(Bloomberg) — Murphy Oil Corp., Petroliam Nasional Bhd. and Sierra Oil & Gas are in talks to form a group that would bid jointly for the first opportunity in more than seven decades to independently operate offshore fields in Mexico’s deep Gulf waters, a person with direct knowledge of the plan said.
The three producers are in the process of signing a joint study and bid agreement, a step to form a consortium for Mexico’s sale of deepwater leases on Dec. 5, according to the person, who asked not to be identified because the information isn’t public.
Mexico, which ended a monopoly on oil exploration as it struggles to arrest declining production at its aging fields, expects the historic sale of deepwater drilling rights in the Gulf of Mexico will bring in investment of as much as $44 billion. About three quarters of Mexico’s prospective resources are located in the deep waters of the Gulf, according to government data.
Independent sale appeals
A total of 16 operators and 10 financial companies have already qualified to bid for the December auction. The sale has lured more interest than an opportunity to partner with state-owned Petroleos Mexicanos to develop the Trion field in the Perdido area.
Murphy Oil, which is approved to act as an operator should the company win an oil block, will not "reveal information about the upcoming lease round at this time," Kelly Whitley, the Houston-based company’s vice president of investor relations and communications, said in an e-mailed response to questions. Ivan Sandrea, chief executive officer of Mexico’s Sierra Oil & Gas, declined to comment. Petronas, as the Malaysian state-run oil producer is known, didn’t respond to e-mails seeking comment. The company is also qualified as an operator.
The aspiring bidders have joined forces before. Murphy Oil and Petronas bid together for two blocks in Mexico’s first shallow-water oil auction in July last year, though their offer fell short of the minimum 40% stake the government required to retain in the fields.
Sierra Oil & Gas, which bid in a consortium with Talos Energy LLC and Premier Oil Plc, won rights to explore for crude in two blocks in the same auction. Petronas and Sierra Oil & Gas bid in consortium groups in the country’s second auction, though neither were awarded contracts.
Bidder’s Backing
Sierra Oil & Gas, a recently formed company in Mexico that qualified as a financial partner for the Dec. 5 auction, has received funding from BlackRock Inc., Riverstone Holdings Ltd. and EnCap Investments LP. Chevron Corp., Exxon Mobil Corp. and Hess Corp. have also agreed to bid together at the upcoming auction, a person with knowledge of the plans said last month.
Joint agreements to bid can be dissolved if one of the companies withdraws its intention to participate in the contract, and the companies may opt not to bid even if the consortium is still in place.
Bloomberg News by Adam Williams and Amy Stillman
