Listado de la etiqueta: México

Proposed border tax could harm U.S.-Mexico energy trade: official

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A border tax floated by aides to U.S. President Donald Trump is «not a good idea» for bilateral energy trade, a senior Mexican official said on Wednesday, also confirming that Mexico’s second-ever deepwater oil auction would happen this year.

A 20 percent border tax on Mexican imports to the United States has been pitched by the Trump administration as one way to force Mexico to pay for a new border wall, a top campaign promise.

Separately, a so-called border adjustment tax has been proposed by the new administration and its Republican allies in Congress that in theory would tax imports but not exports.

Both proposed taxes face opposition from U.S. oil refiners and automakers, among other sectors, warning they would raise consumer prices.

«We don’t see this kind of a tax as a good idea,» said Aldo Flores, Mexico’s deputy energy minister for hydrocarbons.

«Our position continues to be that free trade and the free flow of these goods has benefited both countries, strengthening the energy security of both,» he said.

Relations between the United States and Mexico are especially tense as Trump has threatened to upend nearly a quarter century of free trade, deport millions of illegal immigrants and build his signature border wall while getting Mexico to pay it, something the Mexican government has said it will not do.

For decades, the two neighbors have nurtured a robust cross-border energy trade, with crude oil produced by state company Pemex sold to U.S. refiners, while American producers sell natural gas and fuels like gasoline and diesel to Mexican buyers.

Last year, the total value of U.S. energy exports to Mexico totaled $20.2 billion, while Mexico exported mostly crude oil worth $8.7 billion to the United States, in a reversal of the historic balance of energy trade between the two countries, according to U.S. Energy Information Administration data.

Similarly, Mexico’s crude shipments could be pressured if the United States approves the new Trump-backed permit for TransCanada’s (TRP.TO) proposed Keystone XL pipeline and the project brings new supplies of Canadian heavy crude to U.S. refineries.

«Supposing that (the pipeline) is completed, that changes the competitive playing field for Mexican crude,» said Flores, adding that producers of oil in Mexico would have to be more creative in how they market their output.

 

DEEPWATER AUCTION

Mexican and Canadian heavy crudes have competed for years for buyers among U.S. Gulf coast refineries.

While Mexico’s oil regulator is planning three new oil auctions later this year, covering shallow water and onshore fields, a new deepwater auction is also planned.

«It will be toward the end of the year,» said Flores, who also sits on the Pemex board and took over as deputy energy minister in August.

He declined to specify where the deepwater blocks would be located.

Flores added that a first-ever auction of shale oil and gas blocks would «probably» be scheduled, noting that necessary regulations would be published before the end of the year.

Last year, Mexico concluded four first-ever oil auctions, part of a landmark energy opening finalized in 2014 that ended Pemex’s decades-long monopoly, including a December deepwater auction that awarded 10 blocks to a wide range of international oil majors.

While Mexican crude output has declined over the past dozen years from a peak of 3.4 million barrels per day, Flores said he expected output to total 1.9 million to 2.0 million bpd in 2018, similar to a forecast of 1.94 million bpd for this year.

 

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David Alire Garcia and Adriana Barrera / Reuters

Wed Feb 15, 2017 | 8:09pm EST

Mexico, NAFTA and energy on the same side

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When it comes to NAFTA and energy, there is no doubt that Mexico gets the better end of the deal with a series of special carve outs for its national industry. The result has been an unbalanced, incongruous relationship between the United States, Mexico and Canada. In other words, when it comes to energy, NAFTA is anything but free trade .

Take the following examples from chapter six of NAFTA, addressing energy trade:

An American company is permitted to open a power plant in Mexico to generate power for Texas, but, according to the provisions carved out for Mexico’s nationalized energy industry, the power plant would have to sell all of its excess power to Mexico’s Federal Electricity Commission (CFE) at the rate negotiated by CFE. ( Annex 602.3(5) ) If a cogeneration plant is built in Mexico with the express purpose of providing power for a Canadian company’s factory in Mexico, then, according to NAFTA, it must sell any excess power to CFE. ( Annex 602.3(5)(b) ) In both cases, the American and Canadian operations face a disadvantage in price negotiations because they are required to sell excess power to CFE only.

When it comes to oil and gas exploration, NAFTA includes a provision requiring the three countries to maintain incentives to encourage companies to find new energy reserves. ( Article 608.1 ) However, in the special provisions, Mexico is exempted from incentivizing – or even permitting – private exploration and development. This special provision makes clear that “the Mexican State reserves to itself” all E&P, nuclear power, foreign trade, transportation, storage, distribution and electrical supply within its own borders. ( Annex 602.3(1) ). In the U.S. and Canada, free trade in energy exploration must be promoted. In Mexico, the government can do what it chooses .

