International Bidding Procedures of Petroleum in Mexico


International Bidding Procedures of Petroleum in Mexico

Oct 17, 2000 – 1:35:24 PM

  1. Introduction

On November 24, 2010, the Board of Directors of Petróleos Mexicanos (PEMEX)issued the “Guidelines for the open international public bidding” that shall apply for all bidding procedures for substantive activities with productive character comprising the exploration, exploitation, refining, transportation, storage, distribution and first hand sales of oil and by-products obtained from its refining. The Guidelines provide a framework for the bidding procedures designed to foster integrity, fairness,transparency and promote efficiency and competition.

  1. General

The Mexican Federal Constitution provides that the Nation owns all the oil and all solid, liquid and gaseous hydrocarbons. The Nation’s domain shall not be transferred to others and shall be permanent. Neither concession nor contract shall be granted with regard to hydrocarbons.

Mexico carries out the exploration and exploitation of hydrocarbons through PEMEX according to the Statutory Law. The Ministry of Energy exclusively grants to PEMEX and to its subsidiary entities the assignment of zones for the exploration and exploitation of oil. Companies interested in engaging in the procurement of exploration, exploitation and refining of oil with PEMEX shall do so by means of bidding proceedings.Nevertheless, there are some exceptions, for instance, the single-source procurement.

  1. Guidelines for Open International Bidding

The Guidelines are in accordance with PEMEX Law, its Regulation and theProcurement Administrative Provisions. The purpose of the bidding is to award a contract for Services for the evaluation, development and production of hydrocarbons, with a validity of up to 25 years, in accordance with the model contract.

  1. Calendar

The Guidelines provide with a detailed calendar for all the events of the bidding such as the sale deadline of the guidelines, visits to the contract areas, workshop period,clarification meeting, pre-qualification period, announcement of the results of the pre-qualification, submission of proposals, decision, award and contract execution period.

  1. Publicity and Transparency

All the bidding events shall be public and transmitted through Internet. Any person may attend the events of the bidding, prior registration of his/her participation. Such person, however, shall abstain from intervening in any manner in such events.

The bidding shall have the intervention of at least one social witness appointed by the Ministry of Public Administration
(Secretaría de la Función Pública), with the aim of certifying the legality and transparency of the procedure and keep the society informed.

  1. Proposals

The bidders may participate in the bidding as individual entities or as a consortium.A person that submits an individual proposal or a consortium proposal may not submit another proposal on his/her behalf or through related companies. Prior to the contract execution, the awarded bidder may incorporate a specific purpose company, and such company shall execute the contract as contractor.

  1. Clarification meetings

The bidders may submit questions and request clarification or modifications before and after the clarification meeting. PEMEX shall answer the questions in writing.

  1. Prequalification

Before the proposal submission and opening, the pre qualification period shall be carried out, during which a review of the expertise and of technical, financial and legal capacities of each bidder shall be made. People who have purchased theGuidelines and signed a confidentiality letter are the only ones that may be prequalified. PEMEX shall not receive proposals from bidders that have not been prequalified. The pre qualification results shall be announced to the bidders through a prequalification certificate that shall expressly state whether the bidder meets the expertise requirements.

Some of following requirements are needed in order to prove the expertise required and to obtain the pre-qualification certificate:

  1. Legal issues such as i) legal existence and purpose of the bidder; ii) legal capacity and powers of the legal representatives; and iii) regarding consortium proposals, each one of the companies must prove its legal existence and powers of representatives, among other issues.
  2. Technical issues

a) Evidence of the operation of fields during the last year and investments in exploration and production projects during the last 4 years. Companies of the same corporate group may prove the requirement if they submitted a consortium proposal.

If the bidder is listed in the stock market or it is an issuing agent authorized and regulated by a securities authority acknowledged in the USA or in Europe, the bidder must provide its annual report and SEC Form 10-K or the SEC Form 20-F or an equivalent, to prove relevant annual production levels and investments required in exploration and development. If the bidder is not listed in the stock market or it is aState entity, it must submit a copy of the contract entered into with the government or letter issued by the authorities associated to the contracts that show the bidder has operated fields.

b) Capacity to implement and apply quality, safety, health and environmental protection systems in the operation.

Financial issues:

  1. Submit one credit rating document of the bidder for the bidding, issued by a credit rating company, registered with the national Banking and Securities Commission.
  2. The financial capacity shall be met when the credit ratings are equal to or greater than:
    i) BBB (in case it is granted by Fitch); ii) Baa2 (in foreign currency, in case it is granted by Moody’s); iii) BBB (in case it is granted by Standard & Poor’s or by HRRatings de México).

Evaluation and award

PEMEX shall evaluate the proposals verifying that the documents meet the above requirements. At least 1 day before the pre-qualification period, PEMEX shall certify with a public notary the maximum acceptable fee. Such fee shall remain confidential until the evaluation stage and shall be used to determine the solvency proposal.Proposals with a fee lower than the maximum fee shall be considered solvent. The bidder with the lowest fee shall be the awarded bidder.

  1. Follow up

In August 2011, PEMEX awarded three major contracts for the mature fields in theSouthern Region:
Carrizo, Magallanes and Santuario. In October PEMEX will tender six fields:
San Andrés, Loma Bonita, Pánuco, Altamira, Arenque and Atún. InNovember and December it will tender Chicontepec. Additionally, in January and February 2012, PEMEX will tender deepwater areas.