Mexico’s Giant Zama Discovery Gets New Interest Owner

DEA Deutsche Erdoel is buying Sierra Oil & Gas, giving the German operator stakes in six new blocks off Mexico—including the Zama discovery, where appraisal drilling is now under way.

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Germany’s DEA Deutsche Erdoel AG has agreed to acquire privately held Sierra Oil & Gas, interest owner in six blocks in Mexico, including the giant Zama discovery.

Sierra holds a 40% nonoperated interest in the 465-sq-km Block 7 containing much of the shallow-water Zama discovery, where appraisal drilling is under way. Zama is estimated to hold 400–800 million BOE of recoverable resources with estimated peak output of 150,000 BOE/D. Production is expected to start up by 2022–2023. Talos Energy is operator and Premier Oil is the other partner.

Sierra holds interests in 9,400 sq km of exploration acreage in Mexico’s Sureste Basin. Its other five blocks, all nonoperated, include:

  • Block 2: Sierra has a 25% stake in the 195-sq-km block near shore. Hokchi Energy, a subsidiary of Argentina’s Pan American Energy, is operator. Talos Energy is the other partner. Two exploration wells are expected to be drilled there in 2019.

  • Block 4: Sierra has a 50% stake in the 2,359-sq-km block, which is operated by Malaysia’s Petronas with the other 50% interest.

  • Block 5: Sierra has a 23.3% stake in the 2,573-sq-km block alongside operator Murphy Oil and partners Petronas and Ophir. An exploration well is expected to be drilled there in first-quarter 2019.

  • Block 11: Sierra has a 40% stake in the 533-sq-km block alongside operator Repsol of Spain.

  • Block 29: Sierra has a 25% stake in the 3,253-sq-km block. Repsol is operator and Petronas and PTT Exploration & Production are partners.

Source: DEA.


DEA’s newly bolstered Mexican portfolio will consist of 11 blocks total, including one onshore production block. Altogether the blocks are expected to require a $2 billion capital investment over the next 5 years, Sierra said. With the agreement, DEA has committed to participate in the drilling of 9 offshore exploration wells and Zama development.

The deal, which will need government approvals from entities such as Mexico’s National Hydrocarbons Commission and the Federal Economic Competition Commission, is expected to close in first-half 2019. It will be fully funded by DEA owner LetterOne. Sierra is backed by investment firms EnCap, Riverstone Holdings, and BlackRock.

DEA is already in the process of combining its oil and gas business with that of fellow German firm Wintershall, creating one of Europe’s largest oil and gas producers. 

Zama Appraisal Drilling Commences

Talos said it launched the Zama appraisal program 29 November with the spudding of the Zama-2 appraisal well. The program, consisting of two wells and one sidetrack, is expected to wrap up by midyear 2019.

Zama-2, north of the Zama discovery well, is intended to confirm the oil-water contact and collect information to better understand the reservoir's aquifer support, Talos said.

The well will also be deepened 500 m below the Zama reservoir to test the Marte exploration prospect. This will be followed by an updip vertical sidetrack from the main borehole, which will be cored. A drillstem test is expected in second-quarter 2019.

The Zama-3 appraisal well, to be drilled south of the discovery well, will help delineate reservoir continuity and quality in the field’s southern portion, the operator said. It will also be cored.

The Ensco 8503 semisubmersible drilling rig, which drilled the Zama discovery well in 2017, is undertaking the program. Talos also in November awarded a contract to McDermott International for concept and engineering services for the Zama development. Work on concept selection has begun with expected completion in third-quarter 2019.