Mexico opening its oil industry for the first time in more than seven decades is creating competition for Brazil’s auction later this year, said two top officials at the country’s oil regulator.
International oil companies with the technical and financial capacity to operate offshore projects will be reviewing what both countries offer, Helder Queiroz and Olavo Colela, officials at Brazil’s oil regulator, said in an interview Tuesday. While Mexico is giving foreign operators a first crack at a region with “immense potential,” Brazil offers contract terms known to bidders, Queiroz said.
“For offshore activities there is real competition,” Colela, a bidding round adviser to ANP’s board, said at Bloomberg’s office in Rio de Janeiro. “Mexico has something Brazil had back in 1998, 1999. Brazil had stuff nobody had knowledge of.”
Brazil is also grappling with a buyers market for oil assets as producers sell fields around the world to raise cash and cut costs following a plunge in oil prices. Brazil should focus on offering exploration acreage on a regular basis so producers have opportunities to expand, said Queiroz, one of five ANP directors.
Brazil is still an attractive location because state-run Petroleo Brasileiro SA and other companies have had success exploring in areas where new concessions will be auctioned, such as the Alagoas basin, and companies are familiar with the model Brazil has used for 12 previous auctions, Colela said.
Brazil isn’t offering any blocks in the so-called pre-salt region where Petrobras must operate each concession with at least a 30 percent stake. These production-sharing contracts have come under increased criticism from industry groups, including the Brazilian Petroleum Institute.
Mexico has attracted fewer registered bidders than Brazil’s most recent auctions, and companies have expressed reservations about Mexico’s contract model, Colela said.
Mexico modified the contractual terms for the shallow water oil blocks being auctioned to provide more flexibility to bidders given crude prices, Deputy Finance Minister Miguel Messmacher said Tuesday in Mexico City. The country will award 14 shallow water oil blocks on July 15 as the nation’s crude market opens to competitors for the first time since 1938.