Mexico receives 69% more oil royalties in the first semester

The participation of private companies in the country's oil industry paid off in the first half of the year, after Mexico obtained greater resources for royalties from 111 oil contracts awarded last year, which meant a growth of 69 percent, compared with the same period last year, reported the National Hydrocarbons Commission (CNH).

Mexico receives 69% more oil royalties in the first semester. Image: Pixabay
Mexico receives 69% more oil royalties in the first semester. Image: Pixabay

The government received between January and June 2019 a total of five billion $661 million pesos for contracts auctioned by the past administration, which opened the hydrocarbons sector to private participation with the Energy Reform.

The main increases in consideration, it said, were obtained due to income from State participation in the Operating Income, the item that increased one thousand 246 million pesos compared to the same half of 2018.

While revenues from Contract Fee for the Exploration Phase increased by 459 million pesos and Additional Royalties with an increase of 441 million pesos.

The document also noted that the Bonus to the firm has been a mechanism that has boosted oil revenues, however, this year there were no new bids.

According to information from the regulatory body, the bidding activity in the first half of last year generated revenue by signing a tie-break of $13,168 billion pesos from 12 contracts.

So far this year, the CNH has approved the exploration and exploitation of at least 20 priority fields for Petroleos Mexicanos (Pemex) for this administration, which seeks to increase the production of barrels in the coming years.

Among the development plans previously confirmed and approved by CNH, correspond to the fields Cahua, Cheek, Esah, Xikin, and Chocol.

According to CNH, as a whole, these fields will have a peak production of around 190 thousand barrels per day, between 2021 and 2022.

As for Pemex's partnerships with private companies, they total 1 billion 862.19 million dollars, of which 316.71 million correspond to the farmout with BHP Billiton in the Trion field.

While the investment approved for the alliance between Pemex and Petrolera Cárdenas Mora reaches 869.65 million dollars, the one related to the Ogarrio area with Deutsche Erdoel reaches 675.83 million dollars.

At the same time, the five migrations of Pemex Exploración y Producción, Petrofac México, Servicios Múltiples de Burgos, DS Servicios Petroleros and Operadora de Campos DWF add up resources committed for nine billion $769.32 million dollars.

In the oil contracts resulting from Round One, the CNH approved investments of 21 billion 265.52 million dollars, of which only seven billion 861.07 million dollars are from the Italian ENI and seven billion 757.33 million dollars from Fieldwood Energy, both from Round 1.2.

Data from the organization reveal that the resources that the oil companies would exercise as a result of Round Two are for two billion 834.66 million dollars, while until last June of Round Three had been approved investments for 355.22 million dollars.

Rating agencies continue to see the impact

Despite the data presented by the regulator, risk rating agencies such as Moody´s continue to be skeptical about the management that Pemex will have after the presentation of its Business Plan.

According to the rating agency, recurrent transfers to the oil company represent a medium-term credit risk for the fiscal accounts, together with budgetary pressures derived from the effects of the decrease in oil production and the slow growth registered.

"The government's decision to make Pemex a national champion and expand its presence in the oil sector will require a significant increase in capital expenditures on oil exploration and production, in addition to the financial resources needed to rehabilitate existing refineries and build a new one," it noted.

Therefore, it anticipated that the Government's support for the oil company could be in the order of between 1.0 and 2.0 percent of GDP annually in the coming years.

By Mexicanist

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