Exclusive: BP Pulls Out of Oil, Gas Exploration in Mexico

The British company is winding down its participation in three offshore blocks it was awarded during auctions held by the previous federal administration

BP's logo on the company's headquarters in Milton Keynes, England.
August 15, 2022 | 08:45 PM

Mexico City — British Petroleum (BP), one of the world’s largest energy companies, is winding down its oil and gas exploration business in Mexico, six years after its arrival following the opening of the energy sector to private companies as part of the 2013 energy reform.

The subsidiary BP Exploration Mexico will conclude its participation in three exploration contracts in offshore blocks located in the Gulf of Mexico, two of them as operator and one as partner, which it was awarded in the auctions held by the Mexican government during the administration of former president Enrique Peña Nieto.

BP began participating in auctions in Mexico in 2016.

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In February 2022, the company, which is chaired in Mexico by Angélica Ruiz, ceded corporate, management and operational control to French giant Total E&P Mexico of the CNH-R01-L04-A1.CS/2016 contract in deep waters off the coasts of Veracruz and Tabasco, which it was awarded in partnership with Total and Norwegian oil company Equinor.

Later, in August of this year, BP received authorization to return early the production sharing contract CNH-R03-L01-G-CS-03/2018 in shallow waters off the coast of Campeche, in partnership with subsidiary Total E&P Mexico, Hokchi Energy and QPI Mexico, on November 26, 2022.

BP told Bloomberg Línea that after analyzing the seismic studies, it concluded that the geological probability of success was very low in that offshore block. The commercial viability of the prospect is unlikely, said company spokeswoman Selene Gonzalez.

The third contract, CNH-R01-L04-A3.CS/2016 is in deep waters, and in which BP participates as a partner with Total, and which is operated by Equinor Upstream, which also intends to exit Mexico to focus on priority hydrocarbon areas and renewable energy projects.

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A spokesperson for Equinor confirmed to Bloomberg Línea that it requested to relinquish the field to the National Hydrocarbons Commission (CNH) in 2021.

The CNH has not responded to Bloomberg Línea’s requests for comment.

Investment in the two contracts operated by BP in Mexico was $36 million, and which is only 16% of the total approved investment of $219 million, according to the most recent CNH data.

BP’s CEO, Bernard Looney, stated in April 2021 during a call with analysts that the company’s operation in Mexico was important, but that it was not the focus of its growth strategy.

The situation for oil companies in Mexico is unfavorable. President Andrés Manuel López Obrador cancelled two oil auctions scheduled at the beginning of his administration in 2019 and set private companies a production target of 280,000 barrels per day before considering new rounds.

Currently, private oil companies in the country produce 97,000 barrels per day, equivalent to 5% of the national total, and barely one-third of the target for the end of the six-year term.

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López Obrador said in September 2021 that some of the 110 tendered contracts could be cancelled due to the lack of results, but decided not to do so because it would cause “an uproar” despite “speculation” with the sale of blocks and the lack of results.

After the approval of the energy reform in December 2013, the previous administration promised production of three million barrels per day by 2018 with investment from private companies and associations, but the goal has not been reached and extraction has fallen from 2.5 million barrels produced by state oil giant Pemex to 1.6 million per day with a marginal contribution from the private sector of less than 5% of the total.

BP’s indirect presence and other businesses

BP told Bloomberg Linea that it maintains an “indirect participation” in some exploration and production blocks, specifically in those of Hokchi Energy through Pan American Energy Group, its main shareholder.

Hokchi Energy is a consortium owned by the Argentine firm Bridas and BP, with a 50% shareholding each, and which holds two contracts in offshore Gulf of Mexico.

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The consortium operates the Hokchi offshore field, one of the most productive in the private sector with 20,000 barrels of oil per day, while it faces problems in the other contract where the Xaxamani discovery is located, in which it requested an extension due to “serious unforeseen damage to the drilling equipment in the evaluation area” not attributable to Hokchi, according to the CNH.

BP produces 2.2 million barrels per day globally, and has a network of more than 500 gas stations in Mexico, and sells 300 million cubic feet of natural gas per day to industrial clients.

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