Economics: Fourth O&G Tender A Big Success
Last week Mexico announced the results of its fourth phase of Round One hydrocarbon field tenders, the country’s first deep water bid round. The blocks that were awarded were more attractive than the ones offered in the first three phases due to their production and profitability potential. Precisely for that reason major international oil companies indicated from the time the details of the industry opening were announced that this was the phase in which they were most interested because they involve almost 3 billion barrels of crude oil equivalent and the full range of grades of crude (extra light, light, heavy and extra heavy) as well as associated wet gas.
Eight of the ten blocks on auction were awarded. The resulting investment is estimated at up to 41.78 billion dollars, 18% of which correspond to Pemex’s farm-out in the Trion field, 39% to deep water fields near the line of demarcation with areas claimed by the United States (Cinturón Plegado Perdido), and 56% to those blocks that lie off the coasts of the states of Veracruz and Tabasco (Cuenca Salina).
In this week’s Economic Outlook, we provide a detailed analysis of the main results of the fourth phase of Round One bidding and their implications going forward.
Other economic news last week included the release of positive demand data as private consumption grew at a 12-month rate of 3.6% in September, an improvement over the 3.2% average increase recorded between January and August of this year.
Purchases of domestically generated services and products powered growth in the headline result at the same time as demand for imported goods snapped a negative trend of recent months.
It should be noted that official figures show consumption has served as the economy’s main growth driver during the first nine months of the year, and the positive industry data available for November suggests that will remain the case going forward.
During the next-to-last month of 2016, the industry sold 154,616 light vehicles, a record high for any month of November, and 22.5% greater than at the same time in 2015, according to the Mexican Automotive Industry Association (AMIA). Between January and November 1,411,105 autos were sold, 18.5% more than in the same period of 2015.
Exports of cars were 9.6% higher than in the same month of 2015 (although they were 0.02% lower compared to the same 11-month period of 2015), and production was 7.4% higher in contrast with the accumulated 1.5% increase recorded for January-November 2016.
These numbers deserve to be highlighted given that they come at a time when consumers have displayed considerable pessimism, and inflation is on the upswing.
In November, the official Consumer Confidence Index fell at a 12-month rate of 9.0%, and inflation accelerated to its fastest pace in 23 months (3.31%).
Lastly, on Thursday Fitch Ratings cast a pall over the consumption outlook when it announced a change in its outlook on Mexico. While Fitch reiterated Mexico’s BBB-plus rating, which is two notches above the minimum investment grade, the agency lowered its outlook on its long term foreign and local currency issuer default outlook from stable to negative and warned that there is a 33% chance of a downgrade in the next 24 months. Moody’s and Standard & Poor’s announced similar downgrades earlier this year. The firm said a deterioration of Mexico’s debt or interest burden could raise the vulnerability of public finances to adverse shocks.
Now read on...
Register to sample a report