December 18, 2015
Mexico Plans Deep-Water Auction for Round One – Fourth Public Bid in 2016
As part of the implementation of the Mexican energy reform, the Mexican government has selected certain fields
that will gradually be tendered to foreign and domestic companies for hydrocarbon exploration and production
projects. Round One comprises 109 blocks for exploration and 60 blocks for production, and includes new areas
of different sizes and types of resources, including: (i) deep-water; (ii) shallow-water; and (iii) on-shore fields.
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Together, these blocks cover approximately 28,500 km .
As previously reported, the National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos) (“CHN”)
called three international public bids: one for 14 exploration and production blocks in shallow waters, another for
9 production blocks in shallow waters, and another for 26 onshore production blocks. The winners were
awarded production sharing contracts in the first two public bids and with license contracts in the third one,
respectively. The fourth public bid is significant because it is the first bid covering deep-water blocks and is the
second time license contracts are used in Mexico. Also, it is anticipated to attract up to $44 billion in new
investment.
General Description of the Fourth Public Bid Call
On December 17, 2015 the CNH published the call for the fourth international public bid to award ten license
contracts for the deep-water production of hydrocarbons. This is the first bid covering deep-water blocks and is
the second time license contracts are used in Mexico.
Four of the ten blocks are located in deep waters in the Perdido Belt off the coast of Tamaulipas, close to the
U.S. waters of the Gulf of Mexico, while six are located in deep waters in the Salina Basin off the coasts of
Veracruz, Tabasco and Campeche. A license contract will be issued for each block.
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1. Size of the Blocks. The total area of the blocks to be auctioned is 15,616.8 km , broken down as follows:
Type of Block
Block
Location
1
2
3
Deep Waters
2
Area (km )
1,678
Perdido Belt
2,976.6
1,686.9
4
1,876.7
1
2,381.1
2
2,411.2
3
4
Salina Basin
3,287.1
2,358.7
5
2,573.2
6
2,605.5
2. Location of the Blocks*
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a. Perdido Belt
1. Block
2. Block 2
3. Block 3
4. Block 4
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b. Salina Basin
1. Block 1
2. Block 2
3. Block 3
4. Block 4
5. Block 5
6. Block 6
*Source: CNH (National Hydrocarbons Commission)
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Technical Bid Information:
(a) Type of Exploration and Production Contract. License Contracts.
(b) Term of the License Extraction Contract. 35 years from the date of execution of the contract. The
term of the contract may be extended for an additional term of 10 years and a second additional term of
5 years, for a maximum total of 50 years.
(c) Governing Law. Hydrocarbons Law (Ley de Hidrocarburos), Regulations to the Hydrocarbons Law
(Reglamento de la Ley de Hidrocarburos) and the Administrative Rules for the Tender of E&P
Agreements (Disposiciones Administrativas en materia de Licitaciones de Contratos para la Exploración
y Extracción de Hidrocarburos).
(d) Location of the Contract Areas. Deep-water fields located in the Perdido Belt off the coast of
Tamaulipas and in the Salina Basin off the coasts of Veracruz, Tabasco and Campeche.
(e) Language of the Proposal. Spanish.
(f) Bid Bond. For each block, participants must provide a standby letter of credit for a total amount of
USD$3 million for a term of 100 (one hundred) days from the date of submission of the proposals.
(g) Requirements of the Bidder to Access the Data Room. The interested party must be a company with
proven experience in E&P activities in at least one deep-water project and must pay a fee of
MX$38.5 million for data room access.
(h) Registration Fee. MX$280,000.
(i) Form of Participation. Companies may participate in the bidding round as individual bidders
(“Individual Bidder”) or as joint bidders (“Consortium;” jointly, a “Bidder”). Either as an Individual
Bidder or a Consortium, a Mexican entity must be created as a special corporate purpose vehicle to
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execute the License Contract . One or more companies may submit a joint bid, acting as a Consortium,
pursuant to the following:
•
Any of the companies of the Consortium may pay the fee to access the Data Room and be
registered in the Bid;
•
Only joint bids from a Consortium that obtains a prequalification certificate will be accepted, and
therefore, any new company not a member of the Consortium in the prequalification stage will not
be accepted. After the prequalification stage is over, another member may be added to the
Consortium;
•
A company may only be part of one Consortium in the Bid;
•
The designated operator must have at least 30 percent of the economic participation in the
Consortium and no other member of the Consortium may have an economic participation larger
than that of the designated operator;
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The License Contract must be jointly executed by the Mexican entity and the Individual Bidder or Consortium as joint and several
obligor(s). The Individual Bidder or Consortium are jointly liable along with the Mexican entity for purposes of the License Contract.
