Latin America: Assessing the

impact of oil prices, energy

reforms and national oil
companies on deal activity

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TABLE OF CONTENTS I 3

Table of contents
04 Introduction and key findings 14 Country focus – Colombia

05 Latin America M&A review 2014-17 16 Country focus – Mexico

11 Country focus – Argentina 18 Latin America—upcoming licensing rounds

12 Country focus – Brazil 19 Latin American oil and gas statistics

Key definitions
ASSET DEALS LICENSING
The acquisition of an entire asset or a stake in an asset (e.g., explo- New exploration licences awarded through official licensing rounds or in-
ration block or producing field). Excludes farm-in deals. dividual agreements with government-backed organisations.

CORPORATE DEALS
The acquisition of an entire company or business unit.
FARM-IN DEALS
A particular type of asset deal, whereby the original licence holder will retain a stake in
the project or asset and, as part of the consideration, will often be carried for upcoming
costs or have prior costs reimbursed by the new acquiring partner.
Throughout the report, the terms “DEALS INCLUDING LICENSING” and
“DEALS EXCLUDING LICENSING” are used at relevant stages. If licensing is ex-
cluded, the text is referring to asset, corporate and farm-in deals only.
All dollar amounts throughout refer to United States dollars.
All M&A and company performance data in this study is extracted from Evaluate Energy,
unless otherwise stated.

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INTRODUCTION AND KEY FINDINGS I 4
Introduction and key findings
Latin America has witnessed $23.4 billion in upstream deals including licensing
rounds since the start of 2014, based on our new analysis of M&A deal activity
in the region.
In terms of deal value, the greatest proportion of investment has been made in Brazil
and Argentina. Colombia, which enjoys significant on-shore activity from Canadian
companies, has faced a major reduction in recent activity, while Mexico’s energy re-
forms have prompted several new licensing rounds.
AMONG OUR KEY FINDINGS:
• Latin American countries are in a race with each other and the world to attract
investment. Each country has unique challenges and significant opportunities.
• Many countries within the region are experiencing an energy transformation
with varying degrees of impact. Some already have prolific resource bases but
cumbersome business environments, while others possess less attractive re-
sources in terms of volumes and accessibility but offer significantly reduced
socio-political risk.
• In terms of overall spend, Latin America mirrored many oil and gas markets world-
wide by facing a significant dip in activity, in terms of dollars, during 2015 following
the price downturn.
MARK YOUNG
Senior Oil & Gas Analyst,
CanOils & Evaluate Energy
Mark is a senior analyst with
Evaluate Energy and specializes
in North American upstream
company performance.
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• The dip in activity, in terms of dollars, can be almost entirely attributed to a lack
of large deals being agreed during the downturn. In all but two quarters since
2014 where upstream M&A spending exceeded $500 million, one or two deals
make up more than 75 per cent of the total. The rest of each quarter’s activity
was often comprised of many smaller deals under $100 million.
• Taking values out of the equation and looking at the deal counts alone, it would
actually be very difficult to pinpoint when the price downturn took place. This sug-
gests a relatively sustained willingness to deal, even if the motivation changes and
the eventual individual deal values are smaller.
• Very little middle ground exists between the large deals and relatively smaller deals.
Deals with values between $100 million and $500 million have been extremely rare
over the past four years. This dynamic is likely a symptom of a landscape dominated
by national oil companies (NOCs) and small-time explorers, with mid-sized producers
firmly in the minority.
• In an effort to strengthen economies and standards of living, governments are
implementing strategic energy reforms and policy changes to attract foreign
investment for a multitude of new discoveries that have significant potential.
• The rapid changes taking shape across the region helped M&A activity to remain
relatively consistent throughout the great price collapse, and will continue to fuel
new M&A opportunities for the short to mid-term.
DARRELL STONEHOUSE JIM CHISHOLM
Editor, Special Reports, Vice President, Latin America,
Daily Oil Bulletin Sproule
Darrell has covered the North Jim is responsible for leading
American energy market as both Sproule’s business growth in
a writer and editor for almost the Latin American market.
two decades. He is a former
editor of Oilweek magazine.
 5

Latin American M&A review

2014-17

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DEAL REVIEW I 6

Latin American deal review – 2014-17

Latin America has seen $23.4 billion spent in upstream deals, including Latin American total deal value by country
licensing rounds, since the start of 2014, with the biggest individual year Jan. 1, 2014 to Dec. 31, 2017 ($ million)
for spending being 2017. There was $10.5 billion spent on upstream deals FIGURE 1
in 2017. Some of the largest deals in 2017 involved Statoil ASA, ExxonMobil
Brazil
and Pemex, while three licensing rounds in Brazil drew great interest and
high bids on the back of important regulatory amendments. Argentina

