Lukoil Acquires New Operating Interest in Shallow-Water Gulf of Mexico
Russian oil major Lukoil expanded its Gulf of Mexico presence, acquiring a 50% operator interest in Mexico’s Area 4 offshore license area.
Russian oil major Lukoil agreed to acquire the 50% operator interest held by Houston-based Fieldwood Energy in Mexico’s Area 4 offshore shallow-water project for $435 million plus 2021 expenditures incurred up to the closing date of the transaction, Lukoil announced.
Fieldwood Energy and PetroBAL, the oil and gas subsidiary of Mexican conglomerate Grupo Bal Sa De CV, won rights in October 2015 to develop Block 4 under a production sharing agreement (PSA). The partners’ lone bid in Mexico’s second licensing round granted 74% of the pretax profit to the Mexican government but without any increases to the minimum local work program requirements.
In August 2020, Fieldwood filed for Chapter 11 bankruptcy protection and in June won approval of its plan to restructure $1.8 billion of debt and invest an estimated $7 billion in environmental cleanup, according to Bloomberg.
The Chapter 11 plan was approved in late June after 5 days of virtual testimony and argument in the US Bankruptcy Court for the Southern District of Texas which highlighted such issues as the legal ins and outs of plugging oil wells that are no longer in use, Bloomberg reported.
Mexico’s Area 4 includes two blocks, 58 km2 in total, located 42 km offshore in water depths of 30–45 m. The Ichalkil and Pokoch oil fields within the blocks have recoverable reserves of 564 million BOE, of which 80% is crude oil.
The construction of production facilities is currently being finalized, and first oil is expected in Q3 2021. Development will be three-phased with peak daily production expected to exceed 115,000 BOE, Lukoil said.
Fieldwood and PetroBAL signed the PSA in 2016 for a period of 25 years with rights to extend for up to 10 more years.
In a statement, Lukoil president and CEO Vagit Alekperov said Mexico is of “strategic” importance to the development of Lukoil’s international upstream operations.
In November 2018, Lukoil and Eni signed a farmout agreement on Blocks 10, 12, and 14 in the shallow waters of Mexico’s Sureste Basin, enabling the Russian major to further expand its exploration portfolio in the region, diversify risks, and build up exploration competencies, Lukoil said.
Lukoil holds a 60% stake and operates Block 12, with Eni retaining 40%. Under the agreement, Eni operates the remaining blocks, with Lukoil assigned 20% interests in each of Blocks 10 and 14.
In March 2018, Lukoil and Eni won rights to yet another Sureste Basin target, Block 28, in licensing round 3.1. Eni operates Block 28 and holds 75% while Lukoil controls 25%.
Development of Block 28 “allows Eni to build up and consolidate a new core area with significant operational synergies in the country,” the Italian multinational firm said at the time.
Eni also holds a 100% stake in Area 1 where it has discovered 2 billion bbl of hydrocarbons in place.