Exactly how Talos Energy and Pemex will develop a shared oil reservoir may soon be decided by Mexico’s regulators after the two companies missed another key deadline.
Last week, Houston-based Talos said that it was moving forward with Mexico's Pemex on how to unitize the field but that both companies failed to reach an agreement by the 25 March deadline established by the Mexican Ministry of Energy, known as SENER. By missing the deadline, the government agency is now charged with proposing final terms.
“We appreciate the increased momentum and commitment from Pemex towards achieving a joint resolution,” Timothy Duncan, CEO of Talos, said in a statement. “As we transition into this new phase in the process, we look forward to continuing to engage constructively with both SENER and Pemex and we are confident we can achieve a positive outcome for all parties.”
Zama was discovered in 2017 by a Talos-led consortium that includes Germany’s Wintershall Dea (40%) and London-based Premier Oil (25%).
It was hoped that the offshore field would be considered the crowning achievement of Mexico’s energy reforms that opened its oil and gas sector for the first time in almost 80 years. Zama was the first field discovered as a result of Mexico's open licensing auctions and is also one of the country’s biggest prospects, holding an estimated 670 million BOE.
However, Pemex moved in 2019 to become the operator of the field after citing that the reservoir in question extended into a block it owns rights to.
Based on the results of an independent audit, Talos has maintained that 60% of the reservoir is inside the boundaries of its block—findings that Pemex initially disputed.
In July 2020, Talos and Pemex were given an initial period of 120 daysto set unitization terms, but after it was clear that an agreement was not forthcoming, an extension was granted to March of this year.
Days prior to the latest deadline Pemex leadership has issued new signals that it no longer opposes a Talos operatorship of Zama. “If all the conditions are acceptable and beneficial for Pemex, we could analyze it,” Pemex CEO Octavio Romero said in an interview last week with Reuters.
Talos has previously submitted development plans for Zama which includes two fixed-leg platforms that would have a combined upper target of 150,000 B/D of oil.
New Bill Could Nullify Permits
The Zama dispute has rolled on in parallel with President Andrés Manuel López Obrador’s efforts to curtail the scope of the energy reforms passed into law by his predecessor in 2014.
Last week, President López Obrador asked the Mexican congress to pass a bill that would reverse key parts of the reforms by granting the government power to suspend drilling permits and operating licenses. Suspensions could be issued as the government sees necessary to protect national security, energy security, or the national economy.
Under the draft bill, which is expected to be passed by the congress ahead of nationwide elections in June, the government could appoint the state-owned Pemex to operate the affected assets until the suspension was lifted. The bill lays out a similar policy for Mexico’s electric grid, which is the other focus of President López Obrador’s energy reform rollbacks.
The bill has been considered an easier route to restoring control over the country’s energy assets to state-owned companies than passing a new amendment to the constitution, which is how the energy reforms came to be.
Critics of the proposed bill also argue that it conflicts with existing free trade agreements and that the revocation measures are likely to be viewed as an expropriation of private and foreign-owned assets.