In a landscape dominated by high-value, NOC-related assets/megaprojects Colombia

and much lower-priced exploration acreage held by small explorers, is there
Mexico
a middle ground in terms of deal value in Latin America’s M&A market? If
not, what can change this picture? Trinidad
and Tobago
Other
IMPACT OF PRICE DOWNTURN ON DEAL ACTIVITY
It is vital to start any analysis of recent deal history by tracking M&A trends 0 3,500 7,000 10,500 14,000
alongside the fluctuations in benchmark oil prices. The price downturn that
began in the third quarter of 2014 saw WTI prices plummet to a quarterly
low average of just over $33 in the first quarter of 2016. The question is: Latin America deals, Q1 2014 to Q4 2017
FIGURE 2
what impact did lower-for-longer barrel values have on the appetite for deal 7 110
making within Latin America? And did the size, number and composition
of deals vary in line with the WTI price?
5.25 82.5
The findings are intriguing. In terms of M&A spending per quarter, Latin $ billion

$/bbl
America, as a region, mirrored most oil/gas markets: upstream deal 3.5 55
activity dipped dramatically as oil prices fell and then rebounded as
prices stabilized heading into the latter part of 2016 (see Fig. 2). Many
1.75 27.50
commentators have consistently felt that the region—characterized by
emerging oil plays in early development—was always a likely location for
stymied M&A deal-flow should oil prices decline significantly. 0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016 2017
Total value of Latin America upstream Average WTI price by quarter
deals, incl. licensing ($ billion) ($/bbl)

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DEAL REVIEW I 7

Per cent of deal value made up by individual deals in all

HUGE DEALS HAVE MAJOR IMPACT ON quarters since Q1 2014 with +$500 million in total deals
APPARENT ACTIVITY LEVELS and licence awards
What’s equally interesting is the skew toward major deals during 2014-17, FIGURE 3
which impacts how market activity and confidence are analyzed. This is Q4 2017
because, on either side of the price downturn, whenever total quarterly deal Q3 2017
values for Latin America exceeded $500 million, it was not due to a litany of
Q2 2017
deals. In each case, one or two massive deals were almost entirely responsible
Q4 2016
for the apparent uptick in activity, not any increase in the number of deals.
Q3 2016
In the nine quarters since the start of 2014 that have over $500 million in Q2 2016
deals, only twice do the two largest deals of each quarter make up less than Q4 2014
75 per cent of total Latin American deal spend (see Fig. 3). Q2 2014
Q1 2014
In the only two quarters that didn’t fit this trend - the third and fourth quar-
ters of 2017 - the overall deal value was far more spread out due to three 0% 25% 50% 75% 100%
lucrative licensing rounds in Brazil that fetched a total of $3 billion in bonus Biggest deal Second biggest deal Rest of deals
bids. (See page 13 for more information.)

Latin America deal count vs. oil price

DEAL COUNT UNAFFECTED BY OIL PRICES? FIGURE 4
For Latin America as a whole, fluctuations in the total number of deals (large 25 110
or small) agreed to during 2014-17 seem remarkably unaffected by the oil
price. There is a relatively unchanging willingness to deal even if the mo- 18.75 82.5
tivation may have changed and the individual deal values themselves are
relatively small. If we look at the number of new upstream deals agreed to

$/bbl
12.5 55
in Latin America in each quarter since 2014, it is actually impossible to spot
where the price downturn took place (see Fig. 4).
6.25 27.5
The number of deals does fluctuate, but they reflect only a mild correlation
with oil prices. (This time, the various awards in licensing rounds have been 0 0
excluded to avoid any relevant quarter appearing more active than others Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
due to many awards occurring at once and skewing the data.) 2014 2015 2016 2017
Total number of Latin America upstream Average WTI price by quarter
deals, excl. licensing ($/bbl)

