The Spanish oil company, Repsol, is in talks with the Mexican state-owned oil company, Pemex, in an attempt to repair their troubled relationship.
Pemex is the third largest shareholder in Repsol, with a 9.5% stake, yet last year the 40 year old partnership threatened to fall apart when the Mexican’s led a coup against Repsol’s Chairman, Antonio Brufau. Brufau has now decided it is time to try and make peace and wishes to put the past behind them; the potential deepwater reserves that Pemex controls in the Gulf of Mexico probably have very little to do with it.
Pemex has seen its oil production volumes fall steadily since a peak of 3.4 million barrels a day back in 2004. The reserves in the Gulf of Mexico could reverse this trend, and Repsol could offer Pemex its expertise in offshore drilling if a friendship was re-forged.
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Peter Hutton, an analyst at RBC Capital Markets, said that, “Pemex has an appetite for access to international technology and Repsol may be able to bring that.”
Merrill Lynch stated that, “Repsol's growing cooperation with Pemex could see them getting access to the Mexican portion of the Gulf of Mexico, which holds an estimated 4-10 billion barrels of recoverable oil reserves.”
The failed coup last year was led by Pemex, with the aid of another major shareholder, Sacyr Vallehermoso, in an attempt to secure more lucrative dividend flows. Upon its failure Sacyr was forced to sell half of its 20% stake in order to avoid bankruptcy.
The instability in Repsol’s boardroom, as well as concerns over the debts held by its main shareholders has led to a 27% fall in share prices over the course of the year. Analysts believe that the stability and exploration potential that a renewed relationship will bring could be viewed very favourably by the market.
By. Charles Kennedy of Oilprice.com
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