Falling Oil Prices Are Not the Only Deterrent to Investment in Mexico's Oil Fields -

On July 15, Mexico auctioned 14 shallow-water exploration blocks. The auction marked the first time in nearly eight decades that private and foreign investors could directly participate in Mexico's exploration and production of oil reserves since the industry was nationalized in 1938. Despite Mexico's high expectations for this first round of bids, only two of the 14 Blocks were successfully tendered. A consortium of Mexico's newly formed Mexican Sierra Oil & Gas, Houston-based Talos Energy LLC, and United Kingdom's Premier Oil PKC successfully bid on both tendered Blocks.

Industry experts have provided various reasons for why the auctions fell well short of Mexico's expectations to tender at least a third of the Blocks in the first round of auctions. Not surprisingly, some cite plummeting oil prices. In December 2013, when Mexico amended its Constitution to allow for private investment in the oil sector, oil was trading at over US $100 a barrel. Eighteen months later, oil prices were less than half.