UPDATE 2-Failed Pemex oil field auction ups pressure on Mexico to reform
POZA RICA, Mexico, July 11 (Reuters) - Mexican state oil monopoly Pemex got a dismal response to an auction of contracts at one of its main oil fields on Thursday, turning up pressure on the government to open up the industry to more private capital with an imminent reform.
Most bidders in the Chicontepec basin auction signalled they wanted a higher fee per barrel than Pemex was willing to give for the private contracting scheme to turn around part of the big field, which has consistently fallen short of expectations.
Pemex only successfully contracted half of the six blocks put out to tender, part of Mexico's efforts to find more investment to boost flagging crude output. The two biggest blocks did not even attract bidders, the company said.
The lack of interest led to immediate calls for President Enrique Pena Nieto to push for a reform that will make Mexico's oil industry more attractive for private investors when the government presents its planned overhaul by early September.
"The process in this round has been a failure," said Luis Miguel Labardini, a partner with Mexico City-based energy consultancy Marcos and Associates.
"This shows the new administration that what is really required in Mexico is a deeper reform."
The company also failed to attract bids from multinational oil producers. While oil majors BP and Royal Dutch Shell both purchased project specifications, neither ultimately sought to qualify for the auction.
U.S. oil services giant Halliburton won the contract to operate the Humapa block, which contains 341 million barrels of oil equivalent (boe) in proven, probable and possible (3P) reserves spread across 49 square miles (128 sq km).
And Mexico's Grupo Diavaz got the nod for the Miquetla block, which contains 248 million boe in proven, probable and possible reserves spread across 43 square miles.
The Chicontepec auction marks the third round of the country's fee-per-barrel private contracting scheme, fruit of a 2008 reform aimed at revitalizing aging oil fields and attracting long-term private investment.
The six blocks constitute about 15 percent of the basin's total reserves, or about 3.2 billion barrels of crude equivalent, and cover 368 square miles.
Sixteen companies, nearly all oilfield service companies, pre-qualified for the auction.
The Chicontepec basin, discovered more than 80 years ago, is located in the east-central states of Veracruz and Puebla and is home to about 40 percent of Mexico's certified hydrocarbon reserves, or about 17 billion boe.
Last year, Chicontepec produced an average of 74,800 barrels per day (bpd). Despite heavy investment, Pemex has failed to meet production targets at the geologically complicated basin, where millions of barrels of oil are scattered across many small deposits, a feature that makes production costly and slow.
Boosting output is one of the chief aims of the government's energy reform, which will be a major political challenge.
The Mexican constitution mandates that only the state can own and commercialize the country's oil and gas resources, but Pena Nieto has promised a major overhaul of the industry to attract new investment from private oil companies.
His Institutional Revolutionary Party (PRI) must break with years of tradition to go down that path, and will need support from other parties in Congress, where it lacks a majority.
Pemex has been a symbol of Mexican self-sufficiency since the oil industry was nationalized by the PRI in 1938.
While details of the reform have yet to be revealed, a formal proposal is expected by Sept. 8.
Mexican crude oil production has fallen to just over 2.5 million bpd from a peak of 3.4 million bpd in 2004.