of Mexico's National Hydrocarbons Commission (CNH) and participants are seen during an auction of shallow-water oil and gas blocks, in Mexico City, Mexico March 27, 2018. REUTERS/Henry Romero

Spain’s Repsol and Britain’s Premier Oil were among the winners but 19 of the 27 blocks in the first two Gulf coast basins on offer received no bids, Mexico’s energy regulator said. Results for a third basin were due to be announced later on Tuesday.

Leftist Andres Manuel Lopez Obrador, who has a comfortable lead in most polls, said that if he wins the July 1 vote, he would review more than 90 contracts signed since Mexico passed legislation in 2013 ending the 75-year monopoly of state energy firm Pemex.

Running for office for a third time, Lopez Obrador has also said he would hold a referendum on the future of the reform, and ask President Enrique Pena Nieto to cancel two auctions planned for the second half of the year, if he wins in July.

Mexico’s next president takes office in December.

Despite the political uncertainty, Tim Davis, the group exploration manager for Premier Oil, said he was bullish about the future of the oil and gas opening.

An employee of Mexico's National Hydrocarbons Commission (CNH) is seen on a screen as she places documents during an auction of shallow-water oil and gas blocks, in Mexico City, Mexico March 27, 2018. REUTERS/Henry Romero

“I think you could see a slowdown (if Lopez Obrador wins).

“But...I think they will see the benefits,” of the investment that’s coming in and the invigoration of new ideas and new companies coming in.

Repsol and Premier Oil claimed two areas each in the shallow-water Burgos basin.

Consortiums made up of state-run Pemex, Mexico’s Citla Energy, Spain’s Cepsa, Britain’s Capricorn Energy and Germany’s DEA Deutsche Erdoel posted winning bids for four blocks in the Tampico-Misantla-Veracruz basin further south along the Gulf.

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Mexico’s deputy secretary for hydrocarbons Aldo Flores blamed the patchy interest on the quantity of natural gas in some of the blocks, saying companies were more interested in finding oil.

“This will continue to be a challenge for us given the abundance of natural gas in Texas at very low prices,” Flores told Reuters on the sidelines of the auction in Mexico City.

REGIONAL CONTESTS

Mexico is also competing for private companies’ interest with Brazil, which is also holding an auction this week, with another scheduled in June.

Brazil holds its own election in October, with the most likely leftist contender in the presidential race, Ciro Ferreira Gomes, warning he would expropriate energy assets bought by investors if he wins.

In Thursday’s auction, Mexico is offering 35 areas in the Burgos, Tampico-Misantla-Veracruz and Southeast basins.

Fourteen companies including BP, Chevron, Eni, India’s ONGC Videsh, Pemex, Petronas, Repsol, Shell and Total qualified to bid as individual bidders, while 22 consortia have also qualified to bid.

Davis said Premier would be bidding on more areas later on Tuesday.

“If we win all the ones we bid on, I’m going to have a big hangover tomorrow,” he said.

Additional reporting by Marianna Parraga; Writing by Gabriel Stargardter; Editing by Frank Jack Daniel, Susan Thomas and Diane Craft

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