Learning the Ropes of a New MarketWed, 01/18/2017 - 14:21
Of the 40 participants to place bids in December 2015’s onshore Round 1.3, 14 walked away from the competition with one or more blocks. But that does not mean the remaining 26 companies left completely empty handed. According to Alberto Bessoudo, General Director of Emusa, the round was a chance for aspiring E&P companies like his to learn vital lessons for similar future ventures. “Round 1.3 was a learning process for us,” he says. “We took very positive things from it that we will implement in future rounds for a more effective strategy.” Emusa, which has represented a group of Mexican investors since 2013, bid on four blocks during the round together with Houston-based operator Triple Five Energy.
Topén, Malva, Pontón and Secadero were the four blocks Emusa bid on but those were awarded to a range of other companies after Emusa’s bids fell short. In a round characterized by the high-royalty rates offered, companies offering a leaner future government take in their proposals trailed behind. In the case of the Malva block, for example, Renaissance Oil won after bidding an additional royalty rate of 57.39 percent, while Emusa’s consortium offered 5.01 percent.
“Emusa’s strategy was not focused on offering high royalties,” Bessoudo says, “but that is the way Round 1.3 allowed companies to learn and make subsequent changes.” CNH’s prioritization of royalty rates during Round One has been a hot topic in the industry, drawing criticism from those who claimed it drew attention away from investment and therefore potentially decelerated activity in the industry. But Bessoudo has praise for the authorities carrying out the Energy Reform. “The government is doing a great job of opening the market and making Mexico an attractive investment destination.”
Emusa’s learning process is not limited to Mexico. The group also holds stakes in US-based blocks where it participates as a nonoperator. “Our aim is to gain valuable experience in the US in blocks that already have production, then transfer this experience to Mexico.” Bessoudo is convinced Emusa makes for an attractive nonoperating partner for onshore bidding rounds.
“Our partnership with T5 has been key to building our presence in Mexico,” he says. Citing T5’s extensive experience operating blocks in the US, he says Emusa’s experience in building businesses from scratch in other sectors in Mexico made for a highly compatible relationship between the two companies. But most important was their shared long-term vision. In a dynamic market where opportunities are based on years rather than months, Bessoudo is convinced Emusa is sowing the seeds that will lead to an enduring business in the country. “We want to become leaders in any business we get into.”