Bidding Rounds Research Articles

Optimizing Bidders Selection of Multi-Round Procurement Problem in Software Project Management Using Parallel Max-Min Ant System Algorithm

This paper presents a Game-theoretic optimization via Parallel MinMax Ant System (PMMAS) algorithm is used in practice to determine the Nash equilibrium value to resolve the confusion in choosing appropriate bidders of multi-round procurement problem in software project management. To this end, we introduce an approach that proposes: (i) A Game-theoretic model of multiround procurement problem (ii) A Nash equilibrium strategy corresponds to multi-round strategy bid (iii) An application of PSO for the determination of global Nash equilibrium. The balance point in Nash Equilibrium can help to maintain a sustainable structure not only in terms of project management but also in terms of future cooperation. As an alternative of procuring entities subjectively, a methodology to support decision making has been studied using Nash equilibrium to create a balance point on benefit in procurement where buyers and suppliers need multiple rounds of bidding. Our goal focus on the balance point in Nash Equilibrium to optimizing bidder selection in multi-round procurement which is the most beneficial for both investors and selected tenderers. Our PMMAS algorithm is implemented based on MPI (message passing interface) to find the approximate optimal solution for the question of how to choose bidders and ensure a path for a win-win relationship of all participants in the procurement process. We also evaluate the speedup ratio and parallel efficiency between our algorithm and other proposed algorithms. As the experiment results, the high feasibility and effectiveness of the PMMAS algorithm are verified.

Does prior knowledge of food fraud affect consumer behavior? Evidence from an incentivized economic experiment.

This study uses a laboratory experiment to examine whether prior knowledge of food fraud persistently affects consumer behavior. We invited regular consumers of olive oil to participate in an olive oil valuation experiment. We used a within-subject design to compare consumers' willingness to pay (WTP) for Italian extra virgin olive oil (EVOO) before and after receiving information about labeling scandals in the Italian olive oil industry. After the first round of bidding, but before introducing information about labeling scandals or otherwise mentioning food fraud, we surveyed participants about whether they had heard of food fraud. Results indicate that prior knowledge of food fraud plays an important role in explaining consumers' valuation behavior, both in the pre-information baseline bidding and in how they update their valuation in response to information about a food fraud scandal. Consumers who reported prior knowledge of food fraud partially accounted for the possibility of food fraud in their initial pre-information valuation, submitting significantly lower bids than participants who did not report prior knowledge. They also reacted less to olive oil fraud information than consumers who reported no prior knowledge of food fraud. Findings of this study highlight the potential long-term consequences of increasing consumer awareness of food fraud incidents on consumer WTP for products in industries that have experienced food fraud scandals.

Sustainable Development through Natural Gas Network Development in India

Natural gas has been gaining popularity as a fuel for the next century across the globe. The Indian government has been pushing to boost the natural gas share in the energy mix to 15% by 2030. City Gas Distribution (CGD) plays a crucial role in meeting the set target as the Indian government has given it a tag of priority sector. The Indian Government has been aggressively expanding the CGD footprints across India by conducting the bidding rounds for new Geographic Areas (GAs). This paper provides a comprehensive review of city gas distribution and delivers insights on developing a sustainable natural gas business in India.

E&P Notes (October 2019)

E&P Notes (October 2019)

Shale gas Sino-foreign agreements in China: attractive or not?

Abstract This article presents an analysis of how China will participate in the ‘shale revolution’ through Sino-foreign collaboration by evaluating the legal arrangements on offer today in the onshore shale gas industry—specifically focusing on the essence of the different agreements, the obstacles for foreign investors under the current petroleum regime, why obstacles exist and what the relevant solutions to them might be. The first part of the article provides a general introduction to the use of JV contracting models and PSCs in the development of Chinese shale projects with foreign investment, and analyses the crucial factors which apply to determining the boundaries between the different forms of contract and the concerns of the relevant parties in the process of negotiation. The second part of the article investigates the reasons for the absence of IOCs in the second shale gas bid round, and why Shell terminated its PSC with CNPC even though commerciality had been declared. Finally, taking into account the underlying reasons for why China's legal regime hinders foreigner investors' enthusiasm for shale gas investment, it proposes relevant suggestions to enhance the attractiveness of Sino-foreign shale gas cooperation.

