By continuing to use this site, you agree to our use of cookies.


In Japan? You can go to Argus Japan


Mexico weighs shared crude reserve mechanism

9 Oct 2017, 9.52 pm GMT

Mexico weighs shared crude reserve mechanism

Mexico City, 9 October (Argus) — Mexico's government faces a high-profile decision over crude reserve ownership between state-run Pemex and outside investors that could set a precedent as the country tries to attract upstream spending.

Houston-based Talos Energy, partnering with Mexico's Sierra Oil & Gas and UK's Premier Oil, announced in July a major discovery at the Zama-1 exploration well in the shallow waters of the Gulf of Mexico. The consortium won the block in a 2015 public auction.

The initial oil in-place volumes at Zama-1 range between 1.4bn to 2bn barrels, the firm confirmed at the end of July. Since then, Pemex has expressed its intention to take a share of the reserves discovered by the Talos consortium, based on the claim that the block extends to a neighboring block belonging to Pemex.

Pemex chief executive Jose Antonio Gonzalez Anaya said in a July television interview that his company would look to partner with the consortium, as their field shares resources with at least one Pemex block.

"If the discovery goes beyond the block, then it is in their rights," an executive from a company that has won several blocks in past upstream auctions in Mexico told Argus. "It happens all the time and the alternative is a competitive draining situation — it is better to cooperate," he added.

The national hydrocarbons commission (CNH) and companies involved in the process were not immediately available to comment.

The Mexican hydrocarbons law published in October 2014, shortly after the enactment of a ground-breaking energy reform that ended Pemex's monopoly, indicates that Mexico has established a forced unitization model.

Article 62 of the hydrocarbons law says that in the event of shared resources between two contractual areas, contractors must present a joint proposal for a unitization agreement to the energy secretary.

The proposal must include, among other things, exploration and development plans for the unified area and the duration of the plan for how to share the pooled reserves. If the two parties cannot reach an agreement, the energy secretary will determine the terms under which the unitization will be carried out.

But the legislation has never been used, and the resolution of the current debate will set a precedent.

"It is a fairly common situation in the rest of the world," said Eduardo Lopez, an independent energy consultant, who until recently worked as an executive director at Ernst & Young. "In Mexico, however, many experts, starting with authorities themselves, seem to be discovering this [scenario], as there is still no legal framework for it."

Companies are going to monitor what happens, and "it is going to set a very important precedent," added Miriam Grunstein, an oil specialist and professor at Mexico's CIDE university.

According to the law, the final decision lies in the hands of the energy secretary, but the CNH is also involved in the process, and will have to submit an opinion to the secretary.


View more news articles

Share this page

Contact Us

Request a callback

I agree to the Argus privacy policy