Rosneft eyes Mexico

The Company may compete for blocks in the Mexican offshore.
Rosneft, just after Lukoil, can begin to fight for areas of the Mexico shelf. According to the sources of Kommersant, the company is exploring pnly the shallow waters, as working on the deep shelf may interfere with US sanctions. But operations on the little-studied offshore areas around Mexico is considered to be difficult, note the mixed results of LUKOIL. Rosneft, which is actively collecting projects in Latin America, had a project with ExxonMobil in the US Gulf of Mexico shelf, but the partners did not find commercial reserves.

Rosneft is now completing to study the areas on the shallow shelf of Mexico, which will be auctioned for the first time in the summer of 2017, sources told Kommersant. According to the Commission on Mexico's hydrocarbons (CNH), in the end of June, 15 contracts will be awarded under the terms of the production sharing agreement on the areas of the Gulf of Mexico. The company must decide on its participation in the data room by the end of March, and the tender will be held in June, as follows from CNH data.

Rosneft together with ExxonMobil has already assessed the Gulf of Mexico, its the American sector, but last year the partners abandoned the project for exploration of 20 sites, finding no commercial reserves. Rosneft will take part in the tender on terms of the consortium, since the risks are too high, says a source of Kommersant (in the US the project operator with 70% was Exxon). It is unlikely that Rosneft will be the operator of the project in Mexico, said Valery Nesterov of Sberbank Investment Research, adding that to wait for large stocks in the Mexican shelf is not worth it.

Access to Mexican mineral resources for private companies was liberalized in 2013, but the first auction of the plots on the deep shelf actually ended in failure: out of 14 offered plots, only two were distributed.

Over two years, there also were tenders for land plots. According to the source of Kommersant, because of sanctions Rosneft can not compete for the deep offshore and land plots are of no interest to it.

So far, among the Russian companies an active interest in Mexico was expressed only by LUKOIL, which won 50% of the operator of the project Amatitlan (25% more from Pemex Mexican and Canadian Renaissance Oil, which had bought the stake in January for $1.75 million). At the last tender in December 2016 a consortium of LUKOIL and Eni's, applying for one of the deepwater blocks, lost, suggesting a low price. LUKOIL operations in Mexico, are assessed by the sources of Kommersant in the industry with caution. According to a source familiar with the situation, the Russian company, while participating in Mexico's tenders, had a "systematic problem of asset valuation", and at the end of last year, fired the head of the Mexican office Xenia Baumgarten (headed the representative office in March 2015) . "All Mexican tenders are open; wins the one who offers the best financial conditions," says tanother interlocutor of Kommersant. In Amatitlan, LUKOIL has been losing money for two years, he believes.. According to him, the company wanted to get preferences there, but these expectations were not met. LUKOIL and Rosneft declined to comment.

LUKOIL was actually the first Russian company that represents the interests of private business abroad, its place now is taken by Rosneft, says Valery Nesterov. He also noted that the failure of LUKOIL overseas forced to act cautiously and Rosneft tends to expand in America, as it has projects in Venezuela, Cuba, Brazil. The market has already recovered from the accident at the BP Deepwater Horizon offshore platform in 2010, so in the American sector of the Gulf of Mexico the oil production reached a record last year, the expert adds.