Mexico’s Deepwater Attracts Exxon, Chevron, Hess Partnership

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America’s two supermajor energy producers, Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), are joining forces with Hess Corp. (NYSE: HES) to bid as a group for rights to drill in Mexico’s deepwater offshore fields. The auction is currently set for December 5 and includes 10 offshore regions.

The three companies have reached a joint operating agreement, according to sources cited by Bloomberg News. Details of the agreement are not available, but such deals typically state the roles and obligations of the partners and designates which will be the project’s operator.

Since removing a nearly eight-decade ban on non-Mexican exploration and production companies, Mexico has held three auctions and achieved only modest success. The first, in July 2015, resulted in just two of 14 shallow-water blocks being taken. A second auction last October resulted in three of five shallow-water offshore contracts being awarded, and the third, with bidders competing for onshore assets, drummed up 25 bids for 25 fields, most from small Mexican firms.

The December deepwater auction is expected to raise some $44 billion from 26 companies qualified to bid in the first-ever sale of deepwater rights. Royal Dutch Shell PLC (NYSE: RDS-A), Statoil ASA (NYSE: STO) and BP PLC (NYSE: BP) are also expected to sign joint agreements and participate in the bidding.

Mexico is also planning to auction rights to onshore shale oil fields late this year or early in 2017. A previous try at auctioning these fields was a bust, primarily due to timing. But the shale auction may be the most lucrative of all for Mexico.

Mexico’s national oil company, known as Pemex, has estimated that the country’s onshore shale resource is 60.2 billion barrels, more than half of which is oil. Another assessment, by the U.S. Energy Information Administration (EIA), estimated a total recoverable resource of 104 billion barrels, of which 13.1 billion barrels are oil.