E&P Notes (June 2019)

Blacktip: Shell’s New Discovery in the Gulf of Mexico The newest deepwater find in the Gulf of Mexico will be known as Blacktip. It is located about 250 miles south of Houston in about 6,200 ft of water. Shell announced the discovery in late April, calling it the “second material discovery” in what the firm terms the “Perdido Corridor,” according to Andy Brown, Shell’s upstream director. A company statement highlighted that the exploratory well intersected more than 400 ft of reservoir pay zone in the prolific Wilcox formation. The deepwater operator is still evaluating and appraising the field as drilling continues to define the reservoir’s extent. Chinese-Owned Operator Claims Longest Permian Lateral Chinese-owned, Houston-based Surge Energy reported that its subsidiary, Moss Creek Resources, drilled the Medusa Unit C 28-09 3AH well in the West Texas Permian Basin to a TMD of 24,592 ft, with a total horizontal displacement of 17,935 ft, or 3.4 miles. Latshaw Drilling & Exploration’s Rig 10 drilled the well, which stayed 100% in zone of the Wolfcamp A formation, over 18 days from surface to total depth utilizing conventional mud motor and measurement-while-drilling technology. It is the longest known lateral in the Permian based on the IHS and Drillinginfo databases, Surge said. Murphy Oil to Buy Deepwater US Gulf Assets for up to $1.625 Billion Murphy Oil has agreed to acquire deepwater US Gulf of Mexico assets from LLOG Exploration for up to $1.625 billion. The deal will result in the El Dora-do, Arkansas-based Murphy adding 32,000–35,000 BOE/D net to its 2019 US gulf production, of which 60% will be oil, bringing its total US gulf output to 85,000 BOE/D net. The gulf will represent 66% of the company’s total daily production. “With this transaction, Murphy becomes the eighth-highest producer in the Gulf of Mexico. Only a year ago, they were No. 20,” said Imran Khan, senior research manager, US Gulf of Mexico upstream oil and gas, at consultancy Wood Mackenzie, in comments on the deal. ExxonMobil’s Guyana Offshore Discovery Count Rises to 13 ExxonMobil’s Yellowtail-1 well on the Stabroek Block offshore Guyana encountered 89 m of “high-quality, oil-bearing sandstone,” the major said, bringing its discovery count in Latin America’s emerging oil powerhouse to 13. Located 10 km northwest of the Tilapia discovery, the Yellowtail-1 was drilled by the Noble Tom Madden drillship to 5,622 m in 1,843 m of water. Yellowtail-1 is the fifth discovery in the Turbot area—which includes the Tilapia, Turbot, Long-tail, and Pluma discoveries—where ExxonMobil plans another Stabroek Block development hub. Yellowtail-1 adds to the 5.5 billion BOE in estimated recoverable resources on the block. Majors, IOCs Win Blocks in Argentine Offshore Bid Round Thirteen companies placed bids on 18 blocks in the Austral, North Argentina, and Malvinas West basins as part of Argentina’s first open bid round for offshore acreage in more than 20 years. Nearly every major came away with blocks while other international oil companies and South American-focused operators also gained acreage, pushing total bids to almost $1 billion. Among them, Equinor took seven blocks, Qatar Petroleum (QP) received five, and ExxonMobil counted three. Other companies receiving tenders were Total, Shell, BP, Eni, Wintershall, Tullow, Mitsui, YPF, Pluspetrol, and Tecpetrol.

