The National Hydrocarbons Commission (CNH) on Sept. 30 successfully auctioned off three of the five production-sharing contracts for shallow waters production blocs off the coast of Tabasco and Campeche states that were up for bidding.

Two of these contracts saw intense competition, one from the full field of participants and the other from half the companies and consortia that signed up.

The third one received a lonely, single offer, but that was enough for it to be awarded.

The remaining two contracts drew blank slates.

The authorities are claiming victory, after the previous call for bids largely fell flat, with only two of 14 contracts awarded last July 15. Attempting to preempt critics, Energy Secretary Pedro Joaquín Coldwell lowered public expectations for this new phase by saying that it would be a success if two contracts were awarded.

After the bidding session came to a close, CNH president Juan Carlos Zepeda expressed great satisfaction with energy reform, and Under-Secretary of Energy for Hydrocarbons Lourdes Melgar Palacios quipped that these results would help revert the country's declining oil production by the end of the Peña Nieto administration.

Yet, though the outcome was better than expected, not everything is as rosy as the government claims. First, some of the companies that had prequalified for bidding did not show up, namely Shell and Chevron, which are more interested in much bigger opportunities in deep waters (see the graphic below).

Their decision to skip this bidding round largely reflects their negative assessment of the field's small size and the meager profits they would likely reap from winning the contracts.

Second, the investments these contracts will bring, around 3 billion dollars, do not make up for the hyped expectations the Peña Nieto administration created to sell energy reform to the electorate. Thus far, total amounts pledged from the first two completed calls for bids add up to $4 billion dollars, less than a quarter of what the government offered. Even with deep water bids coming in 2016, the shortfall is likely to be significant.

Third, the softening of the bidding rules and the lowering of royalties the government agreed to to make this call for bids more attractive than the previous one shines a light on its inexperience rather than its savvy. Following a Goldilocks strategy to determine fiscal terms of contracts (not too hard, not too soft) can raise the risk of politically well-connected companies nudging the process just enough to get unfair advantages.

In sum, Mexico's second call for oil and gas bids turned out well, but it can hardly be considered a hallmark of things to come. Learning to sail the turbulent waters of international energy markets is likely to inflict more damage than the government is willing to admit.

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