Monday, September 26, 2022

Oil companies swap stakes in Mexico as government holds off on auctions

Must Read

OilNOW is an online-based Information and Resource Centre

(Reuters) – With Mexico’s government insisting that energy companies increase oil and gas output before it auctions off more of the country’s vast reserves or offers more partnerships with state-run Pemex, firms ranging from foreign majors to local players are scrambling to buy and sell blocks they already own.

The negotiations are creating a dynamic secondary market for oil acreage, which could be the only investment opportunity left for firms until leftist President Andres Manuel Lopez Obrador unblocks his predecessor’s flagship energy reform that has seen no new licensing rounds since 2018.

Companies selling stakes include large foreign producers that were awarded blocks in previous rounds such as China’s CNOOC and Germany’s Wintershall Dea. Smaller firms including Hokchi Energy and Grupo Diavaz are also trying to share a portion of their assets.

For sellers, allowing partners to get into their projects is a way to limit growing political and financial risks while sharing required capital expenditure. For buyers, this secondary market can open a way into a country whose industry still holds enormous potential although its competitiveness is fading.

“If I want to grow and there are no rounds, the only option left is to buy a stake in some of the existing,” said Benigna Leiss, former country manager of U.S. Chevron Corp in Mexico. “Fortunately, regulation allows doing so.”

Several high-profile negotiations were announced since last year between firms including Italy’s ENI, Qatar Petroleum, Royal Dutch Shell and Chevron.

Former President Enrique Pena Nieto awarded over 100 contracts to energy firms in 2015-2018 to explore and produce oil and gas in Mexico. His reforms also opened the door for Pemex to form joint ventures.

But Lopez Obrador’s administration has suspended auctions planned for 2019 and halted farm-out opportunities until the existing projects add barrels to Mexico’s dwindling output.

Now, negotiations of stakes have brought opportunities for all types of investors, ranging from promising deepwater areas at Mexico’s Gulf to small onshore fields.

CNOOC, which faces heavy capital investment in Guyana, plans to sell stakes in two offshore blocks at Mexico’s Perdido basin. The negotiations are expected to be done in January, the company said, without revealing names of the interested buyers.

CNOOC in 2018 said it could sell or swap some of its unit Nexen Petroleum’s U.S. Gulf assets as part of a portfolio rebalancing. But planned stake sales in Mexico are “ordinary trading” of projects for oil exploration unrelated to other regions, the firm added in an email to Reuters.

Wintershall Dea, the oil and gas unit of chemicals giant BASF, is also reshuffling its Mexican portfolio after buying independent firm Sierra Oil and Gas in late 2018 by offering a stake in an offshore block it shares with Malaysia’s Petronas [PETRA.UL], according to three sources.

Wintershall declined to comment.


Latest News

Government to compensate property owners who will be displaced by Gas-to-Energy project – Attorney General

A government delegation led by Guyana’s Attorney General, Mohabir Anil Nandlall, on Friday met with residents of several Region...

More Articles Like This