Mexico is allowed to “restrict the granting of import and export licenses for the sole purpose of reserving foreign trade” in a variety of energy goods including (but not limited to): aviation fuel, gasoline, shale and tar sands, diesel oil, most forms of commercial gasses and kerosene. ( Annex 603.6 ). The U.S. and Canada must keep import and export licenses open.

These carve outs meant to favor Mexico’s national energy industries have not been kind to Mexico’s economy, energy supply or business development. Mexico has insisted one form or another of nationalized energy for almost a century . Basic tenants of capitalism explain that a closed, national energy regime prohibits competition, leading to misalignment of resources and prices. Absent a truly robust and well-managed system in Mexico, this is what happened.

In 2014, historically low levels of oil production, higher energy consumption and depleted oil reserves led Mexico amend its constitution to open Mexico’s state energy industries to foreign investment. These changes permitted the Mexican government to auction off certain oil and gas leases to foreign, private companies for development and to allow foreign companies to participate in owning pipelines, refineries, petrochemical plants and even electricity generation. Mexico also committed to bringing gasoline and natural gas prices in line with market prices rather than setting them artificially.

Although the process has not always been smooth – Mexico is experiencing gasoline shortages and spikes in gasoline prices, in part, as a result of these efforts – the overall trend towards liberalization in Mexico’s energy industry is promising. Many companies have bid for offshore leases to produce oil and gas in the Gulf of Mexico and the opportunities to invest in Mexican energy businesses are growing.

Since the Mexican state is no longer the only legal investor, owner, producer, buyer and seller of energy and energy products in Mexico, there is now a potential to renegotiate chapter six of NAFTA and eliminate the special provisions and carve outs for Mexico. This would not only help improve Mexico’s energy situation, but improve trade relations amongst the three North American trade partners.

Grupo México proyecta invertir en energía

Grupo México proyecta invertir en energía

Story by Ellen R. Wald, Ph.D. is a historian and scholar of the energy industry / Petroleumworld

02 17 2017

Reservas 3P de crudo se hunden 30% en un año

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Las reservas totales o 3P de hidrocarburos en México, incluyendo petróleo y gas, descendieron 30.1% en el último año, con lo que al 1 de enero del 2016 se ubicaron en 26,100 millones de barriles de petróleo crudo equivalente, luego de la consolidación de estos volúmenes que publicó la Comisión Nacional de Hidrocarburos (CNH) tras una controversia en la medición del campo Akal, el más grande de Cantarell.

Tan sólo del 2012 a la fecha, estas reservas 3P (probadas más probables más posibles) cayeron 40%, desde 43,837 millones de barriles.

En la consolidación nacional de reservas 2P y 3P del país, la CNH publicó que al 1 de enero del 2016 estas reservas se descomponen en 17,792 millones de barriles de petróleo crudo equivalente como reservas probadas más probables o 2P (con 50% de factibilidad comercial) y suman 26,140 millones de barriles de petróleo crudo equivalente, al añadirse las reservas consideradas posibles o 3P (con 10% de factibilidad comercial).

En petróleo, las reservas 2P ascienden a 13,272 millones de barriles y las 3P a 19,454 millones de barriles y en gas las 2P son de 22,026 miles de millones de pies cúbicos y las 3P de 32,567 miles de millones de pies cúbicos.

Las reservas totales de aceite cayeron 24.7%, que son 6,300 millones de barriles menos en comparación con el reporte al 1 de enero del 2015. Cabe mencionar que del 2013 a este último reporte cayeron 36.6%, que son 11,300 millones de barriles menos; prácticamente las reservas probadas del país.

Pero las reservas 3P de gas cayeron todavía más: 40.7% en un año (22,600 miles de millones de pies cúbicos menos en un año). Las reservas nacionales de gas se han reducido 48% del 2013 a la fecha.

Por campo, las mayores disminuciones estuvieron en Chicontepec, con una caída de 43% de las reservas 2P; además de Samaria Luna, en Tabasco, con una caída de 16%, y Akal, en Cantarell, que cayó 14 por ciento. En las reservas 3P, la caída en Chicontepec fue de 56%, en Akal de 11% y destaca una caída de 15% en las reservas de aguas profundas, por el efecto de los precios del petróleo que impactan en la rentabilidad de las reservas.