Comments: Offshore Rebound

Editor's column Although the shale sector continues to thrive, the pace of deepwater E&P is now gradually picking up. Offshore is making a comeback after the harsh cutbacks that followed the oil price drop that began 5 years ago. The downturn saw declines in exploration spending, final investment decisions, and production. But it is now rebounding, as capital expenditure increases and a number of new finds in promising basins bolster optimism. A survey of industry executives released last month shows renewed confidence in exploration. Attractive plays in “deepwater sweet spots” such as Brazil, Guyana, Gulf of Mexico, and east Mediterranean are attracting the most attention from operators, according to the Wood Mackenzie survey of 258 executives involved in E&P. Noteworthy is the increasing amount of money being spent on digitalization in global exploration budgets. About half of operators’ budgets are going for drilling and a fourth for geological surveys, but digitalization now accounts for 8% of the total budget and will likely rise as new seismic processing techniques, artificial intelligence, and machine learning become basic tools for exploration. “Digitalization offers exploration the possibility of better resolution of the subsurface, better seismic modeling, and growing use of automated interpretation,” said Andrew Latham, Wood Mackenzie vice president of exploration. “The survey results back up our expectation that the exploration industry, led by the majors, will spend billions each year on digitalization.” Some 22% of the executives surveyed said exploration projects can break even with Brent in a $55–60/bbl price band while 18% would be happy with a $45–50/bbl price range. Before the oil price crash, companies saw a break-even Brent price of $80/bbl. A challenge for operators, especially since the oil price downturn, is keeping costs down. At a panel discussion at this year’s Offshore Technology Conference, representatives of operators noted that companies have made great strides in this area, largely driven by standardization and simplifying projects. US Gulf of Mexico breakeven costs are now as low as in the $30/bbl range, compared with a $50/bbl range a few years ago, according to one of the panelists, Chris Golden, a senior vice president for Equinor. A number of new discoveries show renewed interest in offshore, particularly Latin America. Shell plans to drill its first two deepwater wells offshore Mexico this December in the Perdido Basin, and will likely drill more next year, according to Martin Stauble, Shell’s vice president of exploration for North America and Brazil. Shell and ExxonMobil recently won acreage offshore Colombia, which is trying to revitalize its E&P, and a number of major operators have been active in Brazil licensing rounds. And Argentina’s held its first open bid round for offshore acreage in more than 20 years in April. ExxonMobil has also made a number of major discoveries offshore Guyana. Its Liza Phase 2 project received government and regulatory approvals in May and remains on track for first oil by early 2020 and will produce up to 220,000 B/D by mid-2022.

Impact of regulatory framework on bidding behavior of firms: Policy implications for the oil & gas sector

India's economy is heavily dependent on foreign oil with the country importing nearly 80% of its crude requirement. Consequently, government of India has been keen to encourage private investment in this sector through attractive policy frameworks. The earlier New Exploration Licensing Policy (1999–2015) has met with limited success, especially in the context of attracting multinational firms, necessitating its replacement with Open Acreage Licensing Policy. The factors that resulted in the limited success of a regulatory framework are not fully understood, especially the impact of firms bidding behavior. This paper adopts a qualitative approach to examine bidding decisions of four petroleum exploration firms across several bidding rounds from a resource picking mechanism perspective. Our findings suggest that uncertainties in the regulatory framework were exploited by the firms resulting in policy inefficacy. Our research identifies four variants of uncertainties and three types of aggressive bidding behavior. We recommend that in order to increase policy efficacy, there is a need to decrease stance uncertainty. Further adoption of a behavioral strategy lens to examine regulatory policy can inform the extant literature.

E&P Notes (May 2019)

