BHP Billiton, Cnooc, Total, Others Take Blocks in Mexico Offshore Auction--2nd Update
December 05 2016 - 4:44PM
Dow Jones News
By Robbie Whelan
MEXICO CITY -- Australia's BHP Billiton won the bidding to join
with Mexican state oil company Petróleos Mexicanos to explore a
oil-rich region of the Gulf of Mexico, in the first award of
several auctions of deep-water oil blocks on Monday.
Billiton outbid BP PLC to become Pemex's first private partner
in exploration and production in a deep-water block containing its
Trion oil field, located offshore just south of the U.S. Mexico
border, under Mexico's 2013 opening of the oil industry to foreign
investment.
China Offshore Oil Corp., or Cnooc, won two other blocks. One of
its bids offered an up to 17% additional royalty on oil production
to the government.
Other successful foreign bidders include a consortium of
France's Total SA and Exxon Mobil Corp., a group comprised of
Statoil ASA, BP PLC and Total, and another group including Murphy
Oil Corp., Ophir Energy and Malaysia's Petronas Carigali. Mexico
awarded eight of the 10 deep-water blocks up for bid, in addition
to the Trion joint-venture with Pemex.
Chevron Corp. also was awarded a deep water block in a joint bid
with Pemex.
For Trion, both Billiton and BP offered additional royalties of
4%, on top of the minimum royalty payment of 7.5%, while Billiton
offered an additional cash commitment of $624 million, higher than
the $606 million offered by BP.
Billiton will have 60% of the project and Pemex 40%, and as
winning bidder is obliged to make a minimum investment of $570
million.
Timothy Callahan, director general with BHP Billiton in Mexico,
said his company became more confident in its bid after Pemex in
early November changed certain terms in the Trion joint operating
agreement, including the voting procedures governing the
contract.
"We had to get comfortable with the JOA. It's not completely in
line with international standards...but we look forward to working
with Pemex, " he said.
BHP Billiton has collaborated with European exploration
companies on the production of two oil fields in U.S. waters in the
Gulf of Mexico. "We're a proven operator on the U.S. side of the
border," Mr. Callahan said. "We have proven that we can work in
deep waters and that we can work in the Gulf of Mexico, and we hope
to bring both skill sets to our collaboration with Pemex."
The auction is the fourth under the 2013 opening of the Mexican
oil industry, but the first for deep-water reserves and the first
to attract the interest of major oil companies.
The Trion field, part of a larger area of oil deposits known as
the Perdido trend, was discovered in 2012 and is thought to contain
about 485 million barrels of commercial reserves. It is expected to
cost about $11 billion to develop the field, with capital
expenditures of $7.5 billion, according to Mexico's oil regulator,
the National Hydrocarbons Commission.
"We see attractive potential in Trion and the Perdido trend, and
we are pleased to have the opportunity to further appraise and
potentially develop this prospective frontier area of the
deep-water Gulf of Mexico, " said Steve Pastor, president of BHP
Billiton petroleum operations.
Pemex's chief executive, José Antonio González Anaya, said the
state oil company hopes that by 2025, the Trion field will be
producing around 120,000 barrels a day.
BHP Billiton is the world's biggest mining company by market
value. Mr. González Anaya called Monday a "great day" for Mexico
and said he's confident it will bring significant advantages, such
as technology, to Pemex.
"I'm happy that the bids were so close, and that there wasn't a
'winner's curse.' When bids are far apart, sometimes winners may
think they offered too much."
Write to Robbie Whelan at robbie.whelan@wsj.com
(END) Dow Jones Newswires
December 05, 2016 16:29 ET (21:29 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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