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DEAL REVIEW I 8

LATIN AMERICA IS STILL NOC-DOMINATED Latin America deal value spread—includes asset,
Oil prices do matter—especially for large-value deals. Nearly all of the corporate, farm-in and licensing deals
large-value deals in Latin America took place on either side of the price FIGURE 5
downturn, indicating that the price does need to be at a certain level for
these larger deals to take place. The only exception here is the $427-million Number of deals Number of deals valued Number of deals
acquisition of Apco Oil & Gas International by Pluspetrol in Argentina that valued at $100 between $100 million and valued over $500
million or less $500 million million
was agreed to in the fourth quarter of 2014, at the start of the downturn.
  2014 81 3 3
For Latin American M&A, recent history has us looking at either a handful of 2015 98 1 0
larger deals (over $500 million in value) or many smaller deals (under $100
million), with very few middle-ground, or “mid-sized,” deals (see Fig. 5). 2016 57 6 4
There are a number of possible explanations, with the dominating presence 2017 116 13 5
of NOCs in the region arguably the most important.
Total 352 23 12

NOCs—all controlled at least in part by their respective governments—still

own the largest individual portions of oil and gas production. This remains
the case today, although it is true that some of Latin America’s largest pro-
NOC portion of annual production for Latin America’s largest
ducing nations have been slowly opening up to foreign or independent
company investment over varying lengths of time. In Argentina, Brazil and
producing countries with significant IOC involvement
FIGURE 6
Colombia, the countries with the most significant independent company 100%
involvement, production is still dominated by the state-controlled entity
(see Fig. 6).
75%
If these companies agree to sell or acquire assets, they tend not to deal in
small, licence-by-licence transactions. They are far more likely to agree to 50%
multibillion-dollar farm-out deals with huge international oil companies or
a transaction covering huge tracts of land in one swooping activity than sign
25%
multiple mid-sized deals of between $100 million and $500 million apiece.
Equally, the assets likely up for investment are going to be megaprojects or,
especially in the case of Brazil, deepwater exploration and development. 0
Even participating in these types of projects as a non-operating party is YPF (Argentina) Petrobras (Brazil) Ecopetrol (Colombia)
beyond the financial capabilities of companies likely to deal in smaller,
2014 2015 2016
licence-by-licence, mid-sized deals.

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DEAL REVIEW I 9

MID-SIZED COMPANIES REMAIN A MINORITY Top upstream deals in Latin America from Jan. 1, 2014 to Dec. 31, 2017
Aside from NOCs, the majority of the landscape is comprised of:
FIGURE 7
• Large companies partnering with NOCs on megaprojects or large-scale
cooperation agreements in areas where only companies with the deepest Date
Total acquisition
announced & Acquirer Target company Brief description
pockets can realistically operate (e.g., Brazil’s deepwater offshore pre-salt cost ($’000)
country
basin); and
Statoil ASA acquires a 66% interest in the
• Smaller local or internationally based explorers looking to prove the worth of Jul 2016
Statoil ASA Petrobras Carcara pre-salt oil discovery, offshore 2,500,000
an asset to larger investors following a speculative entry via a licensing round. (Brazil)
Brazil, from Petrobras
Statoil ASA acquires a 25% interest in the
While there are a handful of mid-sized companies involved in Latin America— Dec 2017
Statoil ASA Petrobras Roncador oil field in Brazil’s Campos Basin 2,350,000
Canacol Energy, Gran Tierra Energy and Parex Resources out of Canada, to (Brazil)
from Petrobras
name a few—they are in the minority. As there are not many of these com-
Total SA acquires a 22.5% interest in
panies around, an increase in mid-sized deals would require more mid-sized Dec 2016
Total SA Petrobras BMS-11 and a 35% interest in BMS-9 2,225,000
(Brazil)
companies to enter the region. This would involve a mid-sized company in Brazil from Petrobras
undertaking a sizeable diversification away from its existing core business Andes Energia PLC will merge with Trefoil
plan to set up shop in an emerging Latin American area. This is highly un- Jul 2017 Andes
Trefoil Holdings Holdings, which owns over 99.99% of 1,769,253
(Argentina) Energia PLC
likely—especially in this oil price environment, which has seen mid-sized Petrolera El Trébol S.A.
companies in North America, at least, inclined to trim non-core operations May 2014 Morgan Morgan Stanley acquires an 11.86% stake
YPF SA 1,431,664
and focus on core business rather than break ground on a new continent.    (Argentina) Stanley in Argentina’s YPF SA from Repsol
  Qatar Petroleum acquires a 23% interest
Jan 2014 Qatar
There are additional reasons, too, that companies more likely to agree to Royal Dutch Shell in the Parque das Conchas (BC-10) project 1,000,000
(Brazil) Petroleum
mid-sized deals may be absent from Latin American deals: from Royal Dutch Shell
• Oil prices may still be too low to make mid-sized interests in Latin American Pampa Energia SA acquires a 67.19%
May 2016 Pampa Petrobras
assets or the region’s emerging formations sufficiently attractive to many (Argentina) Energia SA Argentina SA
interest in Petrobras Argentina SA from 897,163
independent companies; and Petrobras
• Lingering concerns over fiscal regimes or political uncertainty in the region. Feb 2014 Apache YPF SA acquires Apache's operations in
YPF SA 852,000
(Argentina) Corporation Argentina
Most likely, it is the combination of a landscape dominated by NOC-related Oct 2017 ExxonMobil acquires half of Statoil’s
ExxonMobil Statoil ASA 800,000
assets and a tendency towards megaprojects, all surrounded by small-time (Brazil) interest in the BM-S-8 block offshore Brazil
explorers, that most breeds this lack of a middle ground in terms of deal Sep 2017 ExxonMobil acquires an interest in certain
values in Latin America’s M&A market. ExxonMobil Government Body 605,318
(Brazil) blocks in Brazil’s 14th bid round

