Energy reform in Mexico opens market for first time in the nation for almost 80 years
CNOOC, China's largest offshore oil and natural gas producer, has strengthened its investment in Mexico's energy sector by buying two deepwater oil blocks at auction.
China National Offshore Oil Corp has won two of the 10 blocks on offer, one of them just 6.5 kilometers from the maritime border with the US, with bids that far outstripped the minimum required, according to the State-owned company.
The first offer was nearly six times the minimum required, and the second was almost as high, the company said.
The deepwater oil blocks are considered a "jewel in the crown" by the Mexican government. The auction was part of the country's energy reform that is opening a sector that has been closed to private exploration and production for nearly 80 years.
According to Li Li, energy research director with ICIS China, Mexico's energy opening, which is meant to revitalize the country's oil and gas industry, is good news for Chinese companies, as the country is listed as the 12th largest oil producer with rich oil and gas resources.
"Mexico's plan to tender deepwater exploration blocks in the Gulf of Mexico, open to foreign and private companies, is a good outcome for the country, given the low-price environment for oil and gas," said Li.
"It will further help Mexico open up its energy sectors. And, foreign companies, including the Chinese State-owned companies like CNOOC, will have more development opportunities and a more comprehensive strategic layout in South America through the bidding."
CNOOC and other participants have rich experience in offshore oil exploitation, which will help Mexico better drill for the country's rich deep sea resources, she said.
According to the Mexican government, four of the 10 deepwater blocks being auctioned are located in the Perdido Fold belt, near the US side of the Gulf. Six are in the unexplored Salina basin further south.
Pedro Joaquin Coldwell, Mexico's energy secretary, said the Mexican government is delighted that China came to compete and win, saying the move helps boost the two nations' economic ties.
If this contributes to opening a new chapter in Sino-Mexican relations, that will be something else good to have come out of the energy reform, he said.
Mexico abruptly annulled a $3.6 billion high-speed rail contract won by a consortium led by China Railway Construction Corporation in 2014, which strained bilateral relations.
Duncan Wood, head of the Mexico Institute at the Wilson Center in Washington said in an interview with The Financial Times that this is a sign that Chinese firms really want to get involved here, despite China not yet being a major player in Mexico up to now.
In addition to CNOOC, a consortium made up of Norway's Statoil, BP and Total of France also won two contracts. Mexican oil company Sierra was part of consortiums that won two other licenses and a Chevron-led bid scooped another.
Total and ExxonMobil of the US also won one bid. Shell failed to win the only block it bid for.
