Mexico on Monday auctioned eight out of ten deep water oil and gas blocks up for grabs in the Gulf of Mexico, and scored a joint venture for a major crude field in the most hotly-anticipated round of the country’s energy opening so far.
China’s Offshore Oil Corporation took two of the eight blocks, while Australia’s BHP Billiton outbid Britain’s BP in a bid to partner with Mexican state oil firm Pemex in the promising Trion light oil field in the Gulf of Mexico.
France’s Total also made three winning bids, teaming up with U.S. major ExxonMobil in the Perdido Fold Belt close to the U.S.-Mexico maritime border for one and with Norway’s Statoil and BP for two blocks in the Salina Basin further south.
“This underlines Mexico is very competitive in the oil and gas sector,” said Energy Minister Pedro Joaquin Coldwell.
Before the current administration ends in two years, Mexico will likely hold three more oil auctions for shallow and deep waters, as well as onshore areas, probably including tenders for so-called non-conventional fields like shale, the minister said.
Over the next decade, the fields auctioned on Monday could add some 900,000 barrels per day (bpd) to Mexican output, said Juan Carlos Zepeda, head of the national oil regulator.
All told, fields containing an estimated 8.4 billion barrels of oil equivalent (boe) were awarded.
Almost 1.2 billion of those were areas rich in most-valuable light and super light crude secured by China Offshore, a unit of the Chinese giant CNOOC, in the Perdido Fold Belt, where output on the U.S. side of the formation has been booming for years.
Joaquin Coldwell extended a “warm welcome” to the Chinese oil firm, which easily won the two blocks they sought. China Offshore’s entry into Mexico looks set to mark the biggest investment by a Chinese company in the country.
The Mexican unit of BHP Billiton secured the rights to tie-up with Pemex in Trion, less than 50 miles (80 km) from the U.S.-Mexico maritime border.
BHP outbid BP by some $18 million with a $624 million offer to complement its 4 percent additional royalty bid.
Pemex estimates Trion will require an $11 billion investment to successfully develop. The competition marks the first time the ailing Mexican oil giant will join forces with a private company to drill since losing its monopoly in 2013.
Pemex chief executive Jose Antonio Gonzalez Anaya said the Trion field would produce 120,000 barrels per day (bpd) by 2025, though the company has often missed output targets in the past.
The government had said it would be content if four of the 10 blocks went, so the auction was welcome news for Latin America’s No. 2 economy, which has been roiled by fears of economic turmoil by Donald Trump’s election as U.S. president.
The peso currency has slumped amid fears Trump will make good on threats to tear up a joint trade deal with Mexico or impose hefty tariffs on Mexican-made goods. It strengthened slightly during the auctions on Monday.
Trion is nearly 500 square miles (1,285 sq km) in size and is sandwiched between other blocks in border-straddling Perdido.
New investments in the project are expected to begin next year, almost entirely from BHP’s commitment to spend $1.12 billion, while commercial production is not seen coming online until 2022 at the earliest.