Development of ISCs in 2012

Many of the companies that participated in the first round of integrated service contracts (ISCs) also competed in the second round of contracting. Additionally, there were some new players in the second round that did not bid in the first, something that David Enríquez, Partner at Goodrich, Riquelme y Asociados, sees as a positive sign for Pemex. “It is always interesting to see new players in the marketplace, and this should be considered an achievement for Pemex.” He goes on to say that the lack of interest from the IOCs in the second round was natural. “The brownfield contracts on o†er did not have the profile to match the investment priorities of such large companies. It should not be considered a failure on the part of Pemex that these companies were not interested in the available fields.”

“When it comes to ISCs, I have always said that we have to measure commercial success according to the reference price of the contracts, the final fee per barrel, and the number and level of participants in each round,” says Enríquez. “In these terms, I believe the second round of contracts can be considered a success for Pemex, despite the fact that there were fewer participants in the second round than in the first; this could instead be seen as a message from the industry regarding the areas that were o†ered in the second round.”

Rather than focus on the fact that the contracts were not ideally suited to the IOCs, Enríquez points out that other companies such as Petrofac have taken advantage of the field profiles: “Petrofac have made it very clear to everyone that they have come to Mexico to capitalize on the mature fields on o†er, and now, after two rounds of contracting, they have asserted themselves as the leading private operator for this type of field.”

The second round of contracts was an excellent example of the importance of choosing fields with the right profile for potential operators, and setting the right reference price: at the initial awarding stage the tender for the two o†shore areas on o†er, Arenque and Atún, was voided by Pemex. At Arenque this happened due to the fact that no company made an o†er under the maximum fee per barrel price set by Pemex. At Atún, it was due to the fact that no company had made a bid for the field. Enríquez’s perspective is that Pemex misjudged the reference price it set for the areas, and the reason for this is di·cult to explain. “There has been a lot of criticism of Pemex for the reference price it set for the two o†shore areas. Pemex has been working in shallow waters for so long that it should have a fair appreciation of the cost of working on such projects; the reference price was so far below a fair price for the contracts that it almost seems like Pemex wanted to send a message to the market about its perspective on the integrated service contracts. At the very least, it is fair to say that there was some serious misalignment of goals within Pemex.”

However, Enríquez is careful to point out that from the Pemex perspective the contracts have to be considered successful. “In the second contracting round Pemex is able to set the reference price for its fields based on the maximum it wishes to pay for the service being provided. If no company manages to make a bid under that price, then fields are not awarded. Through this system Pemex never puts itself into a situation where it makes a loss on the fields, and for the contractors success must also be measured in this way: companies would not make bids that would not be profitable for them in the long run. Therefore, every awarded tender can be seen as a success for both parties.”

The third round of integrated service contracts are scheduled to be awarded in July: this time, the blocks on o†er are in Chicontepec, one of Pemex’s more challenging geological areas. “Chicontepec is going to be an interesting round, because of the companies that have a working knowledge of Chicontepec and its challenges,” says Enríquez, referring to the private sector oilfield service companies that have been working at the asset for a number of years through field labs, experimental zones where companies were charged with testing di†erent extraction technologies and techniques. “In this round, I believe that rather than seeing new players winning blocks on their own, we will see experienced players teaming up with newcomers. Without the actual experience of working at the field, it will be hard to outbid the companies that have an understanding of the region.”