Mexico is proving to be a quick study in opening up its oil industry.
The country’s first oil-block auction in July was dismal, with only two out of 14 contracts awarded. But a second attempt, on Sept. 30, was markedly better, with three out of the five blocks tendered.
The auction drew a diverse group of players, from international firms to domestic companies, and bidding for some of the blocks was hyper-competitive. A unit of Italian major ENI won the first block by offering to share 83.75% of operating profits (link in Spanish) with the government. The minimum requirement was 34.8%.
“It’s a good sign that the market is interested in Mexico,” says Pablo Medina, an analyst with Wood Mackenzie who live-tweeted the auction.
Mexico is brand new at marketing its oil assets. For more than 70 years, state-owned Pemex controlled oil production, and the idea of foreign participation was considered by many Mexicans to be an affront to national sovereignty.
But in a series of historical—and controversial—reforms in 2013 and 2014, lawmakers started allowing private companies to invest in the oil sector.
The terms of the first auction were not especially market-friendly, though. Officials required steep guarantees from bidders in case a project fell through, and they did not disclose the required profit-sharing minimum until after buyers had placed their bids.
Mexico learned the lesson, Medina tells Quartz. For the latest auction, the guarantees were lowered, and the minimums were advertised well before hand.