Mexico plans to let recent offshore discoveries ‘marinade’ by postponing next offshore auction

Instead of having their next round of offshore oilfield auctions in December as planned, Mexico wants to postpone the auctions a month until January 2018.

This comes a week after Houston-based Talos Energy announced the discovery of an oil reservoir with an estimated 1.4 billion barrels of crude in the southern Gulf of Mexico. Talos Energy made the announcement on July 12, and on the same day the Italian oil producer Eni also announced their discovery of oil off the coast of Mexico.

Eni’s discovery is also a significant find, with an estimated 1 billion barrels of crude in the reservoir.

Mexico’s chief oil regulator Juan Carlos Zepeda commented that the latest discovery, “confirms that the Mexican side of the Gulf of Mexico is very prolific. International and national interest is awakening.”

Both companies mark the first time a private-foreign drilling company has found oil in Mexico since Mexican lawmakers broke up the government-owned Petróleos Mexicano’s (PEMEX) monopoly in 2014.

“There was already interest to come, explore and work in the Gulf of Mexico before these finds, but now to have discoveries in such a short time, interest of international entrants to have activity in Mexico has renewed,” remarked Juan Carlos Zepeda.

Talos Energy expects to start producing crude in three to four years, but Eni plans to fast-track development to start producing thirty to fifty thousand barrels per day as soon as 2019.

Per the deals made with the foreign oil companies, the Mexican government will keep close to 90% of the profits earned by Eni and nearly 83% from Talos Energy and its partners.

In a press release, Eni’s chief executive officer Claudio Descalzi announced, “We are very pleased with the results of our exploration and appraisal campaign in Mexico which demonstrates the validity of our design to cost exploration approach. The Amoca field, which is located at a water depth of only 25 meters, represents an optimal opportunity for a phased development approach with a low breakeven. It is an ideal project in this low oil price environment. Eni’s objective is to become the first international company to establish operating production in Mexico, which would be the first tangible success of the country’s important “Reforma energetica” campaign.”

Featuring a fire-breathing six-legged dog as an iconic logo, Eni is headquartered in Rome and operates in 73 different countries around the globe. The company has ventures in upstream, midstream, and downstream and was formed by the Italian government in 1953.

In the second round of international bidding for offshore acreage of the coast of Mexico, the Italian oil producer won the rights to three new blocks in the shallow waters of the Sureste Basin as the chief operator.

Mexican officials plan to announce the locations of the blocks and their associated acreages for the January auction in the near future. This will give the oil industry plenty of time to strategize before the next round of auctions in hopes of finding more billion barrel reservoirs.

Article written by HEI contributor Raymond Arrasmith.

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