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 10

Country focus

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COUNTRY FOCUS I ARGENTINA 11

Argentina Argentina’s top 10 deals between Jan. 1, 2017 and Dec. 31, 2017
(excluding licence awards) FIGURE 9
Argentina is the country that has seen the second-highest total
Total
value of upstream deals since the start of 2014, at $7.4 billion. This Date
Acquirer Target company Brief description acquisition
is 36 per cent of all deals in Latin America over that time period. announced
cost ($’000)
The value was driven by four deals, each over $800 million. In
Andes Energia PLC will merge with Trefoil
addition, Argentina saw eight upstream deals in the mid-range 24/07/2017
Andes
Trefoil Holdings Holdings, which owns over 99.99% of Petrolera 1,769,253
of $100 million to $500 million, more than any other Latin Energia PLC
El Trébol S.A.
American country since the start of 2014. Recent and high-
value transaction activity has been focused on the emerging 07/05/2014
Morgan
YPF SA
Morgan Stanley acquires an 11.86% stake in
1,431,664
Vaca Muerta shale area of the Neuquén basin. Stanley Argentina’s YPF SA from Repsol

Pampa Petrobras Pampa Energia SA acquires a 67.19% interest in

04/05/2016 897,163
Energia SA Argentina SA Petrobras Argentina SA from Petrobras

“ Estimated
Apache YPF SA acquires Apache's operations in
to have the third-largest reserves in terms of recov- 12/02/2014 YPF SA 852,000
Corporation Argentina
erable gas and the fourth largest in terms of oil, Argentina is
also focused on securing foreign investment. Attracting most of Pampa Petrobras Pampa Energia SA acquires a 32.81% interest
27/07/2016 437,969
the attention, the Vaca Muerta shale play requires significant Energia SA Argentina SA in Petrobras Argentina SA from Petrobras
investment, which is not lost on Argentina’s president, Mauricio
Apco Oil & Gas Pluspetrol to acquire Apco Oil & Gas
Macri, whose mandate recently received a vote of confidence in 03/10/2014 Pluspetrol 427,000
International Inc. International
mid-term elections. His government is regarded as significantly
more pro-business than its predecessor, which has reawakened Schlumberger signs a joint venture agreement
investors’ appetite.
”
— Jim Chisholm, Vice President, Latin America, Sproule
12/04/2017 Schlumberger YPF SA
with YPF SA to acquire a 49% interest in the
shale oil pilot project in Bandurria Sur Block in
390,000
Vaca Muerta, Neuquén.

Pluspetrol acquires 1,240 square kilometers in

12/02/2014 Pluspetrol YPF SA 217,000
Vaca Muerta, Argentina, from YPF SA

Argentina deal value excl. license rounds vs. rest of PMI Patagonia Oil
PMI Resources Ltd. acquires a 100% stake in
02/03/2017 Patagonia Oil Corp. from Blue Pacific Assets 170,600
Latin America, Jan. 1, 2014 to Dec. 31, 2017 ($ billion) Resources Ltd. Corp.
Corp.
FIGURE 8
YPF SA acquires a 33.33% participating
Petrobras interest in the Río Neuquén block and an 80%
13/05/2016 YPF SA 140,000
Argentina SA participating interest in the Aguada de la
7.4 Arena block
Rest of Latin Argentina deals—
13 America deals— asset, corporate,
asset, corporate, farm-in
farm-in

