A Mexican-led, international consortium has made a major oil discovery in the Gulf of Mexico that will help increase declining production in the sector and may attract more investment from large oil companies.
The estimated billion-barrel reserve is the first discovery since energy reforms opened up exploration to international firms two years ago and the largest by a private company in Mexico in almost 80 years.
Independent Mexican company Sierra Oil and Gas, Houston-based Talos Energy and British-owned Premier Oil discovered the shallow-water field 60 kilometers off the coast of the port of Dos Bocas, Tabasco.
They won the right to explore the block— the most sought after of 13 on offer — after outbidding a Norwegian company at auctions held in July 2015.
Initial drilling at the 166-meter-deep Zama 1 well began in May when the discovery of light crude oil was made.
Conservative estimates say there are at least 1 billion barrels of oil in the field although the figure could be as high as 2 billion and there is also a possibility that it might extend into a neighboring block.
More conclusive drilling results are expected next month.
Pablo Medina, a Latin America analyst at global energy research company Wood Mackenzie, said “it is one of the 15 largest shallow-water fields discovered globally in the last 20 years” and described the finding as “the most important achievement so far of Mexico’s energy reform.”
Sierra Oil general manager Ivan Sandrea stated that the Mexican government would receive 69% of the profits from each barrel of oil produced by the new field, a figure that rises to almost 80% when taxes and contract fees are taken into account.
Sierra, backed by Blackrock Inc., Riverstone Holdings and EnCap Investments, has a 40% stake in the project, Talos 35% and Premier 25%.
The energy reform introduced by President Enrique Peña Nieto in 2013 is aimed at reversing Mexico’s declining oil production, which dropped to a 30-year low last year to an average 2.5 million barrels a day.
While international interest in the new exploration opportunities was initially weak, this latest find as well as significant new discoveries on existing blocks by Italian company Eni earlier this year are signs that the gamble is starting to reap rewards and may be the impetus required to attract greater investment.
Massive protests rallied against the reform that allowed foreign investment in the sector for the first time since expropriation and subsequent nationalization of the petroleum industry by President Lázaro Cárdenas in 1938, once a strong source of national pride but less so today.
Despite reform’s detractors, Ivan Sandrea says that the move is now paying dividends, not just for the oil companies and their shareholders but for the Mexican government and people as well.
“The resources generated by this discovery for the state and society highlight the importance of the role that private capital can play in Mexico’s economic growth thanks to the energy reform.”