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story.lead_photo.caption Gas flares from a tower at a Petroleos Mexicanos platform in the Gulf of Mexico about 43 miles off the coast of Ciudad del Carmen, Mexico, in this file photo. - Photo by Bloomberg News / SUSANA GONZALEZ

Mexico's move to open the country's energy industry to private and foreign investment for the first time in decades started slowly this week. The government received only two successful bids for oil leases and failed to draw the interest of major international oil producers.

But future bidding rounds for deep-water blocks in the Gulf of Mexico will draw more interest from major oil players, and could pit El Dorado's Murphy Oil Corp. against the likes of Exxon Mobil Corp. and Chevron Corp. in jockeying for those drilling contracts, analysts said.

"As it happens, this week will provide the first substantive indication of which international oil and gas companies want to be the first movers into Mexico," said Pavel Molchanov, an analyst with Raymond James and Associates, in an email.

The first round of the auction involved 14 shallow-water exploration blocks in Mexico's portion of the Gulf of Mexico. These prospects do not hold enough oil to attract large international producers, analysts said.

"These are clearly not the most 'sexy' opportunities; the more attention-grabbing onshore shale acreage and deepwater blocks will be included in future phases," Molcahanov said, adding that Murphy Oil did not participate in this week's auction.

A spokesman for Murphy Oil said the company plans to bid for oil blocks in Mexico, but could not provide further specifics on the process or say which leases Murphy Oil is targeting.

"Murphy is participating in the upcoming bid round in Mexico," spokesman Barry Jeffery said. "We are looking at the offshore there."

About 31 percent -- roughly 16,800 barrels of oil per day and 54 million cubic feet of natural gas per day -- of Murphy Oil's production in the United States came from the Gulf of Mexico in 2014, the website said.

"Murphy has a long history of operating in the deepwater (U.S.) Gulf of Mexico," Molchanov said in the email. "So it would be reasonable for the company to also show interest in Mexico's portion of the deepwater Gulf."

The auction, which started Wednesday, was the first in a series the Mexican government is holding as part of an energy overhaul.

The oil and gas industry in Mexico largely has been operated by the state-owned oil company, Petroleos Mexicanos, or Pemex, for about 80 years, said Tim Samples, a professor at the University of Georgia who researches energy in Mexico.

Pemex, while a top producer, is not able to turn around the country's declining oil production by itself, he said, adding that the company is fine drilling in shallow waters in the Gulf of Mexico but needs partners to explore deep-water and shale opportunities in Mexico.

"The energy reform is the foundation of this current auction because before the energy from private investment was extremely limited in Mexico's energy industry," Samples said.

Business on 07/17/2015

Print Headline: Mexico oil-lease sale nets 2 bids; Murphy on tap for 2nd round


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