The Zama oilfield, one of the biggest oil reservoirs in Mexican shallow waters, is advancing in its unification process to determine which company will be its operator; during the weekend, Mexican news media released the news that Talos Energy agreed that Mexican state-owned company, Pemex, had the most share interest in the oilfield.
Firstly, as we reported previously, there has been a dispute in the Zama oilfield; the Mexican government leased the area to Pemex, next to Block 7, back in 2014. By 2015 the rights to start production in the site were awarded to a consortium of three companies; those were Talos Energy, Wintershall Dea and Premier Oil.
Secondly, the consortium has already invested $325 million in the Zama reservoir operation. In 2017 it announced that it had discovered between 1.4 billion and two billion barrels of crude. However, Pemex wants to be the Zama oilfield operator, and has since muscled up to claim operation.
Thirdly, the consortium wants that Talos Energy operates the oilfield, as it has the proven record that it could operate it to its maximum capacity. Pemex, however, backed by the Mexican Ministry of Energy, worked out a unitization agreement to divide the crude according to ownership estimates.
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Moreover, in January 2020 Talos said that a petroleum consulting firm found that the consortium had the majority of ownership in the field; as it was sitting on nearly 60% of the reservoir. Pemex denied it and said it had the majority inside its block.
In addition, this weekend, Talos Energy concluded that indeed Pemex had the majority of stake in the oilfield; with 50,44% of it, and the consortium led by Talos the remaining 49,6%. Consequently, the long-delayed unitization agreement is advancing. According to Mexican news media, once the unitization agreement is over, companies will renegotiate the division of the crude, according to international best practices.
However, experts agree that having a single operator in the field is of greater importance that percentages of ownership. Consequently, this discussion should not be delayed anymore. Nevertheless, as the WSJ points out, there’s a conflict of interest; as the decision of who will be the operator of the Zama oilfield is in the hands of the Mexican energy minister; who is also chairman of Pemex.
Consequently, if Pemex becomes the operator of the oilfield, not only it would be a suboptimal choice; but it would also be detrimental to the USMCA accord and its framework. Finally, Talos Energy has said that Zama would generate $28 billion of fiscal revenue to Mexico; however, a suboptimal operator can put that revenue stream at risk.