Adam Williams / Bloomberg
When private drillers struck oil off Mexico’s coast this year, they didn’t anticipate sharing it with the state oil company. It looks like they’ll have to.
The discovery of as much as 2 billion barrels in July, by a group led by Houston-based operator Talos Energy LLC, grabbed the oil world’s attention. Mexico’s energy reformers celebrated. It was the first big find since the government opened the industry to investors in 2014 -- a controversial move in a country that kicked out foreign oil companies in the 1930s, and had mixed feelings about letting them back in.
The reformers were vindicated: Private capital could get results where Pemex, the cash-strapped state operator, couldn’t. More would surely follow. Then a problem emerged. The crude deposit found by Talos, it turned out, spread beyond the boundary of the company’s exploration bloc and into a neighboring one owned by Pemex.
Now the government is rushing to put together a rulebook for how this find, and subsequent ones, get shared out. It could shape the future of the whole energy plan. The group - which includes Sierra Oil and Gas S de RL de CV and Premier Oil PLC - is said to be holding off on further investment pending the decision. Other drillers who bought exploration rights also want to see the government ruling before making financial commitments. The rush of enthusiasm that followed the July find has turned into a nervous wait.
“This is the single most important outstanding issue in the sector,” said Raymundo Pinones, director of Mexico’s Association of Hydrocarbon Companies. “It could delay activity until there is clarity. In place of drilling or continuing with development, the industry is waiting for this to be resolved.”
Read the full article here at Bloomberg.