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•
All members of a Consortium must execute, among themselves, a Private Joint Bidder Agreement
in accordance with Form CNH-4 included in the Bidding Guidelines; and
•
Unlike the prior public bids of Round One, the Bidding Guidelines for the fourth public bid do not
restrict the participation of “Large Scale Oil Companies” in a Consortium.
(j) Prequalification Requirements. Participants in the Bid must satisfy certain financial and expertise
conditions to be prequalified. Some of the requirements are applicable only to the operator and may be
satisfied by an affiliate depending on the case. The requirements in general include the following:
1. Experience. The Bidder must evidence:
a. experience in at least one exploration or production project in deep waters with a depth of at
least 1,000 meters between 2011 and 2015;
b. Capital investments in exploration or production projects for a minimum cumulative amount
of US$2 billion;
c.
that the proposed persons holding key operational positions in the project have at least 10
years of experience in managing and operating off-shore or on-shore E&P projects; and
d. that they have experience in industrial and environmental safety for 5 (five) years.
2. Financial. The Individual Bidder or designated operator must evidence that:
a. it has a total equity of US$2 billion or assets totaling US$10 billion with an investment grade
credit rating. In the case of a Consortium, the non-operating Consortium members must
evidence a total equity of US$250 million; and
b. the designated operator must have at least 30 percent of the economic interest in the
Consortium.
(k) Limit to award of Blocks. There is not a limit. A Bidder may submit bids for all blocks. However, a
company may not submit a bid for the same block, whether individually, through a direct or indirect
participation in a Consortium, or individually through companies in which it has control or that belong the
same economic group.
(l) Timeline of Award Process
•
Date of the Call. December 17, 2015.
•
Registration Payment. From January 6, 2016 to May 13, 2016.
•
Access to the Data Room. From January 6, 2016 to April 15, 2016.
•
Delivery of Prequalification Documents. From June 14, 2016 to July 1, 2016.
•
Prequalification Period. From January 6, 2016 to August 24, 2016.
•
Publication of the List of Prequalified Bidders. August 24, 2016.
•
First Clarification Stage. From December 17, 2015 to April 1, 2016.
•
Second Clarification Stage. From January 6, 2016 to June 3, 2016.
•
Third Clarification Stage. From January 6, 2016 to October 26, 2016.
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•
Updated Version of the Bidding Guidelines. From January 6, 2016 to a date to be determined,
based on the definition of the date for the submission of bids.
•
Final Version of the Bid Guidelines. To be determined.
•
Final Version of the License Extraction Contract. To be determined.
•
Date for the Submission of Bids and Opening Thereof. To be determined during the third
quarter of 2016.
•
Date of the Award. Within two business days following the submission and opening of bids.
•
Date of the Execution of the License Contract. Within 90 days after the publication of the award
of the contract in the Federal Official Gazette.
For more information in connection with this fourth bidding process, please contact any of the following
attorneys:
Mexico
Houston
Dallas
William (Hunt) Buckley
+52.55.5249.1812
[email protected]
Ricardo Garcia-Moreno
+1 713.547.2208
[email protected]
Terry W. Conner
+1 214.651.5604
[email protected]
Luis F. Moreno Trevino
+52.55.5249.1821
[email protected]
George Y. Gonzalez
+1 713.547.2011
[email protected]
Alberto de la Peña
+1 214.651.5618
[email protected]
Ariel Ramos
+52.55.5249.1820
[email protected]
Bradley J. Richards
+1 713.547.2028
[email protected]
Eduardo Corzo Ramos
+52.55.5249.1817
[email protected]
Thomas E. Heather
+52.55.5249.1855
[email protected]
Jorge Maldonado
+52.55.5249.1853
[email protected]
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