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Thoughts on the Pemex-Talos (Zama Field) Dispute

Posted in Mexico, tagged , , , on September 8, 2021| Leave a Comment »

Mexico Map

As I understand it:

  1. The Zama field, with estimated reserves of ~700 million barrels, has a common reservoir that underlies Talos Block 7 and a contiguous Pemex block.
  2. Talos drilled the discovery well and 3 delineation wells. Pemex has not drilled a well.
  3. The companies were unable to concur on the terms of a unit agreement.
  4. A third party study for the purpose of initial tract participation, determined that Pemex has a 50.4% share of the reserves. Talos has criticized this study. A previous study had determined that the Talos group has 59.6% of the reserves.
  5. On July 2, 2021, the Mexican Ministry of Energy (SENER) selected Pemex as operator. Talos is disputing that decision.

Thoughts:

  • One of the few energy policy mistakes that the US has not made is the formation of a national oil company. There have been attempts, most notably the 1975 Senate proposal to establish the Federal Oil and Gas Corporation or FOGCO. (I’m not making this up!).
  • When Mexico’s national oil company is one of the competitors, SENER shouldn’t be determining the unit operator. Instead, an arbitration or independent review process should be established.
  • Pemex appears to have been largely a Zama field passenger to date. The discovery well and all delineation wells were drilled by Talos. If the “rule of capture” applied, Talos would be proceeding with development and Pemex would be negotiating with very little leverage.
  • If Mexico wants to discourage foreign investment in their offshore sector, this is a good way to do it.

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In the wake of the latest Pemex fire, ….

Posted in accidents, Mexico, Offshore Energy - General, tagged , , , , , on August 24, 2021| Leave a Comment »

the Mexican government’s recent decision to anoint Pemex operator of the billion barrel Zama field would seem to merit further scrutiny. Houston-based Talos Energy discovered the Zama field in 2017. The field underlies both Pemex and Zama acreage, and there are common reservoirs. Per Bloomberg:

Mexico’s energy ministry has designated Petroleos Mexicanos as the operator of the country’s largest oil discovery by private companies, in the latest sign of the government’s nationalist approach to the energy industry.

Talos said it was “very disappointed” with the decision and will explore “legal and strategic options” regarding Zama. The company added that the energy ministry had informed Talos of its “sudden” decision only three days after the driller received a letter directly from Pemex arguing for operatorship.

Bloomberg, 7/5/2021

The Mexican government’s decision is indicative of the Lopez Obrador administration’s commitment to rolling back the reforms that had encouraged private sector participation in Mexican offshore exploration and development.

Questions had already been raised about Pemex’s ability to fund Zama development and operate the field safely. This week’s deadly incident and a July pipeline fire add to those concerns. In light of the background political and financial issues, will it be possible to for Pemex and the Mexican regulators to conduct a fully independent investigation of the tragic fire that just occurred?

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