Published On: Tue, Oct 25th, 2016

It’s Mexico vs. Brazil in battle for Big Oil’s cash for deep-water reserves

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Two Latin American countries in need of massive investments to boost drained state coffers have become locked in an escalating competition to attract Big Oil’s interest in their deep-water oil reserves, Bloomberg News reports.

Mexico and Brazil, the region’s two biggest economies, each want a slice from a shrinking pie as international drillers limit their investments during a time of depressed oil prices. Exploration spending by major explorers in 2015 dropped by half from a year earlier to $7 billion USD, according to a Wood Mackenzie Ltd. report in September that also predicted industry spending would continue to be curtailed through the end of the decade.

To compete, Brazil this month scrapped a rule calling for its state-controlled driller to be the operator in all of its fields, controlling at least a 30 percent stake. The following week, Mexico said it would let operators bid individually in the first deep-water joint venture with state-controlled Petroleos Mexicanos, rather than in groups of two or more. In both cases, the initial rules were seen as limiting options for potential bidders.

Mexico and Brazil “are chasing the same dollars,” said Scott Monette, business development manager at the petroleum resource consultancy Gaffney Cline & Associates. “We are starting to see the first salvo of rigorous competition between those countries.´´

Mexico will hold its first-ever deep-water auction Dec. 5, offering up 10 areas in the Perdido area, near its maritime border with the U.S., and in the southern gulf’s Cuenca Salina, as well as a separate bid for the joint-venture with Pemex in the Trion field.

Brazil’s tender, set for 2017, will be the second since the country unveiled tens of billions of barrels of recoverable reserves nearly a decade ago. It will include so-called “unitized” blocks that extend from already discovered pre-salt areas awarded to concession holders in the aughts, according to the head of Brazil’s national petroleum agency, Magda Chambriard.

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Source: bloomberg.com

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