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COUNTRY FOCUS I BRAZIL 12

Brazil Brazil’s top 10 deals between Jan. 1, 2017 and Dec. 31, 2017
(excluding licence awards) FIGURE 11
Brazil has seen $9.9 billion in asset, corporate and farm-in
Date Total acquisition
transactions since the start of 2014. The country is a perfect announced
Acquirer Target company Brief description
cost ($’000)
example of the lack of Latin American mid-sized deals over the
past four years: of the 32 asset, corporate and farm-in deals Statoil ASA acquires a 66% interest in the
agreed to since the start of 2014, only two of them were for a 29/07/2016 Statoil ASA Petrobras Carcara pre-salt oil discovery, offshore Brazil 2,500,000
value of between $100 million and $500 million. from Petrobras

With nine and 15 deals respectively in 2016 and 2017, those Statoil ASA acquires a 25% interest in the
two years were busier than 2014 and 2015, which only saw 18/12/2017 Statoil ASA Petrobras Roncador oil field in Brazil’s Campos Basin 2,350,000
three and five deals, outside of license awards. from Petrobras

Total SA acquires a 22.5% interest in BMS-11

21/12/2016 Total SA Petrobras and a 35% interest in BMS-9 in Brazil from 2,225,000

“Although rocked by far-reaching corruption scandals and the threat

of bankruptcy of Petrobras, Brazil is now steadily returning to a
Petrobras.

Qatar Petroleum acquires a 23% interest in the

new state of normalcy. Recent bid rounds have been dominated Qatar
29/01/2014 Royal Dutch Shell Parque das Conchas (BC-10) project from Royal 1,000,000
by large, multinational independents and national oil companies Petroleum
Dutch Shell
attracted to prolific deepwater targets. As the political situation
and Petrobras stabilize, Brazil should be well placed to attract ExxonMobil acquires half of Statoil’s interest in
27/10/2017 ExxonMobil Statoil ASA 800,000
significant investment, both in its prolific offshore basins and its the BM-S-8 block offshore Brazil
resource-rich but relatively untapped onshore basins. As the latter Statoil Brasil Óleo e Gás Ltda, a subsidiary of
is achieved, Brazil will possess a full-spectrum industry, attractive

”
QGEP Statoil ASA, acquires an additional 10%
to majors, NOCs and junior oil companies alike. 11/07/2017 Statoil ASA 379,000
Participações S.A. interest in the BM-S-8 licence in Brazil from
— Jim Chisholm, Vice President, Latin America, Sproule QGEP Participações S.A.

Parnaíba Gás ENEVA SA acquires Parnaíba Gás Natural from

28/03/2016 ENEVA SA 287,968
Natural Cambuhy and OGX

Brazil deal value excl. license rounds vs. rest of Statoil ASA divests a further 3.5% stake in the
27/10/2017 ExxonMobil Statoil ASA 84,000
Latin America, Jan. 1, 2014 to Dec. 31, 2017 ($ billion) BM-S-8 block, offshore Brazil, to ExxonMobil
FIGURE 10 Statoil ASA divests a further 3% stake in the
27/10/2017 Galp Energia Statoil ASA 71,000
BM-S-8 block, offshore Brazil, to Galp Energia

Rosneft acquires PetroRio’s 55% interest in the

18/05/2015 Rosneft PetroRio 55,000
10.5 9.9 Rest of Latin Brazil deals— Solimões project in Brazil
America deals— asset, corporate,
asset, corporate, farm-in
farm-in

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COUNTRY FOCUS I BRAZIL 13

Brazil—licensing round
review 2014-17 Brazil’s license awards 2015 and 2017—bonus bid review
FIGURE 12
Brazil’s petroleum regulator, ANP, has held four licensing
rounds between 2014 and 2017 to date. Round 13 was held Bonus bids, total, all Largest bidder (combined
in two stages in the fourth quarter of 2015, Round 14 in the Date of awards Licensing round
companies ($’000) successful bids, $’000)
third quarter of 2017, and the country’s second and third pre-
salt rounds in late October of 2017.
While both stages of Round 13 only collected a total of Oct/Dec 2015 Round 13 (Stage 1 & 2) 32,469 Queiroz Galvão (25,675)
$32.5 million in bonus bids, Round 14 and the two pre-
salt rounds were far more successful, even though a large
percentage of the blocks on offer in Round 14 were left Sep 2017 Round 14 1,212,688 ExxonMobil (605,318)
without bids. These three rounds in 2017 combined to
produce almost $3 billion in bonus bids.
Statoil ASA & ExxonMobil
These rounds were held on the back of important regulatory Oct 2017 2nd Pre-salt 1,014,442
(366,888 each)
changes and a number of huge bids were received. In round
14, ExxonMobil and Petrobras, as a consortium for the
most part, invested $1.17 billion in bonus bids, net to their Oct 2017 3rd Pre-salt 753,146 Petrobras (322,777)
working interests in the new licences awarded. The bulk of
this value (93 per cent) was allocated to a 50 per cent stake in
each of the C-M-346 and C-M-411 blocks in the Campos Basin,
a basin that has unexplored pre-salt potential.
The two pre-salt rounds garnered significant interest after
the ANP lifted restrictions that previously meant Petrobras
was the only company permitted to act as operator in Brazil’s
pre-salt fields. Again, it was ExxonMobil and Petrobras that
were among the main headline makers. ExxonMobil, as part
of the second round, partnered with Norway’s Statoil ASA
and Portugal’s Galp Energia on the Carcará North block.
ExxonMobil’s 40 per cent interest in the block meant a bonus
payment of around $369 million. Despite the new allowances
for foreign operators, Petrobras still led all bidders in the
third round, winning the operatorship in two of the three
blocks awarded for a total combined bonus payment of
$323 million.

