Pemex Seeks to Take Control of Billions of Barrels of Oil from US Based Talos
Mexico’s state-run oil firm, Pemex, wants to take over Talos Energy's lucrative project after it found nearly a billion barrels of oil off Mexico’s southern Gulf coast two years ago. It was the first discovery by a foreign firm since the oil industry was nationalized 80 years ago.
The Pemex push to run drilling in the oilfield is driven by leftist President Andres Lopez Obrador philosophy to return more control of Mexico’s energy sector to its state oil firm. His predecessor, Enrique Pena Nieto, ended Pemex’s monopoly and started auctioning off oilfields to private companies in 2015. The president last week heaped new criticism on his predecessor’s energy policy, calling it a “giveaway” of public resources to corporations. Pemex has a potential claim to control over Zama, the name Talos gave the area, because it has drilling rights to an adjacent field.
“If Pemex does end up operating it, that would not send a good signal to private investors,” said one executive from an oil major with several offshore projects in Mexico.
Last month, Lopez Obrador’s energy ministry laid the groundwork for a claim on Zama by requesting and receiving an “exceptional” lease renewal from Mexico’s oil regulator for Pemex’s next-door block, along with 63 others. Pemex needed the renewals because it had not discovered oil on the leases in the past five years. The renewal sidestepped a policy instituted by the previous government, which sought to force oil firms to explore their holdings or risk losing them.
Three of the regulator’s four commissioners backed the renewals, citing Lopez Obrador’s suspension of oil auctions. The dissenting vote came from Sergio Pimentel, one of the few Mexican officials who has publicly criticized Lopez Obrador’s energy policy.
“I think we are demanding too much of Pemex - much more than is desirable or logical,” Pimentel said.
While Lopez Obrador’s government vows to respect existing contracts, it has indefinitely suspended further auctions and is instead offering private oilfield services firms more restrictive partnerships that give Pemex more control.
“The door is closed on newcomers in Mexico right now while it’s wide open in places like Brazil and Guyana,” said George Baker, the Houston-based publisher of Mexico Energy Intelligence.
Some firms are already packing up, including some of the original stakeholders with Talos in Zama. Sierra Oil & Gas sold its 40% stake in Zama, along with the rest of its assets - all of them in Mexico - to the company now known as Wintershall DEA. Premier Oil said last month that its 25% stake was for sale.
Premier said in a statement that it continues to see a “significant opportunity” in Mexico and that it remains committed to developing three other energy projects in the country.
We definitely have to talk to Pemex, to Talos - another company that’s there - to see who will be in charge of the operations, because Pemex has a big part of it,” she said.
If Pemex takes over, Talos would retain its 35% stake but give up operational control, undermining its attempt to establish itself as an international operator with its first project outside the United States.
Earlier this month, Lopez Obrador’s finance ministry gave Pemex $5 billion to pay down debt, the latest in a series of subsidies. The government has so far failed to convince international investors that the bailouts will work or that it can finance ambitious plans to expand Pemex. In June, rating agency Fitch downgraded Pemex debt to junk status..