 

Perforación de pozos al suelo

El comisionado Héctor Acosta explicó en la primera sesión ordinaria del 2017 del órgano de gobierno del regulador que esta “dramática caída” obedece sobre todo a la disminución en la actividad exploratoria de Petróleos Mexicanos (Pemex).

“Desde el 2010 se ha visto una dramática caída en la perforación de pozos de la estatal”, dijo. Los pozos perforados en el 2015 fueron sólo 22, cuando en el 2004 se perforaron 105, según la Secretaría de Energía. “Esto impacta en la falta de incorporación de reservas”.

 

 

Oil Prices

 

 

 

Copyright: El Economista

Trump firma el retiro de Estados Unidos del TPP

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El presidente de Estados Unidos, Donald Trump, firmó este lunes la orden ejecutiva para retirar a su país del Acuerdo Transpacífico de Cooperación Económica (TPP).

Ésta fue una de las promesas de campaña del republicano. «Lo que acabamos de hacer es algo fabuloso para el trabajador estadounidense», afirmó.

No firmó acciones para instruir una renegociación del Tratado de Libre Comercio de América del Norte (TLCAN) con México y Canadá, pero dijo el domingo que comenzarían las conversaciones con los dos líderes para modificar el acuerdo.

“Llevamos mucho tiempo hablando de esto”, dijo Trump. “Creo que vamos a tener muy buen resultado para México, para Estados Unidos, para todos los involucrados. Esto algo realmente muy importante”.

La medida para retirar a EU del TPP es una mera formalidad ya que el acuerdo no había sido ratificado por el Senado.

Expertos en el tema afirman que era poco probable que la Cámara alta lo aprobara ante el escepticismo imperante sobre los acuerdos comerciales y la posibilidad de que lleven a la eliminación de empleos.

No queda claro si Trump tratará de concretar acuerdos individuales con las otras 11 naciones que comprenden el pacto, un grupo que según el Banco Mundial abarca el 13.5 por ciento de la economía mundial.

Trump sostiene que la pérdida de empleos de fábrica en Estados Unidos se debe a acuerdos comerciales como el Tratado de Libre Comercio de Norteamérica, o el que permitió la entrada de China a la Organización Mundial de Comercio.

El acuerdo entre varios países de la Cuenca del Pacífico, incluido México, fue promovido por el expresidente Barack Obama.

Sólo faltaba la aprobación de los congresos de los países participantes: Estados Unidos, Japón, Australia, Nueva Zelanda, Malasia, Brunei, Singapur, Vietnam, Canadá, México, Perú y Chile.

El TPP es un tratado de libre comercio multilateral que fue firmado por los gobiernos de los países negociadores en febrero de 2015. Al cancelar el TPP, Trump complacerá a muchos de sus partidarios más fervientes así como a varios demócratas, y abrirá un vacío económico en Asia que China está ansiosa por cubrir.

En un video publicado en noviembre, Trump prometía retirar a Estados Unidos del TPP “en el día uno” de su presidencia. Denominó al pacto comercial como un “desastre potencial para nuestro país”.

En sus 30 capítulos, el acuerdo regula un gran número de temáticas, que van desde el comercio de lácteos, hasta la regulación laboral, pasando por derechos de autor, patentes, inversiones estatales y medio ambiente.

La administración Obama consideraba al TPP como el mejor tratado posible, aunque varias organizaciones no gubernamentales lo cuestionan por alegar que tiene normas muy opacas para los trabajadores y el medio ambiente. Sostienen además que viola normas soberanas de países miembro e incluso limita el acceso a medicamentos.

FIRMA OTRAS ÓRDENES 

Además, el presidente de Estados Unidos firmó una orden que limita financiación de ONG extranjeras a favor del aborto.

También firmó el decreto que congela la contratación de empleados del gobierno de Estados Unidos, con la excepción de las Fuerzas Armadas.

Se trata de una propuesta que constaba en un documento que Trump denominó «Contrato con los electores estadounidenses», en un apartado que incluía un conjunto de seis propuestas para «limpiar la corrupción» de Washington.

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Copyright: El Financiero.

El decálogo de Peña para las negociaciones con Trump

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El presidente Enrique Peña Nieto anunció este lunes 10 objetivos con los cuales guiará las negociaciones con el nuevo gobierno del presidente de Estados Unidos, Donald Trump.

Peña Nieto expresó durante el evento ‘Posicionamiento en materia de política exterior’ que buscará un diálogo sin confrontación pero sin sumisión.

