Mexico’s Secretaría de Hacienda y Crédito Público (SHCP) released the minimum fiscal terms that must be met by companies in order to win development rights in the second phase of Round One, scheduled for the end of September.
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Image of Round One held in July. From CNH. |
Pre-tax profits for the five shallow water blocks range between 30.2-35.9%.
Mexico’s Comisión Nacional de Hidrocarburos (CNH) established the minimum work program for each block, and SHCP set required investment increase at 0%. In addition, the rules stipulate that the maximum value that companies may bid is 100%, meaning they will be able to submit bids that duplicate the minimum program of work determined by CNH.
According to SHCP, the state will receive income from hydrocarbons discovered through other contractual instruments and tax, including income tax and basic royalties.
“The established minimum values imply that, considering all the economic elements included in the contractual framework and tax, the state will receive the bulk of total profits associated with the development of the contractual areas tendered. It should be noted that in accordance with the provisions of the law on income on hydrocarbons, all contracts contain an adjustment mechanism that ensures that the state will receive any extraordinary income associated with significant increases in prices or the discovery of larger volumes to the expected,” SHCP said in a statement.
The minimum value of the state’s participation in the operational usefulness for each block is set at:
Similar to Round One’s phase one, phase two consists of shallow water areas. The areas consist of five blocks in five fields with 2P reserves. However, according to Lourdes Melgar, Mexico's Undersecretary for Hydrocarbons, phase two will be different, as it comes with lower risks and more competition is expected.
Mexico’s highly anticipated, but highly disappointing Round One (phase one) was held on 15 July, and only awarded two areas in its historic offering of the country’s upstream opportunities to international companies for the first time in decades.
The consortia of Sierra Oil Gas, Talos Energy, and Premier Oil, was awarded Area 2 and Area 7, in the 14 shallow water areas off the coast of Mexican cities Veracruz and Tabasco, respectively.
Round Three’s public tender process is expected to be 15 December. Round Four will include areas in the deepwater Gulf of Mexico, with heavy crude areas, and Round Five will consist of nonconventional areas, which are still being analyzed due to current low oil prices.
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