Pri­vate oil ex­plor­ers hit it rich off Mex­ico’s south­ern Gulf

The Star Early Edition - - INTERNATIONAL - Adam Wil­liams and An­gelina Ras­couet Mex­ico City

MEX­ICO’S de­ci­sion to al­low pri­vate com­pa­nies to ex­plore for oil and gas started to pay off af­ter the dis­cov­ery of at least a bil­lion bar­rels in a new off­shore field. A con­sor­tium of Pre­mier Oil, Sierra Oil & Gas S de RL de CV and Ta­los En­ergy made the dis­cov­ery in the shal­low waters of the south­ern Gulf of Mex­ico, just two years af­ter win­ning the ex­plo­ration li­cence.

It is the first new find by a pri­vate com­pany in the coun­try in al­most 80 years, ac­cord­ing to con­sul­tant Wood Macken­zie, pos­si­ble only af­ter the gov­ern­ment ended the mo­nop­oly of staterun Petroleos Mex­i­canos.

The Zama dis­cov­ery “is the most im­por­tant achieve­ment so far of Mex­ico’s en­ergy re­form”, Pablo Medina, the se­nior up­stream an­a­lyst for Latin Amer­ica at Wood Macken­zie, said. “It is one of the 15 largest shal­low-wa­ter fields dis­cov­ered glob­ally in the past 20 years.”

Mex­ico opened up to ex­plo­ration by pri­vate com­pa­nies in an ef­fort to slow and even­tu­ally re­verse the de­cline in its oil pro­duc­tion. Its out­put fell by about a third over the past decade, ac­cord­ing to data from BP.

The na­tion pumped 2.5 mil­lion bar­rels a day on av­er­age last year, the low­est level in more than 30 years. Af­ter the coun­try ini­tially strug­gled to lure in­ter­est in its fields, com­pa­nies in­clud­ing Ital­ian gi­ant Eni have been bid­ding for li­cences and mak­ing dis­cov­er­ies.

When Pre­mier Oil and its part­ners spud­ded the Zama-1 ex­plo­ration well in May, the es­ti­mates were for as much as 500 mil­lion bar­rels of oil in place. Pre­mier Oil chief ex­ec­u­tive Tony Dur­rant said that fig­ure was now 1bn to 1.5bn bar­rels.

Sierra said the pri­mary tar­get reser­voir con­tains 1.4bn to 2bn bar­rels and could ex­tend into a neigh­bour­ing block.

Pre­mier is tak­ing a “rea­son­able guess”, but said its part­ners may deem it’s be­ing “too cau­tious”, Dur­rant said. Full drilling re­sults due next month are more likely to con­firm or up­grade cur­rent es­ti­mates, he said.

Mex­ico “took a re­ally dif­fi­cult de­ci­sion for them po­lit­i­cally af­ter 40 years of 100 per­cent Pemex-own­er­ship,” Dur­rant said. The open­ing up of the coun­try’s in­dus­try “caught them at ab­so­lutely the worst time, be­cause of the col­lapse in oil prices.

The na­tion pumped 2.5 mil­lion bar­rels a day on av­er­age last year, the low­est level in more than 30 years.

“But to be fair to them, they per­se­vered and they have now got a very strong in­dus­try in­ter­est.”

The block was the most sought-af­ter of the 13 of­fered in Mex­ico’s first auc­tion in July 2015, as the group nar­rowly beat out an of­fer from Nor­way’s Sta­toil.

Zama 1 was spud­ded in May, mark­ing the first time a pri­vate com­pany drilled a new off­shore oil well in Mex­i­can waters since the state mo­nop­oly was lifted. Eni’s ear­lier oil find came from ex­tended drilling on an ex­ist­ing well.

Pre­mier Oil shares soared as much as 38 per­cent to trade at 64 pence (R11.15) in London trad­ing. They were up 30 per­cent at 60.25p a share as of 10.01am.

The field is lo­cated 60km off­shore from the Mex­i­can port of Dos Bo­cas in 166m of wa­ter and con­tains light oil, Pre­mier Oil said.

Drilling will con­tinue at the well to­ward a deeper tar­get in the same lo­ca­tion, Sierra said. Ta­los En­ergy, the op­er­a­tor on the block, owns a 35 per­cent stake in the ven­ture.

Sierra – backed by Black­rock, River­stone Hold­ings and EnCap In­vest­ments – holds 40 per­cent, while Pre­mier has a 25 per­cent share.

The Mex­i­can gov­ern­ment will re­ceive a 68.99 per­cent profit share from ev­ery bar­rel pro­duced in the block, and as much as 80 per­cent when con­sid­er­ing taxes and fees over the life of the project, ac­cord­ing to the Sierra state­ment.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.