Pemex Contracts Draw Little Interest Before Possible Energy Bill

Spain’s Repsol SA and China Petroleum & Chemical Corp. were among companies that withdrew bids to develop blocks at Petroleos Mexicanos’s Chicontepec field, a sign of waning exploration interest before a possible reform of Mexico’s energy industry.

Three of the six blocks auctioned by Pemex at Chicontepec, which is estimated to contain 40 percent of Mexico’s hydrocarbon reserves, didn’t receive any bids from 16 authorized groups. Halliburton Co. won the Humapa block and Petrolite de Mexico SA was awarded the Soledad block contract, Pemex said today in a broadcast on its website. No companies bid on Pitepec, which had the most reserves among the blocks.

“It was striking, and not in a good way, that three of the six blocks had no bidders,” George Baker, a Houston-based energy consultant, said in a telephone interview.

Mexico is on the cusp of opening its energy industry to outside investment in hopes of increasing crude production after eight years of declining output, Pemex Board Member Hector Moreira said yesterday at the Bloomberg Mexico Conference in New York. A bill that would end the government’s monopoly on production is expected to be presented to congress when regular sessions resume by September, Mexican President Enrique Pena Nieto told Bloomberg last month.

Repsol, based in Madrid, Alfa SAB de CV, based in San Pedro Garza Garcia, Mexico, and Halliburton and Schlumberger Ltd., both Houston-based, withdrew bids for the Amititlan, Miahuapan and Pitepec blocks, which were voided on a lack of offers. Pemex, which said it planned a new tender for Amititlan on July 15, canceled the date before the auction ended.

‘Better Options’

Bidding interest wasn’t undermined by expectations of an energy reform, Carlos Morales, who heads exploration and production for Pemex, said in a phone interview from Poza Rica, Mexico.

“If a reform results in the possibility of offering better options for the contracts, we have said that this contract model will migrate to a new one,” Morales said.

The support of the top three political parties in the Pact for Mexico should ensure the energy bill is approved by Congress before the end of the year, Pena Nieto has said. Pemex funds about a third of the federal budget and is Latin America’s largest crude producer.

“We need far more investment, we need capacity in production and we need technology,” Moreira said yesterday. “We need to transform the energy sector in a very deep way. I think now is the time.”

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