American Oil and Gas Reporter - May 2015 - 60

SpecialReport: New World Mexico
The Ministry of Finance (SHCP) is in charge of assessing the
fiscal terms, and therefore plays a significant yet indirect role by
influencing the attractiveness of the areas offered to participants.
As shown in Figure 1, these are the primary agencies overseeing oil and gas investment in Mexico, but new institutional actors include an agency created to oversee environmental and safety regulations, and a fund that will be in charge of paying contractors and managing state oil revenues.
However, as evidenced by the ongoing first bidding round, participants' main point of contact is CNH. The commission is in
charge of organizing the data rooms, reviewing each company's
qualification process, conducting the bidding round, and awarding and signing contracts. It also will be in charge of the technical approval of exploration and development plans, authorizing surface exploration and well drilling, and managing contract
auditing.
These are not small responsibilities for an agency that has been
FIGURE 1
Mexico's New Institutional Arrangement

®

New
Oil & Gas
Operators

Source: Sener and GlobalData

around only for few years, that is still building its technical cadres
and expertise, and for which its role as a regulatory body has meant
some degree of confrontation with Pemex.
The fiscal regime applied to Pemex also has been changed.
During 2014, the Mexican government received a formal request
from Pemex consisting of a list of assets that it wished to keep
under its ownership. This process was dubbed "Round 0" and resulted in Pemex being assigned 83 percent of the country's proved
and probable oil reserves and 21 percent of all prospective resources. The awarded areas are called entitlements, and in the future, Pemex could request that Sener and CNH carry out a feasibility assessment to approve farming out selected entitlements.
The definition of the fiscal terms of these types of joint operating agreements will be established by SHCP.
First Bidding Round
In line with the schedule offered in mid-2014, the first bidding round has begun. It was split originally into five main phases that were scheduled to offer areas in the following order: offshore shallow water, extra-heavy oil, the Chicontepec Basin onshore region (home to an estimated 40 percent of Mexico's hydrocarbon reserves) and unconventional (shale and tight oil), other onshore areas, and deep water.
The government previously had released an ambitious timeline that would have seen the bidding for shallow-water areas
opened in the first half of November 2014, and for the four other areas in each of the first halves of the following four months.
In reality, the call for bids has been delayed for every scheduled
phase and it is possible that some producing fields and exploration
blocks in the unconventional areas have not been offered because
of their low attractiveness in the prevailing oil price environment.
The complexities associated with CNH organizing its first bid
round also will account for some of the change to the timeline
(Figure 2).

FIGURE 2
Round 1 Production, Exploration and Farm-Out Areas and Phases

Source: CNH

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American Oil and Gas Reporter - May 2015

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