PTTEP to Buy Murphy Oil’s Malaysian Business for $2.1 Billion Matt Zborowski, Technology Editor Thailand’s PTT Exploration and Production (PTTEP) is doubling down on Malaysian oil and gas in an effort to broaden its reach in its native South-east Asia. PTTEP has agreed to acquire Murphy Oil’s Malaysian business for $2.1 billion in an all-cash deal. PTTEP also announced that it was awarded two Malaysian exploration blocks in the Malaysia 2018 bid round. The assets to be purchased produced 48,000 BOE/D net to Murphy last year, of which 62% were liquids, and consisted of proved reserves of 468 Bcf of natural gas and 51 million bbl of liquids. The deal includes five petroleum exploration and production projects—Sabah K, SK309 and SK311, Sabah H, SK314A, and SK405B—in the shallow and deep waters off the Malaysian states of Sarawak and Sabah. Global Oilfield Services Market Won’t Recover Until 2025 Trent Jacobs, JPT Digital Editor It has been a tough few years for the world’s oilfield service sector and, according to a new report, the best of times are on hold for a few more. This is according to Rystad Energy, which says the sector is on pace to capture $920 billion in revenue by 2025. The Norwegian market research firm has highlighted the figure as the high-water mark reached in 2014, a year that ended with crude prices falling by more than 40%. “This will be the longest slump faced by the oilfield service industry since the 1980s, with about $2.3 trillion in revenues lost along the way,” said Audun Martinsen, Rystad Energy’s head of oilfield service research. Martinsen continued by noting: “On the bright side, in only 3 years’ time, activity levels will be higher than they were in 2014, although the cost cuts achieved in the sector means spending levels will only be 80% of what was seen in that peak year.” ExxonMobil, Chevron Target Nearly 2 Million BOE/D in Permian Production Matt Zborowski, Technology Editor ExxonMobil and Chevron revealed plans that would result in combined production from the US majors of nearly 2 million BOE/D from the Permian Basin of West Texas and southeastern New Mexico by the mid-2020s. ExxonMobil revised upward its Permian production outlook by almost 80% to reach 1 million BOE/D by as early as 2024. The operator said its resource base in the basin totals 10 billion BOE. Chevron expects its output from the basin to rise to 600,000 BOE/D by year-end 2020 before hitting 900,000 BOE/D by yearend 2023. The company said it has added some 7 billion BOE in Permian resources over the last 2 years. Shale Pioneer: Hard Ceiling On Production Growth Coming Trent Jacobs, JPT Digital Editor The central debate today in the US shale business is how long productivity growth will continue. According to one of the most influential voices in the sector, the answer is not much longer. “I am not particularly optimistic that, over the next 5 years, the industry is going to be able to show the year-over-year improvements in well recoveries that we’ve seen over the past 10 years,” said Mark Papa, chief executive officer of private-equity-backed shale producer Centennial Development Resources. Papa said the two biggest factors at play are frac hits, or parent-child well interference, and a shrinking inventory of high-quality drilling locations. Shale CEO on Parent-Child Challenge, Well Declines: We Know Matt Zborowski, Technology Editor Much has been made recently about the disparities in production between parent and child wells in US shale basins. The increased attention on the issue is part of broader concern among investors about the ability of operators to maintain high levels of output over the next few years. However, Doug Suttles, Encana president and chief executive officer, assures that shale executives are acutely aware of the parent-child challenge. His company has been “very public about this for 5 years now,” he said before an audience largely consisting of the investor community at CERAWeek by IHS Markit this week in Houston. He ultimately doesn’t think it’s “a big threat” to the shale sector. ExxonMobil Makes Huge Gas Discovery Offshore Cyprus ExxonMobil has made what it says is the world’s third-largest natural gas discovery in 2 years off the coast of Cyprus in the eastern Mediterranean Sea. Based on preliminary interpretation of the well data, the discovery could represent an in-place natural gas resource of up to 8 Tcf. The Glaucus-1 well, located in Eastern Mediterranean Block 10, encountered a gas-bearing reservoir of approximately 436 ft. The well was safely drilled to a depth of 13,780 ft in 6,769 ft of water. Industry consultants Wood Mackenzie told Reuters news agency that it estimated recoverable resources of Exxon’s field to be 4.55 Tcf. That compares with its 6.4 Tcf estimate for Calypso, found by Italy’s ENI and France’s Total last year.

Dual sourcing with price discovery

We consider a (standard) reverse auction for dual sourcing and propose to determine both the providers' shares and the reserve price endogenously, depending on the suppliers' bids. Our benchmark considers a two-stage game of complete information. After a first round of bidding, the two most competitive suppliers advance to the second stage and compete again with a refined reserve price, which is based on the lowest price of the excluded providers. We show that at the first stage providers reveal their costs truthfully. At the second stage suppliers balance a trade-off between increasing their share and raising their mark up. Surprisingly, when discarded suppliers are competitive enough, the procedure not only allows taking advantage of dual sourcing but also generates lower procurement expenditures than a standard auction for sole sourcing. We also consider extensions of the benchmark model, including to situations in which providers have private information about their costs.

