Weighing up partners for Mexico oil tenders

Weighing up partners for Mexico oil tenders

Jude Webber /FT

| Mar 13 03:03 |

International oil companies are “polygamous” by nature, says Iván Sandrea, chief executive of Sierra Oil & Gas, the first Mexican exploration company to be formed since the country’s sweeping reform of the sector to open it to private investment.

So one thing the former Statoil executive is not happy about is the government’s insistence that bidders in the two tenders so far launched can belong to only one consortium. “I’ve never seen this in other countries,” he says.

Still, given the natural urge in the industry, as he puts it, not to have to “marry only one bride and stay with her for the whole party”, Sierra is preparing to bid both as part of a consortium, and potentially team up with state oil company Pemex in some fields in which it is looking to bring in private partners.

Sandrea, speaking to reporters, would not say who else was in the bid consortium, but said its members numbered “less than three and more than one”.

Despite the oil price crash, he is expecting fierce competition for what will be the first competitive tender ever in the industry in Mexico. “In my opinion, Mexico ranks as one of the best opportunities [worldwide],” he says. “We are preparing for a competitive round.”

Sierra and its consortium partner got together last year with the aim of bidding for the first two tenders – offshore, shallow-water exploration blocks and shallow-water development fields, respectively. Sierra will not be the operator.

“We are also interested in some mature onshore fields, but not deep water,” he says. Despite his past experience in shale, he says Mexico’s shale prospects “are not a priority for us”.

Pemex is seeking partners for 14 so-called farm-out contracts of 10 areas, which are expected to be awarded in the coming months but which do not require tenders. The energy ministry said this week that it was waiting for details from Pemex.

“We are waiting for the announcement. We are doing technical studies on two farm-out opportunities with Pemex,” he says.

Sandrea may not like the consortium limit, but Sierra’s Edgar Jones, commercial and strategic director, praises the government for its openness to hear the industry’s concerns – as evidenced by its decision to sweeten the tax conditions.

But asked if the terms were now sweet enough, Jones says: “It’s still premature to say if this is enough or not.”

As for other concerns over doing business in Mexico – notably the security environment – Sandrea was sanguine. This is not a war-zone, or (his native) Venezuela, he notes. “The risk is moderate and manageable.”

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