Mexico’s Government Favors Pemex in Oilfield Dispute With Talos Energy

The country’s energy ministry has concealed a document that shows it favors the state oil company’s participation in a mega oilfield which is at the center of a dispute with a private consortium

Mexican Presiden Andrés Manuel López Obrador with Energy Minister Rocío Nahle and workers at the Dos Bocas refinery in Tabasco state.
September 21, 2022 | 01:00 PM

Mexico City — The government of Mexico’s President Andrés Manuel López Obrador (known as AMLO) has concealed a study that favors state-owned oil company Pemex as operator and majority oil producer at the Zama mega oilfield in the Gulf of Mexico, an area that is currently in dispute between the government and a consortium headed by US oil company Talos Energy.

The Energy Ministry has reserved until November 1, 2023 a report prepared by the Ryder Scott company on the oil and gas reserves of the offshore field discovered by the US driller in 2017, according to a document viewed by Bloomberg Línea.

“The file, which includes the requested document, was formally classified as reserved for two more years, starting November 1, 2021,″ the ministry’s transparency unit said, without providing further details.

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On July 5, 2022, the ministry ruled that Pemex would be the operator of the field, and cited a study by Ryder Scott detailing the corresponding percentages of production, in addition to the financial capacity of the state-owned company.

Zama, located in shallow waters of the Gulf of Mexico, has potential production of at least 600 million barrels of light crude oil, and was discovered by the consortium made up of Talos Energy, Premier Oil (Harbour) and Sierra Oil & Gas (now owned by German company Wintershall Dea) in Area 7, off the coast of the state of Tabasco.

On June 14, 2021, Mexico’s state oil company’s subsidiary Pemex Exploración y Producción (PEP) and Talos Energy presented a report to the energy ministry on the distribution of oil and gas reserves prepared by the US-based consultancy, which indicated that 50.4% of the field belonged to Pemex and the remaining 49.6% to the US contractor, according to a public document prepared by Talos Energy’s legal team.

“This was in stark contrast to the 40/60% split arrived at by Netherland Sewell - a consultant hired by Talos Energy in January 2020,” according to a King & Spalding notice of dispute sent to the Mexican government.

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Bloomberg Línea requested Ryder Scott’s study from Pemex, but the company and its subsidiary PEP said they do not possess the document.

Talos Energy’s CEO Timothy Duncan told Bloomberg News that he is not seeking to gain control of the project, but is willing to go ahead and relinquish the operation as long as he has a leadership role in the project.

Talos even threatened to open a dispute through international intermediaries should it fail to reach an agreement with the Mexican authorities.

López Obrador declared on August 20 that Talos Energy is the only US company with a dispute against the Mexican government because “they have not wanted to accept that Pemex has more oil than they do” regarding production at the Zama field.

Pemex promised to drill the Asab-1 well to delimit its participation in the field, but to date has not done so, amid delays in the arrival of drilling equipment.

Alma América Porres Luna, a commissioner at the country’s hydrocarbons authority CNH, said in statements to the media in 2020 that the only way to determine that Pemex has the majority share in the oilfield is with production in the field, or with the drilling of the well.

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Some analysts have considered that the mechanism of unification of shared fields in Mexico was designed for the energy ministry to favor private companies in the event of disputes, following the opening up of the oil and gas sector with the 2013 energy reform, but López Obrador has criticized the management of private oil companies in Mexico and, instead, is promoting the rescue of Pemex as the major operator.

The Mexican oil company currently produces 1.7 million barrels per day, while Talos Energy extracts about 65,400 barrels per day.

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