Mexico's 1st Oil Auction Falls Short

Mexico's 1st Oil Auction Falls ShortMexico's 1st Oil Auction Falls Short

Mexico's historic first oil auction has fallen short of expectations, with only two of 14 offshore fields awarded, as the world's biggest firms shunned the inaugural sale.

The government offered 14 oilfields in shallow waters of the Gulf of Mexico worth a total of $17 billion, the first sale in an energy reform that ends the 77-year monopoly held by state-run firm Pemex, AAP reported.

The auction was the climax of President Enrique Pena Nieto's top economic reform, which was enacted last year after a heated debate in Congress, with leftist parties warning against giving up a symbol of national sovereignty. Energy Minister Pedro Joaquin Coldwell had played down expectations of a big sale, predicting that between four and seven blocks would be awarded. But nine blocks received zero offers while three others were not awarded because the offers fell short of government demands.

The group led by one of Mexico's new independent firms, Sierra Oil & Gas, was the only one to make acceptable bids for two blocks. The consortium includes US company Talos and Britain's Premier Oil.

Seven consortiums and 18 individual companies had qualified for the auction, but only nine participated in the end.

US giants ExxonMobil and Chevron, Anglo-Australian firm BHP Billiton, France's Total and Russia's Lukoil decided to skip the shallow water projects.

Analysts had warned that the auction could be affected by the nuclear deal between Iran and the west, because it will cause oil prices to slide further as sanctions on Iran's oil exports are dropped, adding 1.5 million barrels of crude per day in the market.

The government estimated that each block was worth $1.3 billion. Those not awarded on Wednesday will be offered again at later auctions.

Oil auctions are a new thing for Mexico and officials wanted to make them the most transparent in the world. The event was shown on a live Internet broadcast. The reform breaks the monopoly on drilling held by state-run firm Pemex since the industry's 1938 nationalization.