Mexico Lifts Bidding Limits for 1st Batch of Oil Tenders

Mexico Lifts Bidding Limits for 1st Batch of Oil TendersMexico Lifts Bidding Limits for 1st Batch of Oil Tenders

Mexico’s oil regulator voted late on Friday to relax rules on bidding terms and contracts that form the first step in a historic sector opening that kicks off this summer with the public auction of 14 shallow water fields, Reuters reported.

The July auction will mark the first of five packages of oil fields up for grabs, part of a so-called Round One tender that follows a major energy reform approved by Congress last year.

The constitutional reform ended the decades-long monopoly enjoyed by state-owned oil company Pemex and aims to reverse a decade-long slide in Mexican crude output.

Responding to complaints from private and foreign companies, the national hydrocarbons commission, or CNH, eliminated caps on how many contracts firms can bid on. It also reversed a rule that would have required them to destroy the geological data they purchase for fields they are not ultimately awarded.

The CNH voted to give the finance ministry more oversight over the long-term development plans and annual work program budgets of each contract. The regulator also signaled an adjustment in the 14 contracts’ fiscal terms by putting greater emphasis on companies’ ability to recover costs during the contract’s exploratory phase.

Under the new rules, companies would be able to claim back a further 25 percent during the exploratory phase, with the chance of recovering up to 125 percent of their costs if they struck upon a commercial discovery. Companies whose profits from the contracts jump above a pre-agreed level would be forced to pay a higher percentage to the government.