“Sí vamos a una negociación y para que sea exitosa debemos tener los principios que nos guiarán y los objetivos que perseguiremos”, dijo.

Estos son los 10 objetivos que planteó Peña Nieto:

1.- Estados Unidos debe asumir el compromiso de respetar los derechos de los migrantes mexicanos.

2.- Que cualquier proceso de repatriación de migrantes indocumentados que realice Estados Unidos sea ordenada. 

3.- El desarrollo del hemisferio occidental debe ser responsabilidad compartida. 

4.- Asegurar el libre flujo de remesas de los connacionales.

5.- El gobierno de Estados Unidos debe asumir el compromiso de trabajar conjuntamente con México para detener el flujo de armas de forma ilícita.

6.- Los intercambios comerciales de los tres países deben estar exentos de cualquier arancel o cuota, como ha ocurrido desde 2008. Se buscará incrementar las exportaciones a Estados Unidos y Canadá sobre una base de sana competencia y el desarrollo de sectores de mayor valor agregado.

7.- Al modernizar el marco comercial de América del Norte los gobiernos deben incluir nuevos sectores como el de telecomunicaciones, energía y comercio electrónico.

8.- Cualquier nuevo acuerdo comercial debe traducirse en mejores salarios para los trabajadores mexicanos.

9.- Proteger el flujo de inversiones hacia México y asegurarse que el país siga siendo atractivo para las inversiones. «Vamos a defender las inversiones nacionales y de cualquier otro país que haya confiado en México». 

10.- Trabajaremos por una frontera que nos una y que no nos divida.

«México no cree en los muros, nuestro país cree en los puentes».

La Secretaría de Relaciones Exteriores informó el jueves que el titular de la dependencia, Luis Videgaray, y el secretario de Economía, Ildefonso Guajardo, se reunirán en Washington con miembros confirmados del gabinete de Donald Trump el 25 y 26 de enero para hablar sobre las relaciones bilaterales.

Mientras que Donald Trump sostendrá una reunión el 31 de enero con Enrique Peña Nieto.

Copyright: El Financiero

Buscadores de petróleo apuntan a México

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Los buscadores estadounidenses de petróleo están cruzando la frontera para tratar de aprovechar la reciente liberalización del mercado mexicano de hidrocarburos en una apuesta a que el derrumbe del peso y otros problemas económicos no descarrilarán el negocio.

Riverstone Holdings LLC, una firma neoyorquina de private equity que es uno de los mayores inversionistas del mundo en energía, ha prometido inyectar más de mil millones de dólares en proyectos en México en los dos últimos años. Su portafolio incluye el financiamiento de un par de empresas formadas específicamente para aprovechar la privatización de los hidrocarburos: la exploradora de petróleo Sierra Oil & Gas y Avant Energy, que construirá y operará ductos y refinerías.

“Estamos decididos a ser actores importantes”, dijo Alfredo Marti, director gerente de Riverstone quien forma parte del equipo dedicado a México. “Decidimos que era una apertura muy real y genuina con activos de alta calidad”, enfatizó.

Sin embargo, los mercados mexicanos han estado caracterizados por la volatilidad desde la elección de Donald Trump a la Presidencia de EU, lo que refleja riesgos que pocos anticipaban hace un año.

Los inversionistas de energía también enfrentan un riesgo político si crece la oposición al Gobierno del presidente Enrique Peña Nieto. La desregulación del sector energético fue la piedra angular de su agenda económica, pero los recortes a los subsidios a la gasolina han provocado manifestaciones callejeras. Algunos observadores advierten que el proceso privatizador se podría detener si el PRI pierde las elecciones del próximo año.

Los opositores políticos de Peña Nieto “no pueden paralizar el proceso, pero lo pueden obstaculizar y desacelerar”, dijo Steven Otillar, socio de Houston de la firma de abogados Akin Gump Strauss Hauer & Feld LLP, que ha participado en acuerdos de energía en México durante dos décadas.

Pedro Joaquín Coldwell, secretario de Energía de México, catalogó la privatización como un éxito. “Hemos logrado demostrar a nivel internacional que México posee un sistema de subastas para contratos de petróleo caracterizado por estándares altos de transparencia y reglas iguales para todos”, manifestó en una entrevista.

Fuente: Vanguardia

Pemex lays out the map for the road ahead

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Mexico’s state oil company Pemex has laid out the broad strokes of a new strategy that could dramatically expand its use of partnerships in the Mexican exploration and production sector over the next five years.