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COUNTRY FOCUS I COLOMBIA 14

Colombia Colombia’s top 10 deals between Jan. 1, 2017 and

Dec. 31, 2017 (excluding licence awards) FIGURE 14

Colombia has seen more individual deals excluding licensing Total

Date
Acquirer Target company Brief description acquisition
awards than any other Latin American country since the start announced
cost ($’000)
of 2014, at 52. However, the country has only seen one deal
over a value of $500 million and one mid-sized deal in that Gran Tierra PetroLatina Gran Tierra Inc. acquires PetroLatina Energy
01/07/2016 525,000
entire time period. Energy Inc. Energy Ltd. Ltd.
Parex Resources Inc. acquires Verano Energy
Among its neighbours, Colombia was the only country to see Parex Verano Energy
13/05/2014 Limited, a private oil company with operations 176,220
a marked drop in deal numbers during and after the price Resources Inc. Limited
in Colombia
downturn. In 2014 alone, Colombia saw 26 individual asset,
corporate or farm-in deals in the upstream sector. The three Petroamerica Suroco Petroamerica Oil Corp. acquires Suroco Energy
28/04/2014 98,890
years since saw 26 deals combined. Oil Corp. Energy Inc. Inc.
Gran Tierra Petroamerica Gran Tierra Energy Inc. acquires Petroamerica
12/11/2015 78,351
Energy Inc. Oil Corp. Oil Corp.
PMI Resources PentaNova PMI Resources Ltd. acquires PentaNova Energy
25/01/2017 74,417
Ltd. Energy Corp. Corp. via a reverse takeover
Platino Energy Holdings, Corp., a subsidiary of
Colombia Energy
Platino Energy Platino Energy Corporation, acquires Global
14/10/2014 Development 49,000
Corp. Energy Development's wholly owned subsidiary
Company
that holds Llanos basin properties in Colombia
Canacol Energy Ltd. acquires an additional 10%
Canacol Petromont
18/06/2014 working interest in the LLA 23 contract from 40,000
Energy Ltd. Colombia SA
Colombia deal value excl. license rounds vs. Petromont in Colombia
rest of Latin America, Jan. 1, 2014 to Dec. 31, A wholly owned subsidiary of Pacific Rubiales
2017 ($ billion) Pacific
PetroNova
Energy Corp. (now known as Frontera Energy
28/02/2014 Rubiales Corp.) farms in to earn a 50% participating 35,611
FIGURE 13 Colombia Inc.
Energy Corp. interest in the Tinigua Contract, Colombia, from
PetroNova Colombia Inc.
1.3
Canacol Energy Ltd. acquires a 100% interest
Canacol OGX Petroleo E
18/12/2014 in the VIM 5 and VIM 19 contracts from OGX 29,500
Rest of Latin Colombia deals— Energy Ltd. Gas SA
Petroleo é Gas SA
America deals— asset, corporate,
19.1 asset, corporate, Petroamerica
farm-in 15/06/2015 PetroNova Inc. Petroamerica Oil Corp acquires PetroNova Inc. 21,707
farm-in Oil Corp.

