Eduardo Canales Answers Latin America Energy Advisor’s Question: Mexico’s Round One Tender—Flop?

Latin America Energy Advisor, for its Q&A feature “Was Mexico’s First Round One Tender a Major Flop?,” quoted Akin Gump oil and gas associate Eduardo Canales on Mexico’s Round One oil auction, which saw only two of 14 available areas auctioned off.

Canales said, “Despite the results, Round One should not be considered a failure. It is of utmost importance to understand the underlying process that was required to reach this point. Historic constitutional, regulatory and administrative changes, necessary to accomplish the reopening of the Mexican energy sector and implemented at an unprecedented pace, cannot be overlooked. It is certain that Mexico has developed a strong legal foundation for the development of a competitive energy industry.”

Regarding steps the Mexican government might take to improve performance in the next tender of Round One, he said, “[G]overnment officials must reassess and realign their approach with the current market conditions in three different areas: contract area selection with attractive geological characteristics, competitive fiscal and financial terms, and contract and legal restructuring to incorporate industry best practices.”

Looking ahead, Canales said, “Round One has two more tenders coming up soon, one for extraction in Gulf of Mexico shallow waters and another one for onshore exploration. Mexico must look within and make the necessary changes during these upcoming tenders to create a globally competitive bidding system in time for the crown jewel tender: Gulf of Mexico deepwater fields. Otherwise, Mexico will miss an unprecedented opportunity to evolve into a leading energy player.”