MEXICO CITY—Buoyed by the results of Mexico's first deep-water oil auction, widely seen as a big success, President Enrique Peñ a Nieto's government plans to raise the bet.

Mexico intends to hold a second, much bigger deep-water auction around October next year, while state firm Petró leos Mexicanos will likely seek as many as 25 partnerships with private firms over the next two years, Energy Minister Pedro Joaquí n Coldwell said in an interview.

"We're going to be more ambitious, we'll take a step forward because we now have more experience," said Mr. Coldwell. "What we'll very likely see are auctions with many more oil blocks than what we have seen so far."

Mexico awarded eight out of 10 deep-water oil blocks in the Gulf of Mexico on Monday, exceeding expectations and attracting such oil majors as Exxon Mobil Corp. and the China National Offshore Oil Corporation, despite a difficult backdrop of low oil prices and steep cuts in oil investments.

In a separate auction, Australia's BHP Billiton won rights to partner with Pemex to develop the Trion field near the Mexico-U.S. maritime border—the first time Mexico's state-oil firm partners with a private company to share risks and profits.

The results "encourage us to be much more ambitious in the coming auctions," Mr. Coldwell said. "The menu [of blocks] is going to widen considerably."

The Energy Ministry is still preparing the second deep-water auction, which would likely also include shallow-water blocks, but Mr. Coldwell said at least 20 blocks would be offered, probably in September or October.

The positive results from the latest auction promise to provide a boost for an economy suffering from low oil prices, government budget cuts and uncertainty over what U.S. President-elect Donald Trump's administration will mean for Mexico's export manufacturing industry.

The first production of deep-water oil -- which carries higher risk but offers higher rewards than traditional deposits -- is still several years away.

The auction could also help the flagging approval ratings of President Peñ a Nieto, as the economic overhauls passed in his first two years in office have yet to translate into robust economic growth and Mexicans have been dismayed at government corruption scandals and a resurgence of violent crime in the past year.

Mr. Coldwell said this week's oil auction provides decisive support for the 2013 energy overhaul, which amended the Constitution to open the oil industry to private investors after 75 years of state monopoly.

Monday's oil auction was the fourth, and the first involving deep-water reserves. Mr. Coldwell said the government plans six more by the end of Mr. Peñ a Nieto's administration in late 2018. Mexican law doesn't permit presidential re-election.

Three auctions, including shallow-water and onshore blocks, are already scheduled between March and July. After the second deep-water auction next fall, two more are planned for 2018 which will likely include shale oil and gas for the first time.

"That would mean that by then, the energy reform would be very advanced as far as oil is concerned," Mr. Coldwell said. The government expects to have awarded nearly 100 oil contracts to private firms by the end of the administration.

During that time, Pemex will seek partners for 20 to 25 oil blocks, including shallow and deep water, onshore, and shale deposits. Those projects could contain commercial reserves, which are a major attraction for private oil firms.

Partnerships will improve the outlook for Pemex, which is immersed in deep financial difficulties and lacks the money or the technology to produce oil in more difficult and expensive deep-water blocks.

A confident Mr. Coldwell said Pemex's partnerships "are going to be one of the largest investment destinations in the oil industry in the next two years."

Write to Juan Montes at juan.montes@wsj.com and Robbie Whelan at robbie.whelan@wsj.com

 

(END) Dow Jones Newswires

December 06, 2016 11:25 ET (16:25 GMT)

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