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Mexico Opens Up oil Industry for Private Investments - the First Time in 80 Years

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Published on : Jul 16, 2015

In nearly 80 years, Mexico has opened up the doors to its oil industry to foreign investors for the first time. The North American country has decided to sell of 14 oil exploration blocks in the Gulf of Mexico.

In the bidding, however, only two of these blocks were sold, falling far short of the expectations set by the Mexican government from the long-nationalized industry to foreign and private investors.

In the pivotal auctioning of 14 blocks of oil and gas reserves of Wednesday, the government had planned to open the industry so as to encourage investments from the private sector and boost oil production. Of the originally planned 25 companies, only nine took part in the auction.

Production and shallow water exploration contracts were awarded to the same group formed by U.S. firm Talos Energy, Mexico’s Sierra Oil & Gas, and Britain's Premier Oil.

No bids were received, or no offers cleared the bar set by the finance ministry of Mexico, for the other 12 blocks being offered in the auction. The start to the auctioning process, seen as a way for the country’s economic reform, has so far remained quite inauspicious.

In the second block, the bidding consortium won with an offer of giving 55.99 percent of pre-tax profits to Mexico, with an additional 10 per cent work program commitment.
The same consortium won for its bid for the seventh block with an offer of 68.99 per cent share of pre-tax profits, also an additional 10 per cent work program commitment.

The energy ministry had previously said that tat at least 30 percent, or nearly five contracts would be made sold out in the auction of the 14 blocks and that the blocks that were not sold would be tendered again at a later time.