Lukoil paying $435 million for block off Mexico ahead of first oil

Russia’s Lukoil has entered into an agreement to acquire a 50 per cent operator interest in the Area 4 project in Mexico through the acquisition of the operator’s holding company.

Area 4 off Mexico. Source: PetroBal
Area 4 off Mexico. Source: PetroBal

Lukoil said on Monday that the transaction value is $435 million plus expenditures incurred in 2021 as of the transaction completion date. The completion of the transaction is subject to certain conditions, including approval by the Mexican authorities.

The project includes two blocks, 58 square kilometres in total, which are located 42 kilometres offshore Mexico in the Gulf of Mexico. The sea depth at the blocks is 30-45 meters.

Two oil fields – Ichalkil and Pokoch – are located within the blocks. The recoverable hydrocarbon reserves of the fields amount to 564 million barrels of oil equivalent, more than 80 per cent of which is crude oil.

The construction of production facilities is currently being finalized and production of the first oil is scheduled for the third quarter of 2021. The project is developed in three phases, with a peak daily production rate estimated to be more than 115 thousand barrels of oil equivalent.

The project is implemented under a production sharing agreement, which was signed in 2016 for a period of 25 years with the right for an extension for up to 10 years. The partner in the project is PetroBal, the oil and gas subsidiary of Mexican conglomerate GrupoBAL, with the remaining 50 per cent interest.

Vagit Alekperov, Lukoil President, said: “Lukoil considers Mexico a strategic region for the development of our international upstream operations. The new Project, where we will be the operator, is notable due to its considerable explored reserves and significant production potential. It naturally complements our existing portfolio of projects in the Gulf of Mexico”.

Elsewhere in Mexico, Lukoil in November 2018 entered into an agreement with Eni to assign 40 per cent in Block 12 to Eni, retain the remaining 60 per cent stake and remain the operator of the project. In its turn, Eni assigned 20 per cent in Block 10 and 20 per cent in Block 14 to Lukoil and remained the operator of both projects.

Eni is also the operator of Area 1, which holds the Amoca and Mitzon fields, located in the Bay of Campeche off Mexico.