The next bidding round in the opening of Mexico's oil and gas sector, named 2.1, will be called by the end of July and consist of 15 shallow-water blocks for exploration and extraction work in the Gulf of Mexico.

The following round, or 2.2, would be called by the end of the summer and consist of of 14 onshore blocks for E&P work in the gas-rich Burgos Basin in the north of the country, as well as in southeast Mexico, according to government officials.

Rounds 2.1 and 2.2 may result in a higher proportion of contracts being awarded. However, companies will remain cautious, seeking to secure more attractive conditions for unconventional contracts, due to low oil prices ($44 per barrel as of July 19th), and social and security risks of operating in Mexico.

The situation is not unlike many other experiences in newly opened regions of Latin America and other continents, in which community relations and security risks continue to emerge as critical issues for the energy sector.

Experience says that those projects that have suffered delays and cost overruns during the initial phases are likely to be overwhelmed with problems during subsequent project phases.

Successful bidders (specially the international oil companies - IOC, to be operating in Mexico’s oil and gas sector) will face challenges that have the potential to escalate very rapidly.

This is mainly due to the lack of appropriate and timely engagement and information that is available to communities and local stakeholders who may also feel their grievances in the past have not been adequately considered.

To avoid these situations, there is a need for the Government to conduct strategic assessments and engagement, and promote the implementation of good international industry practices.

The IOCs need to develop and adopt “entry strategies” and early engagement with communities and other stakeholders. The strategy should be based on a sustainable development framework that integrates the result of social, environmental, political, and institutional analysis, to improve the understanding of the linkages between development dynamics and social structures that shape development outcome.

These challenges and stakeholder expectations require a contextualized and integrated approach, and innovative solutions to manage the sustainability non-technical risks to ensure the success of the oil and gas business ventures in Mexico.

How HSE International, LLC can help

HSE International uses its sector-focused approach, deep knowledge and experience of the oil and gas industry operating in complex social settings, and international delivery capabilities, including local strategic partners to help our clients.

HSE International has worked in the Mexico’s oil and gas sector since 2008, including supporting IOCs, NOCs and Regulators, along the oil and gas value chain. We have developed a process to address social, environmental, security and safety risks each step of the way, and are eager to contribute to a more sustainable development of the oil and gas sector in Mexico.

For more information email us at: solutions@hseinternational.com