Sweeter crude

29 September 2015 By Martin Langfield

The nation will again try to solicit investors for its ailing energy sector after a first round of bidding in July fell flat. Falling crude prices and output are already taking a toll on Latin America’s No. 2 economy. Sweetening terms enough to lure big money is a must.

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Mexico’s finance ministry on Sept. 14 announced the minimum fiscal terms companies will be required to meet to win development rights in a Sept. 30 oil auction. The ministry set a range between 30.2 percent and 35.9 percent for the minimum proportion of pre-tax profit the government expects to receive for the five offshore extraction contracts up for grabs.

The auction is the second to date in Mexico’s so-called Round One tender following a historic energy overhaul finalized last year.

The five production-sharing contracts covering nine oil and gas fields will be awarded by Mexico’s National Hydrocarbons Commission based on which company or consortium offers the biggest share of pre-tax profit to the government, via a weighted formula that also includes an investment commitment.

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