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COUNTRY FOCUS I COLOMBIA 15

Colombia—licensing round Colombia’s license awards 2015 and 2017—

significant international involvement
review 2014-17 FIGURE 15

Open Round 2014 Ecopetrol live auction 2016

Colombia has held only two rounds since the start of 2014,
awarding 18 different companies with at least a non-
participating interest in blocks in its Open Bid Round of Company
2014, and a further three companies with some blocks that Awarded licences? Number of blocks Awarded licences? Number of blocks
Y/N awarded (gross) Y/N awarded (gross)
were originally owned by Ecopetrol in a 2016 live auction.
Canada’s Gran Tierra Energy and Parex Resources were
successful with bids in both rounds, while the Open Bid Anadarko
Round in 2014 included a number of global oil and gas Y 3 N -
Petroleum Corp.
powerhouses, including ExxonMobil, Royal Dutch Shell and
Repsol. Unlike Brazil, bonus bid information is not available, Andes Energia
Y 3 N -
PLC
but a list of the more significant international independent
companies involved in each round is provided in Fig. 15. ExxonMobil Y 1 N -
State-owned Ecopetrol was also involved in 2014, gaining an
interest in five blocks through its subsidiary Hocol SA. GeoPark Limited Y 1 N -

Gran Tierra
Y 1 Y 2
Energy Inc.
Maurel & Prom
Y 1 N -
SA
Parex Resources
Y 2 Y 1
Inc.
Petroamerica Oil
Y 1 N -
Corp

Repsol Y 1 N -

Repsol Oil &

Gas Canada
Inc. (previously Y 1 N -
Talisman Energy
Inc.)

Royal Dutch Shell Y 1 N -

Statoil ASA Y 1 N -

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COUNTRY FOCUS I MEXICO 16

Mexico’s license awards in Round 1.4 and 2.1—

Mexico significant international involvement

Round 1.4 Round 2.1

FIGURE 16

Licensing round review 2014-17 Company

Awarded licences? Number of blocks Awarded licences? Number of blocks
Y/N awarded (gross) Y/N awarded (gross)

Mexico has been extremely active in holding licensing BP Plc. Y 2 N -

rounds since 2015 following its energy reform of 2013, which
ended Pemex’s 75-year monopoly over the country’s oil and Cairn Energy N - Y 2
gas assets and permitted independent investment. So far,
there have been seven stages of two licensing rounds, with Chevron Corporation Y 1 N -
varying levels of success as time has worn on. Rounds 1.1,
1.2 (both involving shallow offshore licenses), 1.3 (onshore) CNOOC Ltd Y 2 N -
and 1.4 (deepwater offshore) had moderate success. Round
1.4 was undoubtedly the most popular, with the deepwater DEA Deutsche Erdoel
N - Y 1
Gulf of Mexico licences on offer attracting successful bids AG
from Statoil, CNOOC, Total and Repsol, among others. The
first stage of Round 2 attracted a similar crowd to Mexico’s Eni N - Y 3
shallow waters, after the government fine-tuned contract
terms resulting in increased bidding and competition. ExxonMobil Y 1 N -
Rounds 2.2 and 2.3 only attracted bids from smaller,
privately held consortiums. The significant independent Inpex Corporation Y 1 N -
international companies that received licences in the most
Lukoil N - Y 1
popular rounds (1.4 and 2.1) are listed in Fig. 16. Italy’s Eni
was the only company listed below to feature in any previous
Murphy Oil
round (1.1). Y 1 N -
Corporation

Petronas Y 2 Y 1

Repsol SA N - Y 1

Royal Dutch Shell N - Y 1

Statoil ASA Y 2 N -

Total SA Y 3 Y 1

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COUNTRY FOCUS I MEXICO 17

Mexico—Pemex sales so far Pemex asset sales, 2016-17 FIGURE 17

Total
Alongside these licensing rounds, Pemex is undergoing an Date
Acquirer Target company Brief description acquisition
announced
asset sale process to create a series of joint ventures to reduce cost ($’000)
its portfolio obligations while ensuring significant funding to
aid production growth. The company saw production tumble
DEA Deutsche Pemex divests a 50% interest in the Ogarrio
in recent years as output from its maturing Cantarell field 04/10/2017 Pemex 458,984
Erdoel AG field in Mexico to DEA Deutsche Erdoel
plummeted since 2004. So far, Pemex has agreed to three farm-
out deals. Australia’s BHP Billiton, Germany’s DEA and a local
company held by the PICO Group are Pemex’s new partners. The
asset details for each agreement are provided in Fig. 17. BHP Billiton farms into a 60% participating
interest and operatorship of blocks AE-0092
06/12/2016 BHP Billiton Pemex 190,400
and AE-0093 containing the Trion discovery
located in the deepwater Gulf of Mexico

