Mexico’s oil regulator agreed Tuesday to a slew of rule changes for its oil and gas license auction in the hopes of encouraging more companies to bid after a disappointing first round.
According to Reuters, CNH, the country’s oil regulator, agreed to lower the corporate guarantee required for the contracts down to $2 billion from its previous level of $6 billion.
Companies can still meet the requirement through an open-ended parent company guarantee.
Bidders can now also apply a required $2.5 million security guarantee to all blocks they bid on instead of applying the funds to only one block.
The new rules will also give companies a larger slice of earnings if the profitability of a contract increases.
Upstreams drilling for oil and gas in Mexico can now also keep assets that were not previously designated as recoverable expenses,such as mobile rigs, if a contract is revoked for willful misconduct, CNH president Juan Carlos Zepeda told Reuters.
Some new additions were made along with the rule tweaks.
Companies will now have to provide an insurance policy for each contract that is worth at least $1 billion to cover potential accidents per activity.
Drillers must also have a service provider who specializes in spill containment for each of their blocks.
Consortia bidding on blocks will now be allowed to restructure up to one week away from the country’s next auction on September 30 if an operator backs out, an issue that presented hurdles during the last round.
Mexico’s government agreed last year to end the state’s 75 year monopoly on oil and gas development and allow private and foreign firms to operate in the country.
The first auction round fizzled last month after upstreams picked up only two of the fourteen blocks on offer.
Shallow water Block 2 and Block 7 were both awarded to a consortium made up of operator Houston-based Talos Energy with a 45 percent stake, Mexico-based Sierra Oil & Gas with a 45 percent stake and UK-based Premier Oil with a 10 percent stake.
The other blocks didn’t receive any bids, or at least any offers that were cleared by Mexico’s finance ministry, Reuters said.
The next auction will focus on five shallow water production sharing contracts for blocks containing proven reserves and is set for September 30, Reuters added.