Exxon Mobil Corp., Chevron Corp. and French oil giant Total SA opted out of Mexico’s historic oil auction because the fields are too small.
None of the 14 shallow-water prospects in the Gulf of Mexico holds more than 384 million barrels of crude, according to Mexico’s National Hydrocarbons Commission.
That’s far short of the billion-barrel finds prized by major international oil producers, said Fadel Gheit, a New York-based senior analyst at Oppenheimer & Co.
“Shallow water is the minor leagues and these companies want to play in the major leagues,” Gheit said on Wednesday. “Deepwater is where the major leagues are. The shallow waters have already been picked dry.”
The U.S. and European explorers that abstained from the first round of bidding Wednesday also probably balked at some of the financial and contractual terms insisted upon by the Mexican government, Gheit said. Any terms that would have crimped the profitability of developing those fields could have made explorers even more reluctant to risk their investment dollars, he said.
Spokespeople for Exxon and Chevron both said the companies intend to continue assessing future Mexican oilfield offerings for potential investment opportunities. The 14 oil blocks collectively cover an area of the sea floor more than five times the size of New York City.
Future bidding rounds involving bigger oil fields in deep parts of the Gulf of Mexico will draw more interest from big international producers, said Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis.
“In the shallow water, maybe the fields aren’t the best,” he said. “When you get farther offshore, the big oil producers may show more interest.”
Major international producers will eventually seek footholds in Mexico’s oil sector because the country’s untapped crude reserves are too vast to ignore, Gheit said.
“They have to be there because they need access to new supplies anywhere they can find them,” Gheit said. “It’s just a matter of finding the right assets and the right contractual terms.”