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Cheiron wins with top bid for Pemex farmout

Egyptian player beats Canada's Gran Tierra to take up partnership with Mexican state giant on Cardenas-Mora onshore field

CHEIRON Holdings of Egypt placed the winning offer this week to partner with Pemex on development of the onshore field of Cardenas-Mora, part of a fresh bid process following the country's energy reform to establish joint ventures for the Mexican state oil company

The winning company placed an aggressive offer, proposing the maximum additional royalty of 13% and a cash bonus of $41.5 million designed to break a potential tie.

Canada's Gran Tierra Energy, in partnership with Sierra Blanca P&D, the only other bidder, only offered an additional royalty of 5.09%.

"We're extremely happy. We're looking forward to this operation here in Mexico," Shady Kabel, managing director for the company, an affiliate of Pico Energy, told Upstream on the sidelines of the event.

"We trust this partnership with Pemex will be very valuable to us and our presence as operator in this part of the world."

Pemex has laid out farm-outs as a key strategy to ramp up investments and projects amid sharply lower oil prices and steep budget cuts from the government.

According to Mexico's energy reform law, that process must take place via a transparent offer process, run by the country's National Hydrocarbons Commission (CNH) instead of direct negotiations. The jubilation on the onshore block came after disappointment earlier on Wednesday, when no companies bid to partner with Pemex on the shallow-water tract of Ayin-Batsil.

Another process for the Ogarrio field, expected to attract the most interest, was to come later after Upstream went to press.

Cheiron partnered with Pemex in prior rounds of onshore service contracts before Mexico's energy reforms allowed it to assume full E&P partnerships.

The Egyptian company has been in the country for about eight years, Kabel said, and the Cardenas-Mora block was attractive because it was a close match with existing assets in the company's portfolio.

Pemex's initial farm-out of the Trion discovery was well-received by industry and was awarded to BHP Billiton in late 2016 with a $624 million offer, adding to a pre-established minimum for investments of $1.19 billion.

The Ayin-Batsil area, however, did not live up to hopes of a follow-up win this week. With no bids submitted, the area was declared "abandoned" by leasing officials shortly after 9 am.

Though multiple players active in shallow-water had pre-qualified, none ultimately placed an offer.

One company had struggled with the highly regulated process of exchanging information prior to the bid, an informed source said, with delays from natural disasters - including Hurricane Harvey - also contributing to making the bid process complicated. Trion was also seen as a superior resource in both size and quality, according to another.

The two onshore fields, Cardenas-­Mora and Ogarrio, were bid under a licence contract with a 50:50 stake between Pemex and its partners. Both have existing discoveries and are located in Tabasco state.

Cardenas-Mora has targets in both the Upper Jurassic Kimmeridgian and Lower Cretaceous zones and is prospective for volatile light oil. It lies about 35 kilometres south-east of Comacalco and spans 168 square kilometres.

Remaining possible reserves are estimated at 93.19 million boe from the two fields.

Page 16: Mexico's bid round for shallow waters begins