The plans open up the possibility of more than 160 new opportunities for private companies over the next two years.

Pemex has already announced plans for the farm-down this year of an interest in the deep-water Trion discovery, and said 2017 would also bring other farm-outs in the shallow-water area of Ayin-Batsil and the onshore areas of Ogarrio and Cardenas-Mora. The company’s latest 2016-2021 business plan also labels 2017 as its target date for partnerships in the extra-heavy oil field of Ayatsil-Tekel-Utsil and the tricky but promising region of Chicontepec, as well as seven more unspecified onshore areas in the northern and southern parts of the country.

The strategy also sets out ambitious plans for 2018, with six deals proposed for shallow waters in the northern part of the country, 64 onshore agreements in the north and south and 86 natural gas contracts in the Burgos and Veracruz areas.

“Pemex’s business plan is a good roadmap, but short and medium-term challenges remain,” political risk consultancy Eurasia Group wrote in a note. “Operational challenges will remain substantial and many of the projects are likely to face delays.”

Pemex only recently gained the ability to take on operating partners in its projects as part of reforms passed in 2014 to end its nearly 80-year monopoly.

The state-led company has touted its new ability as being crucial to helping make up for its declining production curve and bringing in new technology and best practices.

A small number of farm-outs were announced with the passage of implementing legislation in 2014, but details since then have been scant other than Trion. Industry executives have called for more opportunities.

When it comes to exploration rights, by law Pemex must sign contracts for stakes in its projects via an open public bid round run by Mexican oil regulators, not just by direct negotiations.

Pemex did not provide many details on the projects mentioned, merely offering a list of “business opportunities” as part of its roadmap forward.

The strategy was unveiled as Pemex comes under pressure to show progress and activity on areas assigned in the process known as Round Zero.

That process divvied up what fields the Mexican player could retain following reforms but, without activity, acreage reverts back to regulators.

“The plan is very ambitious but I think it’s rightly so,” said Francisco Monaldi, adjunct professor of political economy of oil at Rice University in Houston, suggesting executives aim to position Pemex to take full advantage of the abilities offered by the energy reform.

Chiefly, Pemex will need to find a “winning formula” that can incentivise new operators to come in, and the process for the deep-water Trion block may end up being a model for that going forward, according to Luis Miguel Labardini, partner at Marcos y Asociados in Mexico City.

Ongoing discussions surrounding that joint operating agreement, with lots of feedback from international oil companies, led to the jettisoning of provisions that could have limited the autonomy of new partners, such as the ability of Pemex to unilaterally remove the new operator despite holding a minority stake in the project.

Some of the areas mentioned, notably the Ayatsil-Tekel-Utsil extra-heavy oil field and the Chicontepec region, also have higher production costs that could make economics difficult if lower oil prices persist.

Experts also acknowledged future political risk. The term of energy reform proponent President Enrique Pena Nieto is up in 2018, and the administration at present stands in a weak position due to multiple corruption scandals and its inability to stem violence from drug cartels.

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Copyright: Up Stream

RGU Secures Funding to Help Develop Oil, Gas Workforce in Mexico

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Robert Gordon University (RGU) in Aberdeen has been awarded funding to create a skills development framework for the oil and gas sector in Mexico. 

The framework will provide recommendations on how to address the potential skills gap in the Mexican oil and gas industry over the next 15 years, both at graduate and vocational level. The university secured the funding, which will be delivered by the British Embassy in Mexico, from the British Government’s Prosperity Fund. 

As part of the development plan, RGU will advise the Ministry of Energy in Mexico (SENER) on appropriate delivery models to train and further develop the Mexican workforce, and to secure a pipeline of future talent.

Work on the development plan has already begun and the framework will be presented to the Mexican Government in December, an RGU spokesperson told Rigzone. In its plan, RGU is undertaking a review of what the UK has done to develop its skilled workforce and is using that information to advise the Mexican Government.

Although Mexico has a long-standing track record as one of the leading hydrocarbon producing countries in the world, it is estimated that it will require more than 135,000 additional skilled people in the oil and gas industry over the next 15 years in order to meet production targets set by the government. 

“The Energy Reform in Mexico presents huge opportunities for the Mexican oil and gas sector,” said Professor Paul de Leeuw, director of RGU’s Oil & Gas Institute.

“RGU is delighted to undertake this important review on behalf of the FCO and to advise the Mexican Government on skills development options for Mexico,” he added.

«As part of the Energy Reform, SENER has developed a coordinated strategic human resource program for the energy sector, seeking to rapidly build capacity to respond to the needs of the transformed energy sector,” said Leonardo Beltran, SENER’s undersecretary for planning and energy transition.

