Mexico will not restart upstream auctions in 2020

Mexico's government will not relaunch upstream auction rounds this year but will unveil a series of new energy projects by mid-February, President Andres Manuel Lopez Obrador said.

"There will be no rounds this year, that should be very clear," Lopez Obrador said today. "Not because of political or ideological reasons, it just does not make sense because they have not invested."

Lopez Obrador, a long-term critic of the 2014 energy reform that dismantled state-owned Pemex's monopoly, cancelled all scheduled auctions for upstream crude blocks, farm-outs and migrations within months of taking office in December 2018.

The president has made reversing a 14-year decline in crude output a cornerstone of his administration but Pemex has so far been expected to go it alone in increasing production.

"We have saved Pemex," Lopez Obrador said. "Production did not drop for the first time in 14 years last year, it was an extraordinary achievement."

Pemex produced 1.68mn b/d of crude in November, flat against a year ago and up from 1.64mn b/d in October, according to the latest information from Pemex.

While senior officials in government have called for the upstream auctions to be re-launched, Lopez Obrador says the three auction rounds have failed to attract the investment and production pledged.

Independent operators produced 47,000 b/d of crude in November, up by 62pc from 29,100 b/d in the same month a year ago. Output also rose by 3.8pc from 45,200 b/d produced in October.

"The companies say that they are going to increase production by 200,000 b/d in 2024, well, hopefully," Lopez Obrador said.

Independent operators have pledged to increase crude output to 280,000 b/d in 2024, compared to Pemex's 2.6mn b/d target.

Of the 111 contracts awarded in the three auction rounds, just 29 are production contracts with the rest still in exploration phase. Contract holders have paid $11bn in royalties and taxes and have committed to invest $37bn under the exploration and production plans approved so far.

Mexico's private sector oil association, Amexhi, estimates that independent operators could add up to 900,000 b/d of crude by 2040 if auctions were resumed based on the blocks identified in the energy ministry's existing five-year development plan.

Government revenue from those auctions could hit $104bn by 2040, Amexhi calculates.

Pemex had planned to launch tenders for integrated service contracts for the development of mature onshore fields last November — a contract model that received a lukewarm reception from the private sector — but it has yet to do so.

The government will instead launch a series of energy projects using public and private investment by mid-February, Lopez Obrador said today, without providing further information.

By Rebecca Conan

source: Argus Media