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Mexico's second deepwater bid round failed to disappoint as 19 of 29 blocks were awarded, including nine to Anglo-Dutch supermajor and Mexican offshore newcomer Shell. Eleven international firms from 10 countries bidding individually and in consortia won blocks--thought to be mostly oil-rich--in the Perdido Fold Belt, Cordilleras Mexicanas basin, and Salina basin of the Gulf of Mexico. Nineteen firms from 15 countries placed 39 bids overall. The winning bids comprised 44,178 sq km, 23 well commitments, and $525 million in tiebreak payments. Mexico's National Hydrocarbons Commission (CNH) announced the results 31 January in Mexico City.
Mexico’s second deepwater bid round failed to disappoint as 19 of 29 blocks were awarded, including nine to Anglo-Dutch supermajor and Mexican offshore newcomer Shell. Eleven international firms from 10 countries bidding individually and in consortia won blocks—thought to be mostly oil-rich—in the Perdido Fold Belt, Cordilleras Mexicanas basin, and Salina basin of the Gulf of Mexico.
Nineteen firms from 15 countries placed 39 bids overall. The winning bids comprised 44,178 sq km, 23 well commitments, and $525 million in tiebreak payments. Mexico’s National Hydrocarbons Commission (CNH) announced the results 31 January in Mexico City.
Benjamin Torres-Barron, partner at multinational law firm Baker & McKenzie, which represented four of the companies that participated in the round, said the auction was “very successful” with results “better than everybody expected.” Estimates prior to the event, including those of the government, had approximately 7–10 blocks being awarded.
Instead, about two-thirds of all available blocks were awarded, making Round 2.4 “a great success for the Mexican government,” said Eduardo Corzo Ramos, counsel with international corporate law firm Haynes & Boone. “Very important companies participated and in the bid values you can see how interested these companies are in Mexico’s energy sector.”
Ramos said he was impressed by the strength of the bids and high-dollar tie-breakers placed by the participating firms. “If you look at the winners, everyone was hitting the maximum [royalty of 20%] with a maximum investment factor.” Competition was particularly fierce for Salina basin Blocks 29 and 21, respectively won by Shell and a consortium led by Repsol with tiebreak bonuses of $110 million and $151 million.
Shell’s haul comprised four blocks won on its own, four in a consortium with Qatar Petroleum, and one more in a consortium with Pemex. Five were in the Perdido Fold Belt just south of the Mexico-US maritime border, and four were in the Salina basin to the southeast in the Bay of Campeche.
“We saw a vast, overwhelming victory by Shell,” said Torres-Barron. “I think Shell was very aggressive based on its prior experience” in Mexico’s first deepwater auction, Round 1.4 held in December 2016, in which the firm’s participation comprised a single failed bid alongside Atlantic Rim Mexico for Block 5 in the Salina basin. Shell learned that “you cannot have all the eggs in one basket,” and therefore diversified its bids through a number of blocks this time around, he said.
Shell concurrently announced on 31 January that it made “one of its largest US Gulf of Mexico exploration finds in the past decade” near Perdido in perhaps a signal that a comeback is under way for offshore exploration and development. Chevron and Total, two other majors who have actively participated in Mexico’s deepwater rounds, also reported a US gulf discovery on 31 January.
The events furthered energy reforms for the two Latin American oil and gas powers, both months away from presidential elections in which leftist candidates have vowed to dial back the changes. Preceding Brazil's 15th Round on 29 March was news that two blocks in the Santos Basin would not be offered after a court determined they would earn more value for the country as part of production-sharing contracts. Those blocks, which garnered strong interest, will be awarded in June. The offshore portion of the latest round was active nonetheless as 22 of 47 blocks were awarded, with much of the interest coming in the Campos Basin. Like the last Brazilian offshore auction in September 2017, ExxonMobil won the most blocks, tallying eight, while Petrobras and Wintershall each took seven blocks and Shell, Chevron, Statoil, and Qatar Petroleum (QP) each took four blocks.
