Mexican Authorities Award Pemex Operatorship of Disputed Zama Field

The Zama field was once considered the ideal result of Mexico's energy reforms that sought to bolster the country's oil and gas output by inviting private companies to participate in the energy sector.

Source: Getty Images.

A ruling by Mexico’s Energy Secretariat, or SENER, this month has made the national oil company Pemex the operator of the contested Zama field that was discovered by Houston-based Talos Energy in 2017.

The companies have been in dispute over the shallow-water Zama prospect since 2018 after Pemex claimed that the discovery was a contiguous reservoir that extends into its offshore block.

Independent reserves audits commissioned by each company have supported their own claims, with Talos’ audit showing that 60% of the reservoir’s estimated 670 million BOE fell within its block. Pemex estimates that its block represents 50.4% of the Zama reservoir.

In statement issued 5 July, Talos lamented the decision and highlighted that it has drilled four wells in the Zama field (one exploratory, three delineation wells) and has demonstrated to Mexican authorities its ability to operate the unit.

“After six years of significant investments in Zama and the Mexican economy, as well as the delivery of a Zama development plan that is credible and in line with the objectives of Mexico, Talos is very disappointed with SENER's sudden decision to award operatorship to Pemex, especially in light of the timing under which the award occurred,” the statement read.

The Zama field lies in about 550 ft of water, which will make it the deepest development offshore Mexico. Talos has emphasized throughout the dispute that it has more experience in these conditions with 5 platforms in US Gulf of Mexico platforms in water depths beyond 550 ft.

Houston-based Welligence Energy Analytics pointed out that Pemex has suffered disappointing results with shallower fields, including a 50% drop in production over a 6-month period at the Mulach field “due to operational challenges.”

Talos was the first private operator to be awarded an exploration block during Mexico’s opening of its energy sector in 2015. Industry analysts have raised concerns that SENER’s decision to award operatorship of Zama to Pemex will stifle future investments from foreign companies.

The open auction for offshore blocks was considered by many observers at the time to be the centerpiece of Mexico’s landmark energy reforms that among other things were designed to help offset the country’s flagging oil and gas output from its super-giant Cantarell field. However, since taking office in 2018, Mexican President Andrés Manuel López Obrador has sought to clamp down on the reforms while bolstering government control over Mexico’s energy resources.

SENER said in its ruling that Pemex and Talos, which is leading a consortium that includes Germany’s Wintershall DEA, have 30 days to draft a development plan together. Observers have pointed out that this deadline is unlikely to be met as Talos and its consortium partners are expected to seek legal remedies.