E&P Notes (January 2019)

E&P Notes (January 2019)

E&P Notes (September 2018)

E&P Notes (September 2018)

E&P Notes (August 2018)

E&P Notes ExxonMobil’s Eighth Discovery Off Guyana Adds Another Development Possibility Matt Zborowski, Technology Writer ExxonMobil said it has “encountered 78 m of high-quality, oil-bearing sandstone reservoir” near the Turbot discovery southeast of the Liza field offshore Guyana. The supermajor’s eighth discovery in the burgeoning oil province could bring about a new development opportunity in the southeast portion of the 26,800-sq-km Stabroek Block. The first phase of development drilling on Liza field began in May. The Longtail-1 discovery well was drilled to 5,504 m in 1,940 m of water by the Stena Carron drillship, which spudded the well on 25 May. It is the second discovery in that area after the Turbot discovery of late 2017. The two discoveries’ estimated recoverable resources total more than 500 million BOE, said ExxonMobil. GE To Spin Off Baker Hughes Pam Boschee, Senior Editor GE is spinning off Baker Hughes (BHGE) in its strategic plan for growth and shareholder value creation. It plans to focus on aviation, power, and renewable energy. GE CEO John Flannery said these areas share technologies, digital and additive strategies, and business models. The separation from Baker Hughes will take place over the next 2 to 3 years as part of GE’s effort to “make its corporate structure leaner and substantially reduce debt,” the company said in a statement. GE Oil and Gas merged with Baker Hughes in July 2017, with GE holding a 62.5% stake. BHGE’s revenue on an annualized basis is $22 billion. GE Healthcare will also be separated into a standalone company, which will begin immediately and progress over the next 12 to 18 months. The spinoffs of BHGE and GE Healthcare are part of GE’s efforts announced last fall to sell $20 billion worth of assets. The Big Unknowns for World’s Balancing Act of Supply and Demand Trent Jacobs, Digital Editor Last year was a dynamic one for both oil producers and consumers. For much of 2017, oil prices headed north but consumption still outgrew daily production—even as those totals were rising too. The net effect was seen as a positive for what has been a chaotic oil market in recent years. However, an annual report from BP’s economic group that studies market forces for the company has raised questions about what could disrupt this tenuous balance going forward. Driven by rising but still relatively low prices, 2017 saw world oil demand increase by an impressive 1.7 million B/D. This 1.8% increase stands above the 10-year average of 1.2% and marks the third year in a row that these figures have seen an uptick. Equinor Releases Subsurface and Production Data From NCS Field Stephen Whitfield, Senior Staff Writer For the first time, the general public will have complete access to the subsurface and production data from a field on the Norwegian continental shelf (NCS). Equinor announced that it will disclose the data from Volve, a shallow-water oil field located in the southern part of the Norwegian North Sea approximately 125 miles west of Stavanger. Following its startup in February 2008, Volve’s production lasted for approximately 8 years. It was originally scheduled for 3 to 5 years of operation. At its peak, the field produced 56,000 BOPD, and a total of 63 million bbl of oil were produced before the field’s shutdown in September 2016. Equinor said that one of the goals of the data release is to allow students from relevant fields of study to train on real data sets. Equinor, ExxonMobil Rack Up More Brazilian Pre-Salt Acreage Matt Zborowski, Technology Writer Equinor secured interests in two of three blocks awarded 7 June during Brazil’s 4th pre-salt bid round, further expanding its footprint in the growing offshore province alongside ExxonMobil, Shell, BP, and Chevron. Three of four blocks were awarded overall, each of which will be operated by Petrobras. The state-owned firm has a right of first refusal to petition the government to operate all pre-salt blocks offered. The round received some $800 million in signing bonuses and $190 million in planned exploration investments. The Norwegian firm took a stake in the highly coveted Uirapuru block in the Santos Basin with partners ExxonMobil and Petrogal Brasil. Petrobras exercised its right to enter the consortium and will be the operator with a 30% interest. Equinor and Exxon-Mobil will each have a 28% stake, with Petrogal Brasil holding the remaining 14%.

