Insight

Mexico's Round Two - onshore phase undermined by gas focus and above-ground risks

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14 September 2016

Mexico's Round Two - onshore phase undermined by gas focus and above-ground risks

Report summary

Mexico has made a risky decision focusing its second onshore licensing round on gas-prone acreage, predominately in the security and infrastructure-challenged Burgos basin. The country is seeking to boost cheap US gas imports while also maintaining energy independence by encouraging companies to focus on the type of gas opportunities that Pemex sees as low priority. 

Table of contents

  • Bids are due in April
  • Qualification criteria more stringent than Round One's onshore phase
  • US imports will double by 2025, making it hard for domestic gas production to compete
  • Security concerns a major risk in the Burgos basin
  • Companies interested in the Burgos blocks face substantial security risks due to the presence of drug trafficking organisations throughout Tamaulipas and Nuevo Leon states, which are engaged in violent competition for the control of transport corridors towards the US. This is exacerbated by police and military operations targeting cartel leadership, which have splintered criminal groups. The result is a highly volatile security situation, characterised by episodic surges of violence that are difficult to predict and mitigate.
  • Liquid hydrocarbons are at the greatest risk of theft when transported via pipeline, with over 900 incidents in Tamaulipas and nearly 150 incidents reported in Nuevo Leon during 2015. Ineffective security on rail and road networks also place cargo at risk. Road-based cargo theft is becoming more violent and sophisticated, creating significant risk as the development of the Burgos basin accelerates.
  • Conclusion

Tables and charts

This report includes 7 images and tables including:

  • Mexico's Round Two - onshore phase undermined by gas focus and above-ground risks: Table 1
  • DROs: government-announced reserves figures
  • Fiscal regime comparison of onshore terms by additional royalty bid
  • Mexico's gas balance to 2025
  • Difficult to achieve competitive returns at our forecast Burgos gas price
  • Burgos blocks face security problems
  • Above-ground risks and US gas imports are key concerns

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