Mexico auctions oil

The government of Enrique Peña Nieto and much of the Mexico’s business sector were happy with this week’s auction, the first to offer licences to explore and develop potential deepwater oil-gas blocks in the Caribean.

Their pleasure was understandable, partly because pessimists had predicted that low international prices would scare off potential buyers, and partly because previous auctions for land-based and shallow-water projects had generated little interest.

This time, however, only two of the 16 blocks on offer failed to find buyers, a good result by international standards.

The blocks are in unexplored territory, but are close to areas on the other side of the maritime border with the United States, which in previous years have been highly productive.

Investors in addition were offered fiscal incentives significantly better than those of the previous auctions, while the blocks themselves were bigger.

Winning bidders included France’s Total, Chevron and Exxon Mobil, both based in the United States, and China National Offshore Oil Corporation, a state-owned company.

Proceeds from the auction are estimated at some $42 billion, although precise numbers will not be known until after 2020, when the fields begin to produce.

The auction was the fourth held in Mexico, following a 2014 reform which opened the energy sector to private investment, after 77 years of a state monopoly.

Pemex, the state-owned company, lacks both capital and expertise, which would enable it to develop potential deepwater resources.