Modelling credit and savings behaviour of chit fund participants

Chit funds are a form of Rotating Saving and Credit Association (ROSCA) prevalent in India. In this institution, a group of individuals pool in equal amounts of money at a fixed frequency, and at every time period a round of competitive bidding takes place among the individuals to identify a borrower for the collected amount. The borrower foregoes his/her right to participate in further auctions, but continues paying his/her share of the pool till every individual in the group has collected the pooled amount. The auction process relies on the bidders’ willingness to give up a certain amount of the pool and take the rest as loan. The amount given up at every time period is shared equally among all individuals in the group. A chit fund, therefore, is structurally similar to the modern formal banking and financial institutions: they act as an intermediary to optimally mobilize funds collected from savers to borrowers and manage repayment of loans from borrowers such that savers receive their dues at the appropriate time. The latter role exposes the industry to credit risk. Modern banking and financial institutions rely heavily on their ability to assess and mitigate credit risk; and, over the last century, they have been able to move from a system where risk assessment was based on human judgment and simple intuition to a system reliant on statistical and mathematical techniques. However, the standard chit fund company still relies heavily on human judgment for assessing risk. The pilot envisages a move towards a standardized statistical methodology for risk assessment and mitigation as the path ahead for the industry.

Comments: Mexico Moves Forward

Editor's column Later this month, Mexico will auction off 35 shallow-water blocks in the Gulf of Mexico, as its attempt to revive its oil and gas industry moves forward. It will be the ninth auction held under a reform program that began 4 years ago, and will follow the most successful auction to date. The 31 January deepwater auction surpassed expectations, drawing participation from supermajors and national oil companies (see page 42). Along with Argentina, Mexico has emerged as one of the upstream bright spots in Latin America. At the January auction, Mexican regulatory officials expected only 7–10 blocks to be awarded. But the event attracted bids from 11 different firms as 19 blocks were awarded, nine of those to Shell. Although the deepwater auction is thought to have the most valuable acreage, future tenders may also attract heavy interest. Last year, a consortium led by Talos Energy discovered as much as 2 billion bbl in place at its shallow-water Zama-1 well in the Sureste Basin. And Eni found as much as 1 billion bbl at the shallow-water Amoca field; startup is expected early next year, which would make Eni the first foreign company to produce hydrocarbons in Mexico in 80 years. Mexico’s decision to open its oil and gas sector to foreign investment could not have come at a worse time, months before oil prices abruptly declined and operators sharply cut spending. But, after weathering the early bid rounds, which attracted only light participation, Mexico appears on a roll. In addition to the March shallow-water bidding, 37 onshore blocks will be tendered in July, and there are plans of auctioning the first unconventional acreage, located near the Texas border, before the end of this year. The July blocks are located in northeastern and southeastern Mexico, covering 3,668 sq. miles and prospects of reserves for 260 million BOE of light crude and gas. The unconventional blocks are concentrated in the Tampico-Misantla and Burgos basins, south of the prolific Eagle Ford acreage in south Texas. The Mexican government previously announced auctions for unconventional acreage twice, but the first two events were canceled because of questions surrounding the potential regulation of hydraulic fracturing. The money from the bidding and the prospects of increased production are welcome news for Mexico. State oil company Pemex has been heavily strapped for cash, deterring advancement in deepwater and unconventional plays. Mexico’s oil production peaked in 2004 at 3.38 million B/D and has since fallen to less than 2 million B/D. The oil sector’s chief concern now is an upcoming presidential election. Leftist candidate Andrés Manuel Lopez Obrador has a sizable lead in public opinion polls ahead of the July election, and has been a critic of the energy reforms. He has vowed to review all contracts that have been awarded during the recent bid rounds. Many political analysts believe that he could indeed slow the pace of reform but would have a difficult time turning back the clock to the days when only Pemex was allowed to invest in the upstream.

