Billion-Barrel Mexico Find Could Spur Rush on Next Oil Auctions

13 Jul 2017   Mexico

A billion-barrel crude discovery in Mexico could be just the lure the country needs to boost investment from oil majors as it lacks the wherewithal to reverse years of sagging output.  At a time when global oil prices were cratering, and drillers were nervously cutting exploration funds, Mexico’s earliest auctions drew spotty interest. Since then, however, European drillers led by Italy’s Eni SpA have increasingly become involved. The find in Mexico’s shallow waters could drive added interest — and higher bids — in future auctions as the government seeks to boost production that’s fallen by a third in the past decade.  The most important business stories of the day. On Wednesday, Premier Oil PlcSierra Oil & Gas and Talos Energy LLC announced the first Mexican discovery by explorers other than state-owned Pemex in 80 years, a reservoir with an estimated 1.4 billion to 2 billion barrels. With new auctions set for the end of the year, the find promises to rev up interest in Mexico’s energy riches moving forward, said Pablo Medina, an analyst at the consulting firm Wood Mackenzie Ltd.

“Future bids will likely be more aggressive,” Medina said in a telephone interview. “This obviously increases the attention people will pay. The area contiguous to this block is going to go up in value, no question.”  About a fifth of Mexico’s public budget relies on oil revenue, with production averaging 2.15 million barrels a day last year, the lowest level in more than three decades. That drop in output, combined with lower oil prices, forced the government to cut spending, causing growth in the $1.1 trillion economy to decelerate to the slowest pace since 2013.  Oil has hovered near $45 a barrel in New York, less than half the $100-plus it reached in 2014, as global supplies remain stubbornly high. The West Texas Intermediate benchmark closed at $45.49 on Wednesday.

Tags:

Comments are closed.