Disappointed Talos to explore legal options over Mexico’s Zama decision

A very disappointed Talos Energy will be exploring legal options following a decision by the Mexican government to designate the state-owned Pemex as the operator of the Zama offshore field in a unitisation dispute.

The Zama field is located in Block 7 of the Sureste Basin offshore Mexico in the Gulf of Mexico and has a water depth of approximately 540 feet (165 meters).

Discovered by the Talos-led consortium back in 2017, it is one of the largest shallow-water fields discovered in the past 20 years. It was also the first major discovery after the Mexican government decided to open up the country’s energy sector to foreign and private producers.

Zama is a shared reservoir that extends from Block 7 to neighbouring Pemex AE-0152-Uchukil Asignación in the Cuencas del Sureste, in the Bay of Campeche in Mexico. As a result, Talos and Pemex were urged to unitise their assets, but the two companies did not see eye to eye when it comes to terms of unitisation.

Talos Energy on Tuesday provided an update regarding operatorship for the company’s Zama asset in offshore Mexico. On 2 July 2021, Talos was notified by Mexico’s Ministry of Energy (SENER) that it had designated Pemex as the operator of the Zama unit, just three days after it received a letter directly from Pemex arguing for operatorship.

Since being awarded Block 7 as the first private operator in the country, Talos drilled the exploratory well that led to the Zama field discovery in July 2017. Talos subsequently continued to invest in the Zama appraisal by drilling three additional wells as part of the delineation of the field.

Talos emphasised it has consistently demonstrated an unrelenting commitment to the optimal development of the field, as the company has advanced a complete Front End Engineering and Development (FEED) study and presented the National Hydrocarbons Commission (CNH) a development plan that maximizes oil and gas recovery.

Talos also noted it has consistently demonstrated its capabilities and qualifications to be the operator of the unit, its expertise operating in Zama’s geology and water depth, and its safety and environmental track record in its operations in Mexico.

After six years of significant investments in Zama and the Mexican economy, as well as the delivery of a Zama development plan that is credible and in line with the objectives of Mexico, Talos is very disappointed with SENER’s sudden decision to award operatorship to Pemex, especially in light of the timing under which the award occurred, the company said.

Talos concluded that it remains committed to maximizing value for its shareholders from its Zama asset and will explore all legal and strategic options to do so.

According to Reuters, the energy ministry’s letter cited Pemex’s technical know-how and nearby oil infrastructure as reasons giving it an edge and cited a third-party study that concluded that Pemex’s block holds a slight majority of the oil below.

Back in May, a third-party reservoir engineering firm engaged by the Block 7 partners and Pemex to evaluate Initial Tract Participation (ITP) within the Zama reservoir recently concluded that the Block 7 consortium led by Talos holds 49.6 per cent of the gross interest in Zama and Pemex holds 50.4 per cent.

According to Talos, the third-party analysis underestimated relevant data obtained during the appraisal campaign.