Mexico’s Second Deepwater Auction Successful

Mexico’s second deepwater bid round failed to disappoint as 19 of 29 blocks were awarded, including nine to Anglo-Dutch supermajor and Mexican offshore newcomer Shell. Eleven international firms from 10 countries bidding individually and in consortia won blocks—thought to be mostly oil-rich—in the Perdido Fold Belt, Cordilleras Mexicanas basin, and Salina basin of the Gulf of Mexico. Nineteen firms from 15 countries placed 39 bids overall. The winning bids comprised 44,178 sq km, 23 well commitments, and $525 million in tiebreak payments. Mexico’s National Hydrocarbons Commission (CNH) announced the results 31 January in Mexico City. Benjamin Torres-Barron, partner at multinational law firm Baker & McKenzie, which represented four of the companies that participated in the round, said the auction was “very successful” with results “better than everybody expected.” Estimates prior to the event, including those of the government, had approximately 7–10 blocks being awarded. Instead, about two-thirds of all available blocks were awarded, making Round 2.4 “a great success for the Mexican government,” said Eduardo Corzo Ramos, counsel with international corporate law firm Haynes & Boone. “Very important companies participated and in the bid values you can see how interested these companies are in Mexico’s energy sector.” Ramos said he was impressed by the strength of the bids and high-dollar tie-breakers placed by the participating firms. “If you look at the winners, everyone was hitting the maximum [royalty of 20%] with a maximum investment factor.” Competition was particularly fierce for Salina basin Blocks 29 and 21, respectively won by Shell and a consortium led by Repsol with tiebreak bonuses of $110 million and $151 million. Shell’s haul comprised four blocks won on its own, four in a consortium with Qatar Petroleum, and one more in a consortium with Pemex. Five were in the Perdido Fold Belt just south of the Mexico-US maritime border, and four were in the Salina basin to the southeast in the Bay of Campeche. “We saw a vast, overwhelming victory by Shell,” said Torres-Barron. “I think Shell was very aggressive based on its prior experience” in Mexico’s first deepwater auction, Round 1.4 held in December 2016, in which the firm’s participation comprised a single failed bid alongside Atlantic Rim Mexico for Block 5 in the Salina basin. Shell learned that “you cannot have all the eggs in one basket,” and therefore diversified its bids through a number of blocks this time around, he said. Shell concurrently announced on 31 January that it made “one of its largest US Gulf of Mexico exploration finds in the past decade” near Perdido in perhaps a signal that a comeback is under way for offshore exploration and development. Chevron and Total, two other majors who have actively participated in Mexico’s deepwater rounds, also reported a US gulf discovery on 31 January.

An Alternative Market Framework for Water Transfers When Third Party Externalities Dominate

Economic studies have argued that transaction costs and third-party impact of water transfers can reduce the potential of water markets in allocating water efficiently across users. The main objective of this study is to design and empirically simulate a market structure, which can overcome the transaction costs and some of the third-party externalities in surface water trading. An important characteristic of this market is trading conducted within a centralized framework by a market manager. Once the bidding rounds are closed, the market manager formulates the market model as a linear programming problem to find the market equilibrium for the bids submitted. The market manager then determines net trades on the basis of each participant’s initial permit allocation. Empirical simulations of the above market design demonstrate that the marginal cost price paid by each participant internalizes the third party impacts of water transfers. Prices are recalculated based upon binding flow constraints in each round of trade and hence additional transaction costs are avoided.

New insights into the Parnaíba Basin: results of investments by the Brazilian National Petroleum Agency

Abstract The Parnaíba Basin is a Paleozoic cratonic basin located in NE Brazil. Despite exploration in the Parnaíba Basin having undergone a long period of stagnation, it is now one of the most prolific natural gas producing basins in Brazil. Production from this basin is c. 5.6 million m 3 day −1 from three established gas fields, with another four fields in development and eight ongoing discovery assessment plans (in January 2017). This success is the result of activity on exploration concessions, both the investments of the Brazilian National Petroleum Agency (ANP) and concessionaires operating in the basin. ANP's investments were decisive in the definition of the offered areas in the bid rounds and, more importantly, in our understanding of the structural and stratigraphic framework through systematic data acquisition, which helped to define an exploration model for the basin. The Parnaíba Basin received investments of c. US $100 million from ANP and the preliminary results from projects located in the SE of the basin suggest the need for a new exploration model for this area, which was probably affected by the Trans Brazilian Lineament. In this model, the petroleum system would include Ordovician–Silurian components.