“The partnership with the UK and particularly with RGU will support the development of capacity building of Mexico’s oil and gas sector,” he added.

“We aim to build a strong partnership that promotes an open, robustly-regulated Mexican energy sector with significant British collaboration. The UK is a global centre of energy excellence and we hope our experience can contribute to the successful implementation of Mexico’s new energy markets,” said the British Ambassador to Mexico, Duncan Taylor.

The project builds on the relationship RGU has been developing with SENER following the visit from the President of Mexico, Enrique Peña Nieto and his delegation to the university in March 2015, and builds on the Memorandum of Understanding (MoU) which RGU signed with SENER in September 2015.

This project is funded by the British Embassy in Mexico as part of its Prosperity Fund energy program. This program seeks to support Mexico’s economic development and create commercial opportunities in the energy sector. Through the Prosperity Fund, the British Government has supported Mexico to shape its energy legislation based on international best practices.

Copyright: Rig Zone

Mexico Said to Begin Quietly Hedging 2017 Oil Price in June

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Mexico started quietly buying contracts to lock in 2017 oil prices when futures were near their peak in June, signaling the start of what has in prior years been the world’s largest sovereign petroleum hedge, according to people familiar with the deal.

The Latin American country bought put options, which give it the right to sell crude at a predetermined price, in June and July, earlier than the usual period of late August to late September, said the people, who asked not to be identified because the process is private.

Brent crude, the global benchmark, peaked at nearly $53 a barrel in early June. Since then, prices have declined about $10 a barrel as the outlook for the global economy soured and OPEC countries boosted production. The people didn’t say how much Mexico was able to hedge before prices fell back.

In response to a list of e-mailed questions, the Mexican Finance Ministry’s press office declined to comment on the status or progress of Mexico’s oil hedge negotiations.

The Latin American country has spent an average of almost $1 billion a year over the past decade buying put options through deals with banks that in the past have included Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley, BNP Paribas SA, Barclays Plc and HSBC Holdings Plc, according to government documents. Mexico’s annual hedge is the largest undertaken by a national government and often roils the market.

Mexico and its bankers try to keep the hedge under wraps as long as possible, to avoid others front-running the trade and making the insurance more expensive. In the past two years, however, some details of the hedge emerged because of new regulations introduced in the U.S. with the Dodd-Frank Act.

Dodd-Frank

The rules forced U.S. banks to report some details of the deal through public swap data repositories. But this year not a single deal bearing the marks of the Mexican hedge has emerged, and two of the people familiar with the program said Mexico and its bankers were using non-U.S. branches of the banks to bypass the reporting rules.

The move to hedge 2017 oil prices comes as Mexico stands to take in about $3 billion from this year’s hedge, which was put on from June to August 2015, if prices remain around current levels. That follows last year’s record payout of $6.4 billion.

Despite Mexico’s hedging success — it received $5 billion in 2009 after oil prices plunged — few other commodity-rich countries have followed suit. Ecuador hedged oil sales in 1993, but losses triggered a political storm and the nation never tried again. More recently, oil importers Morocco, Jamaica and Uruguay have bought protection against rising energy prices.

Copyright: Rig Zone

Drafts of Bidding Terms and Production Sharing Contracts for Round 2 Phase 1 –Shallow Waters, were published by CNH

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On July 20, 2016, the Mexican National Hydrocarbons Commission (CNH) published the drafts of the Bidding Terms and Production Sharing Contracts (PSC) for Round 2, Phase 1, for the Exploration and Extraction of Hydrocarbons in Shallow Waters. Below is a summary of the most important terms and conditions of the drafts of the bidding terms and the PSC.

Shallow Water Blocks

The CNH will bid 15 shallow water blocks, 4 of which are located in the Tampico-Misantla oil province, 1 in Veracruz and 10 in Cuencas del Sureste oil province.

Bidding Terms

  • Interested oil companies may participate in the bid of the 15 blocks, as individual bidders or in consortium.

  • Interested parties and bidders should not be in contact with any official from the CNH or the government that is in any manner related to the Round 2 bids, as bidding terms and contracts should not be subject to negotiation. However, any interested party should be able to make comments related to the bidding terms and contracts through the CNH’s webpage.

  • All stages of the bidding process will take place in Spanish, unless there is a specific provision that states the contrary.

  • Bidding and contract terms, excluding prequalification requirements, might be subject to change at any point in time before their final publication.

