After 80 years, Mexico is finally allowing a private partnership to drill for oil off its shores. On May 21, 2017 a joint venture involving Premier Oil Plc, Talos Energy LLc and Sierra Oil and Gas began drilling for oil in the state of Tabasco in the Sureste Basin. This site is known as the Zama-1 well.
Premier Oil is a London-based company and they have a 25% stake in the venture, while Talos Energy, a Houston based company has a 35% stake. Mexico’s Sierra Oil and Gas has the largest in the venture with a stake of 40%. In 1938, Mexico nationalized all its oil reserves, oil refinery facilities and took over foreign owned oil companies in the country. The country adopted the pronouncement made by President Lazaro Cardenas in the 1917 Constitution, which stated all oil mineral and reserves found in Mexico belonged to Mexico.
This venture was the first step taken to reject that earlier decision. All three of the companies won the right to prospect the site in 2015. It will cost Premier up to $16 million to drill, but the site is projected to have a “high geological chance of success“. The drilling is currently projected to last for 90 days.
Pemex has been the sole Mexican Oil company since it was created in 1938 to expropriate the foreign oil companies and take over all drilling in Mexico. Pemex operated as the second largest non-publicly traded company in the world, second to Brazil’s national oil company, Petrobras. As of 2010, Pemex was worth one fourth of Mexico’s total net worth.
Talos Energy is one to the companies breaking the Mexican hold on foreign drilling. This private company is a Houston-based oil and gas company that focuses on offshore drilling in the Gulf Coast and the Gulf of Mexico. As per their third quarter financial report, Talos Energy produced 28.7 thousand barrels of oil per day and has earned a $100 million in revenue.
Talos Energy and its two partners are the first private enterprise to ever drill in Mexico’s waters. The Zama-1 well is expected to yield up to 1.4 to 2 billion barrels of oil. If this effort is successful perhaps Mexico will see fit to continue allowing private companies to drill for oil so that everyone can benefit.
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