Meeting peak electricity demand through combinatorial reverse auctioning of renewable energy

The option of organizing E-auctions to purchase electricity required for anticipated peak load period is a new one for utility companies. To meet the extra demand load, we develop electricity combinatorial reverse auction (CRA) for the purpose of procuring power from diverse energy sources. In this new, smart electricity market, suppliers of different scales can participate, and homeowners may even take an active role. In our CRA, an item, which is subject to several trading constraints, denotes a time slot that has two conflicting attributes, electricity quantity and price. To secure electricity, we design our auction with two bidding rounds: round one is exclusively for variable energy, and round two allows storage and non-intermittent renewable energy to bid on the remaining items. Our electricity auction leads to a complex winner determination (WD) task that we represent as a resource procurement optimization problem. We solve this problem using multi-objective genetic algorithms in order to find the trade-off solution that best lowers the price and increases the quantity. This solution consists of multiple winning suppliers, their prices, quantities and schedules. We validate our WD approach based on large-scale simulated datasets. We first assess the time-efficiency of our WD method, and we then compare it to well-known heuristic and exact WD techniques. In order to gain an exact idea about the accuracy of WD, we implement two famous exact algorithms for our constrained combinatorial procurement problem.

Comments: Mexico Builds Momentum

Editor's column In August, Mexico’s National Hydrocarbons Commission delayed the date of its next deepwater auction by a month to January 2018 to give companies more time to study the acreage on offer. Although postponing bid rounds is usually taken as a sign of lack of interest by private firms, the opposite is true in Mexico. Discoveries announced over the past few months have validated Mexico’s historic energy reform effort and may propel the oil industry there to reverse years of decline. In a sector hampered by the downturn in oil prices, Mexico’s offshore has emerged as a bright spot. In July, US independent Talos Energy, Sierra Oil and Gas of Mexico, and Premier Oil of the UK announced one of the largest shallow-water finds of the past 20 years. The block, located off the coast of Tabasco state, holds an estimated 1.4 billion to 2.0 billion bbl of oil. The find, which came with Talos’ first exploration well, was the first since Mexico began auctioning off onshore and offshore properties in 2013. The block found up to 650 ft of oil-bearing reservoir of light crude around 28–30 °API. That same month, Italian major Eni announced the discovery of the shallowwater Amoca field in the bay of Campeche, which it said holds 1.3 billion BOE, of which 90% is oil. It is fast-tracking the development with hopes to produce from 30,000 to 50,000 B/D of 25–27 °API crude in early 2019. Consultancy PIRA Energy expects the discoveries to add up to 200,000 B/D of crude production, and believes they are economic at a $50/bbl oil price, but not for at least another decade. Although deepwater and perhaps unconventional reserves hold the most promise for reviving Mexico’s oil sector, the country does not have a lot of time. Years of blocking the private sector out and underfunding the state oil company Pemex have taken their toll. The country’s oil and gas output is down 40% from its peak; oil production is 2.0 million B/D compared with its peak of 3.4 million B/D in 2004. That led the government to finally open the entire oil and gas sector to private money, but the reform launch could not have come at a worse time. Oil prices soon lost more than half their value, severely curtailing companies’ exploration budgets. But the discoveries of Talos and Eni have breathed new life into Mexico’s upstream and attracted the interest of independents and supermajors. That is in contrast to the early bid rounds, which attracted only light participation. To date, seven auctions have been held—three covering onshore, three for shallow offshore, and one for deep water. Pemex has also negotiated farmout agreements with private firms. Another three are scheduled for next year. The key will be interest in the January auction. Thirty deepwater oil and gas blocks will be up for bid in areas thought to be potentially lucrative. Mexico’s deep water has been off limits to private firms and barely explored by Pemex. If resources there are anything like those found in the neighboring US Gulf of Mexico, the country’s upstream sector may become one of the globe’s offshore bright spots.