“ In75-plus
2013, a historic constitutional reform in Mexico ended Pemex’s
year monopoly of the hydrocarbon sector and opened the
door to foreign investment precisely at a time when domestic Pemex divests a 50% interest in the Cárdenas-
demand was increasing. Touted as having one of the best energy 04/10/2017 PICO Group Pemex Mora block in Mexico to Cheiron Holdings 166,500
futures of any developing nation, Mexico has abundant untapped Limited, a subsidiary of PICO Group
potential in both onshore and offshore basins, including virtually
untouched unconventional resources. Since these reforms began,
the country has been hard at work attracting foreign investment
and continuing to build a robust regulatory and investment envi-
ronment to support future growth.
”
— Jim Chisholm, Vice President, Latin America, Sproule

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COUNTRY FOCUS I 18
Latin America—upcoming licensing rounds
BRAZIL – In 2018 and 2019, three bid rounds will be held each year: one for
mature areas, one for the pre-salt and one for exploration blocks. Based
on the recent 2017 rounds, these next rounds should be expected to garner
significant continued interest from the international oil and gas elite.
MEXICO – The next Mexican round (2.4) is scheduled for January 2018 and
will again focus on deepwater positions. This should again attract many
bids from some of the world’s larger oil and gas companies, if Round 1.4
is anything to go by. Round 3.1, including more shallow-water areas, is
scheduled for March 2018, and Round 3.2 will take place before the end of
2018. Pemex’s asset sale plans also continue. For details on the assets that
the company is looking to sign joint ventures for, please refer to Pemex’s
Business Plan 2017-2021 here, which was published in 2016.
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ARGENTINA – While nothing has been finalized to date, the country is
reportedly considering an offshore auction next year, focused on developing
fields off its Atlantic Coast. Plans hinge on what the country’s energy minister
described as the “high probability” that Brazil’s pre-salt basin extends south
and into Argentine maritime borders.
COLOMBIA – Prior to 2014’s Open Round, the country had held a licensing
round every other year since 2008. Since 2014, only the small Ecopetrol field
awards have taken place. In early 2018, however, there will be a bidding round
in the Sinú San Jacinto Basin involving two blocks holding mature fields and
13 other blocks in emerging areas. Contract execution in this bidding round
is expected in March. This will be the first bidding round to take place in the
country after recent regulation updates by Colombia’s oil and gas governing
body, the ANH, aimed at ensuring a more demand-led licensing process than in
the past. The new regulations will allow operators a greater degree of flexibility
in how they manage their investment commitments.
 19

Latin American oil and

gas statistics

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APPENDIX I 20

Latin American major oil and gas

countries overview for 2016
(Countries with more than 100,000 boe/d of production in 2016)

Production and consumption, 2016

Oil production Gas production Total production Oil consumption Gas consumption Production – consumption
Country % oil Country
(mboe/d) 2016 (mboe/d) 2016 (mboe/d) 2016 2016 (mboe/d) 2016 (mboe/d) 2016 (surplus or deficit)
Argentina 619 615 1,235 50% Argentina 687 798 -250
Bolivia 59 317 377 16% Bolivia 78 57 241
Brazil 2,605 378 2,982 87% Brazil 3,018 589 -624
Colombia 924 167 1,091 85% Colombia 340 170 581
Ecuador 545 Unknown 545 100% Ecuador 239 Unknown 306
Mexico 2,456 759 3,214 76% Mexico 1,869 1,440 -94
Peru 135 225 360 37% Peru 256 127 -23
Venezuela 2,410 552 2,962 81% Venezuela 611 572 1,779
SOURCE: BP STATISTICAL REVIEW OF WORLD ENERGY 2016 AND EVALUATE ENERGY SOURCE: BP STATISTICAL REVIEW OF WORLD ENERGY 2016 AND EVALUATE ENERGY

1P reserves and 1P reserves life (based on 2016 production)

1P oil reserves 1P gas reserves Total 1P reserves Reserve life
Country % oil
(mmbbl) (mmboe) (mmboe) (years)
Argentina 2,395 2,063 4,458 54% 10
Bolivia 211 1,650 1,861 11% 14
Brazil 12,634 2,188 14,822 85% 14
Colombia 2,002 727 2,729 73% 7
Ecuador 8,000 65 8,064 99% 40
Mexico 7,977 1,435 9,411 85% 8
Peru 1,187 2,347 3,534 34% 27
Venezuela 300,878 33,558 334,436 90% 309
SOURCE: BP STATISTICAL REVIEW OF WORLD ENERGY 2016 AND EVALUATE ENERGY

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