Mexico raises the bar on oil deals as Latin America vies for investment

Mexico has raised the bar on oil contracts in Latin America after sweetening terms to attract international energy firms, luring $93 billion in future investment in the region's first big auction this year. On Wednesday, Mexico awarded 19 of 29 deepwater blocks on offer, comfortably more than the seven areas expected to be assigned. Anglo-Dutch oil major Royal Dutch Shell emerged as the biggest winner, with nine blocks.
Unique for generous terms such as setting a cap on royalties that oil firms can pledge to the government in bids, Mexico faces off this year with Brazil, Argentina, Ecuador and Uruguay. They will all hold auctions for oil and gas fields in 2018 that require billions of dollars in investment from foreign firms.
Mexico is due to hold major auctions in March and July. While Brazil's prolific deepwater presalt oilfields are expected to attract aggressive bidding from oil majors, other regional rivals could be forced to revise the terms of their auctions if Mexico scores another win in its next auction for shallow water areas in March, analysts said.
Argentina and Ecuador have already changed their terms over the past year in preparation for their 2018 auctions. Argentina has lowered labor costs and some taxes, while Ecuador switched to production sharing from service contracts. Oil prices have reached three-year highs near $70 per barrel in 2018, giving the world's top energy companies a cash boost and improving the chances that they will have the funds needed for big-ticket projects in Latin American.