  • The bidding process will occur in the following stages: i) publication of bidding terms, ii) access to data rooms, iii) registration, iv) clarifications to the bidding terms, iv) prequalification, v) filing of proposals, vi) awarding of contracts and vii) execution of contracts.

  • The following payments will apply:

    Registry fee – $750,000 MXP.

    To have access to the data rooms – Information worth at least $8,000,000 MXP.

  • Bidding day is set for March 22, 2017. The chart below illustrates the timeline for the bidding process:

  • To prequalify for the bidding process companies have to demonstrate, among others, the following:

  • Legal origin of funds.

  • Organization Chart

  • Information regarding companies that have control of the company.

  • In case of SPVs, their corporate and business structure must be detailed, indicating who has significant control or influence. Also Tax Returns and Audited Financial Statements of those that incorporated the SPV, corresponding to the last 2 years, should be filed.

  • Some of the requirements will be waived for those that successfully prequalified to Round 1, Phases 1, 2 and 4, as long as they are still the same members of the successfully prequalified bidder in the past phases.

  • Technical requirements are as follows:

    Experience as an operator in projects from 2011 to 2015 through (i) the participation in at least three projects of exploration and/or extraction of hydrocarbons, or (ii) capital investments in exploration and/or extraction projects that together amount at least USD $1 billion. . It is not required that the interested company participated as an operator in these projects.

    2.Experience as (i) an operator in at least one project of exploration and/or extraction of hydrocarbons in shallow waters and/or deep water or (ii) having participated as partner in at least two projects of exploration and/or extraction of hydrocarbons in shallow waters and/or deep waters in the last 5 years.

    3.Experience in industrial and environmental, health and safety programs during the last five years in exploration and/or extraction projects in shallow waters and/or deep wat

  • As for the financial requirements, the operator shall demonstrate economic capacity, meaning the contractor owns assets of at least USD $10 billion and have an investment credit rating or has shareholder’s equity of at least USD $1 billion. If the operator does not meet the above mentioned financial criteria on a stand-alone basis, the operator could participate in a Consortium demonstrating a shareholder’s equity of USD 600,000,000, as long as the other members of the Consortium demonstrate an aggregate shareholders’ equity of USD 400,000,000.

  • Bidders will be able to participate as an individual bidder and/ or as part of one or more consortiums, however, the one bidder cannot participate in more than four consortiums. Proposals are limited to one per contractual area. There are no restrictions for any company to partner with major oil companies, international oil companies or national oil companies, including Pemex.

  • The weighted average of the offer or biding factor to determine the winner will be calculated considering the value of the Participation of the State in the Operating Profit, and the additional investment factor related to the minimum work program, according to the formula provided in the bidding terms.

  • The additional investment factor is related to the additional investment commitment during the exploration period. The variable corresponding to the investment factor could be 1.5 in case of making an additional investment commitment of working units equivalent to two exploratory wells, 1 in case of committing to working units equivalent to 1 exploratory well and 0 if no additional investment commitment is made.

  • Minimum values to be accepted will be determined by Hacienda before the CNH publishes the final version of the bidding terms and contracts, and at that point Hacienda will also define when such values will be public.

  • A USD $500,000 letter of credit should be submitted as bid bond for each offer.

  • Contracts will be awarded on March 24, 2017 and should be executed within 90 days after they are awarded.

Production Sharing Contracts for the Exploration and Extraction of Hydrocarbons in Shallow Waters

  • Production Sharing Contracts will be applicable. Contractors will perform Oil and Gas activities under the PSC, within the contractual area, at their own cost and risk, in exchange of a consideration from the State.

  • The term of the Contracts will be 30 years. The term may be extended for 2 more periods of 5 years each.

  • Contracts include an initial transition phase of up to 120 days. In such period the Contractors must document the status and integrity of the fields and equipment and initiate a social impact and environmental study to establish the base line.

  • Contracts include an initial exploration period of up to 4 years. In such period

  • Contractors will be obliged to finish the minimum work program. The exploration period may be extended for an additional period of 2 years (conditions apply). This additional period could be extended if for causes non attributable to the contractor he is not able to finish the corresponding activities.

  • Contractors will have to file an exploration plan for approval within 120 following the execution date of the contract. CNH will have 120 days to approve it. If the plan is not filed within the established term, a late fee USD 10,000 per day will apply The exploration plan may be adjusted subject to CNH’s approval.