Total, Google Cloud To Team on AI for Upstream
Matt Zborowski, Technology Writer
Total and Google Cloud are teaming up to combine artificial intelligence (AI) with subsurface data analysis in an effort “to explore and assess oil and gas fields faster and more effectively,” the French supermajor said in a press statement. Google Cloud has previously stated its intention to further its involvement with the oil and gas industry.
Under an agreement, the companies intend to develop AI programs to interpret subsurface images from seismic studies using computer vision technology and automate the analysis of technical documents with natural language processing technology. Total geoscientists will work with Google Cloud’s machine learning personnel as part of the same project team based in Google Cloud’s “advanced solutions lab” in California.
Pioneer Unveils Strategy To Boost Permian Production, Control Costs
Matt Zborowski, Technology Writer
A more crowded Permian Basin means higher drilling, completions, and operating expenses for exploration and production firms, many of which have already spent billions of dollars over the past couple of years to gain core acreage positions in the region.
Confident in its ability to take on these cost increases is long-time Permian operator Pioneer Natural Resources, which traces its roots in the basin back to the early 1960s with predecessor company Parker & Parsley. The company is in the midst of a plan to increase its production to 1 million BOE/D by 2026 while divesting its non-Permian assets.
Shale Output Redefining US Production
Stephen Rassenfoss, JPT Emerging Technology Senior Editor
Recent snapshots of last year’s US energy production show how the shale oil and gas business has gone from a revolution to an evolving production machine.
The centers of oil and gas production remain constant in the recently released production figures from the US Energy Information Administration (EIA), which show that the big-gest concentration of gas production is from a cluster of states—Pennsylvania, Ohio, and West Virginia. They just edged out Texas, which declined a bit last year.
A look at the production changes by state shows Louisiana and Ohio as the fastest-growing states, benefitting from the growing domestic and global markets for US gas.
Abu Dhabi Plans International Tender for Oil and Gas Exploration Blocks
Abu Dhabi National Oil Company (ADNOC) is planning its first-ever competitive tender for international partners to participate in the exploration and development of oil and natural gas, in an effort to boost production in the UAE.
Placed for bid will be four onshore and two offshore blocks, with bidding expected to conclude by October and ADNOC to announce the winners by year’s end, company CEO Sultan Ahmed Al Jaber said at a recent news conference. The partners would bear the exploration costs, and with the startup of production, ADNOC would assume a 60% interest.
Total Becomes Founding Partner of Smart Energy Fund in China
Total’s venture capital arm invested around $50 million to launch the Cathay Smart Energy Fund, alongside the provincial government of Chinese province Hubei (through Hubei High Tech Fund) and Cathay Capital.
Finalized on 27 March, this ranks as one of Total Energy Ventures’ (TEV) biggest investments to date in a fund. Dedicated to China’s energy sector, it will focus on renewable energies, the energy Internet, energy storage, distributed energy, smart energy, and low-carbon businesses.
“Everything changes at lightning speed. If you’re not paranoid, if you don’t check your rearview mirror constantly, you’re at risk of being overtaken,” said Girish Nadkarni, TEV’s CEO in a statement.
International Majors Expand Footprints in Brazil, Mexico
Matt Zborowski, Technology Writer
A wide array of international oil companies shored up their presences in Brazil and Mexico in March following a pair of auctions. The events furthered energy reforms for the two Latin American oil and gas powers, both months away from presidential elections in which leftist candidates have vowed to dial back the changes.
Preceding Brazil’s 15th Round on 29 March was news that two blocks in the Santos Basin would not be offered after a court determined they would earn more value for the country as part of production-sharing contracts. Those blocks, which garnered strong interest, will be awarded in June.
Mexico's historic public tender for its deepwater real estate resulted in the awarding of eight out of 10 blocks on offer. Held last December in Mexico City, the event marked the fourth and final auction of the country's Round One, which reopened doors to foreign oil and gas investment for the first time since the country's energy sector was nationalized almost 80 years ago. The awarded blocks went to 13 companies whose exploration and production operations are expected to generate around USD 34 billion over the next 15 years. The winning bids also committed to drill at least eight deepwater wells. All four blocks offered in the deep water Perdido area were awarded, including two to Chinese Offshore Oil Corporation (CNOOC) and one to a consortium of Chevron, Pemex, and Inpex--Japan's largest oil company.