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This is an abridged version of the comment from Moody's Investor Services found on page 19 here:
in Mexico (A3 negative). According to private-sector estimates, it is one of the 15 largest shallowwater
fields discovered globally in the past 20 years and the eighth-largest in Mexico's drilling
The find is credit positive for Mexico because it will stimulate additional private investment in the
country's energy sector, increase government oil-related revenues and help stabilize Mexico's
declining oil production. The consortium estimates that the field's reservoir is 1.4-2.0 billion
barrels of mid- and light- grade crude oil, which is a good fit for Mexico's existing refineries, most
of which are not oriented to refine heavier crude. The sheer size of the discovery - the first by a
private company since constitutional energy reform in 2013 allowed private participation - has
attracted a lot of interest from foreign investors seeking to win bids for oil concessions.
The Mexican government will receive a 68.99% profit share from every barrel produced in the
offshore field, and as much as 80% when considering taxes and fees over the life of the project.
Taxes, fees and royalties from this field and other oil concessions will support the recovery of the
government's oil revenues, which fell 27.7% in 2016, and accounted for only 8.6% of total
revenues, down from 13% in 2015 and 27% in 2014 (see Exhibit 1). We forecast Mexico's
economic growth at 2.1% in 2017 and 2.5% in 2018.
Other oil and gas blocks were successfully auctioned off last Wednesday. Mexico's National Hydrocarbon
Commission, the oil and gas regulator, estimates that investments from the auctioned fields will generate
$2 billion over the lifespan of the concession contracts. The regulator determined winning bidders on the
basis of a weighted formula that takes into account an additional royalty that the bidder offers to the
government as well as an extra investment commitment in the exploration phase of each 30-year contract.
Oil production in Mexico is currently 2 million barrels per day, down from a peak of about 3.3 million in
2005. The main reason for the decline is dwindling production from lower recovery rates at Cantarell (the
world's second-largest oil field). Non-Cantarell production has been steadily increasing, but because of
Cantarell's size, its lower recovery rates more than offset the increased production in all other fields.