  • Contractors shall file a performance guarantee to cover their obligations related to the minimum work program. The amount of said guarantee will be the result of multiplying the reference value of the work unit by 75% of the work units corresponding to the minimum work program and its increase, or by the number of working units corresponding to the increase of the minimum work program not performed in the initial exploration period and the additional commitment for the additional exploration period.

  • Contractors will have to inform the CNH in case of a discovery within the subsequent 30 days the discovery is confirmed. Once that the Contractors notify the CNH, they will have 60 days to file the appraisal plan.

  • The appraisal plan will have duration of up to 12 months, that could be extended for another 12 months when technical or commercial conditions require it, subject to CNH previous approval.

  • The appraisal plan in case of a nonassociated Natural Gas discovery will have last of up to 24 months that could be extended for 12 additional months when technical or commercial conditions require it, subject to CNH previous approval.

  • Within 60 days after the ending of any appraisal period, contractors will have to inform if the discovery is a “commercial discovery”.

  • Within 1 year after the confirmation of a commercial discovery contractors will have to file the corresponding development plan which shall be approved within 120 days Provisions related to the relinquishment of areas and unifications are included. These provisions will not be understood as a decrease in the Contractor’s obligations to comply with work commitments for the exploration period or its obligations regarding relinquishment activities and other activities set down in the Contract.

  • Contractors will have to keep an Operating Account where transactions related to the contract should be recorded. Additionally, contractors will have the obligation to file budgets of the costs to be incurred during the implementation of each work program and shall comply with the requirements set forth in the PSC.

  • Items included or excluded in the cost recovery and the applicable procedure are properly described in annex 4.

  • Costs resulting from the exploration and production activities will be considered as recoverable costs as long as they comply with the applicable legislation and the guidelines established by Hacienda.

    Among the non-eligible and hence, non-recoverable costs established in the PSC, are the following: i)those not included in the budgets and work programs approved by the CNH or those in excess of the costs that were established in the budget elevate it in more than 5% or elevate the budget contemplated for the activity pursuant to the account catalogue over 10%, ii) financial costs, iii)donations, iv)costs for servitudes, rights of way and lease or acquisition of land, v) overhead expenses and vi) arbitration and dispute resolution costs, among others.

    Overhead expenses related to services received or activities carried out outside the Mexican territory will be recoverable up to a 1.5% of the authorized budget.

  • The volume of hydrocarbons will be measured at the measurement point which may be inside or outside the blocks. Simultaneous to the filing of the development plan, contractors will have to propose the procedures to store, measure and monitor the quality of the hydrocarbons.

  • Assets generated or acquired by the contractors to carry out the exploration and extraction activities should be transferred to the Government when the contract is terminated. Movable assets, lease assets or assets owned by subcontractors are exempted from the transfer to the extent the transactions were not carried out with related parties.

  • Contractors will be able to commercialize the production by themselves or through third parties.

  • Government take will include the i) Contractual quota for exploration phase, ii) royalties and iii) the percentage of the operating profit that will be adjusted according to an R-factor included in the Contracts.

  • The amounts corresponding to royalties will be determined pursuant to the formulas and values established in the Hydrocarbon Revenue Law (HRL) and will depend on the type of hydrocarbon.

  • The PSC includes a sliding scale system based on IRR (before tax) with an initial benchmark of 25% that starts decreasing the Contractor share until the IRR reaches a benchmark of 40%, leaving a final Contractor share to 25% of the bid value. For computing the IRR, the PSC allows the Contractor to recognize four times its costs linked to the minimum work program and to the increase of the minimum work program.

  • The consideration for the contractor will include i) cost recovery and ii) remaining percentage of the operating profit.

  • The percentage of cost recovery will be 60%. However, if in the contractual area only non-associated natural gas discoveries are made, the percentage will be 80%.In addition, for the determination of the recoverable costs, the eligible costs established in the minimum work program and its increase will be recognized at an additional 25% value.

  • The Contracts include provisions to determine the value of hydrocarbons similar to the ones included in prior rounds.

  • Decommissioning provisions are included. Contractors will have to incorporate an abandonment fund once the development plan is approved. The contractor shall deposit ¼ of the annual amount at the end of each quarter.

  • Local content obligations are included: 15% during the exploration period; 17% during appraisal period and for the development period the percentage will start at 26% and will increase yearly until it reaches 35% in 2025.

  • Contractors shall have insurance policies that cover civil liability, well control and damage to the materials generated or acquired during the exploration and production activities.

Administrative and contractual rescission clauses are included in the Contracts as well as provision related to dispute resolution mechanisms under ICC rules as in prior rounds.

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