Exxon Mobil, Chevron Apply To Bid For Mexican Oil Blocks

U.S. energy giants Exxon Mobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX) are among the 21 companies that have registered to bid for Mexico's fourth phase of maiden offshore oil blocks auction.

The supermajors have signed up alongside the likes of European biggies Royal Dutch Shell (LON:RDSa) plc RDS.A, BP plc (NYSE:BP) , Statoil (OL:STL) ASA (NYSE:STO) and TOTAL SA (TO:TOT) to submit proposals for Mexico's early December 2016 auction.

Phase 4 Round 1 Detail

The companies had applied to bid for 10 deepwater exploration blocks – 6 in the Salina basin of the Gulf of Mexico and 4 in the Perdido belt – covering a total of 8,250 kilometer and at depths ranging from 500 to 3,000 meters, as Mexico looks set to welcome private producers to drill in its waters for the first time in more than 75 years.

The areas being bid out for exploration in Phase Four of Licensing Round 1 are estimated to contain 4 billion oil-equivalent barrels in reserves – 22% more than in the auction’s earlier stages.

Terms & Conditions

Technical aspects for qualification requires the parties to have specified knowledge and experience in working in at least one deepwater exploration and production project at a depth of 1,000 meters in the preceding five years, which entails collective capital investments of a minimum $2 billion. According to the bid criteria, contracts will have terms between 35 to 50 years.

A Game-Changer for Mexico?

One of the world’s largest energy markets, Mexico recently opened up the country’s oil and natural gas fields to investment by foreign companies. The historic move – aimed to counter falling output – will see private entities operate in Mexico’s vast energy sector for the first time since 1938, when the industry was nationalized. Latin America's No. 2 economy is hoping to mop up investments up to $44 billion through all phases of the auction by luring multinationals like Exxon Mobil and Chevron to explore oil and gas in the country.

In fact, the winners of oil blocks from the first three bidding phases are looking to drill their first wells as early as the fourth quarter. Mexico feels that that it is necessary to attract state-of-the-art technologies and the financial muscle of overseas players to arrest falling output at the existing wells as well as develop promising deepwater reserves in the Gulf of Mexico.