• 2 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 2 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 3 days Shell Restarts Bonny Light Exports
  • 3 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 3 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 3 days British Utility Companies Brace For Major Reforms
  • 3 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 4 days Kinder Morgan Warns About Trans Mountain Delays
  • 4 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 4 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 4 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 5 days Exxon Starts Production At New Refinery In Texas
  • 5 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 6 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 6 days OPEC Oil Deal Compliance Falls To 86%
  • 6 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 7 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 7 days Aramco Says No Plans To Shelve IPO
Alt Text

Is The War On Coal Really Over?

Even if the EPA manages…

Alt Text

Rising OPEC Production Weighs On Oil Prices

After seeing a slight drop…

Alt Text

OPEC Looks To Permanently Expand The Cartel

OPEC Secretary General Mohamed Barkindo…

Alexis Arthur

Alexis Arthur

Alexis Arthur is energy policy associate at the Institute of the Americas, a think tank on Western Hemisphere Affairs based in La Jolla, Calif. She…

More Info

Petrobras To Help Pemex Explore For Oil

Petrobras To Help Pemex Explore For Oil

Mexico and Brazil, two of Latin America’s energy giants, are considering the possibility of joining forces.

On May 27, Brazilian President Dilma Rousseff announced that Petrobras would offer technical support to Mexico’s national oil company, Pemex. Talks of energy cooperation between Mexico and Brazil span five administrations across the two countries but very little has come to pass.

Times, however, have changed. Mexico’s energy sector is undergoing a transformation, with the historic opening expected to usher in an unprecedented period of foreign investment and oil and gas production. Brazil’s energy sector has largely lost its luster and is in desperate need of a boost. Related: Why Has Chinese Spending On Oil Dried Up?

That has both sides looking at cooperation. An offshore exploration deal in the Gulf of Mexico would be a positive step for both parties.

Despite its political problems, Brazil’s Petrobras has a lot to offer in terms of deepwater expertise. Much of this was developed through its pre-salt operations located in the ultra deepwater off Brazil’s Atlantic Coast.

Yet given the corruption scandal currently entangling Petrobras’ management and partners, some would question whether this is the right time for the company to be entering a joint venture with Pemex, particularly in a low price environment. Then again, perhaps a little foreign distraction is precisely what Petrobras needs.

The notion of Petrobras working with Pemex is not new but much has changed since the idea was first presented by then Brazilian President Lula da Silva to Mexican President Fox in 2000. Related: Expect The Recent Oil Rally To End Badly If OPEC Doesn’t Cut

These initial talks were followed by an agreement in 2005 and then a Memorandum of Understanding, signed by Mexico’s next president Felipe Calderón in 2007, which focused on cooperation in the exploration and production of oil and natural gas. Nothing much has happened in the decade since – the idea of collaboration has floated around but there has been no concrete action.

Since the end of 2013, Mexico’s president Enrique Peña Nieto has spearheaded an energy reform process that has been astonishing in both its speed and reach. The Round Zero auction has already awarded Pemex a sizable portion of available assets and Round One bidding, in which private companies participate, is well underway.

The offshore blocks on the Mexican side of the US Gulf of Mexico are generally considered the prize. There are estimates that these offshore areas could hold up to a quarter of Mexico’s hydrocarbon reserves, or 27 billion barrels of oil equivalent. To exploit these resources, Mexico and Pemex need help.

Petrobras, meanwhile, has largely fallen from grace. When its immense pre-salt resources were discovered in 2007, Brazil’s economy was on the rise. The potential 8 to 12 billion barrels of oil would change the face of the national and regional energy landscape. Yet seven years later, a few dry holes, and a disappointing bid round in 2013, and the outlook has dramatically shifted.

Still, much of this is to do with what happened above ground rather than below the sea. Contract terms with onerous local content requirements and the stipulation that Petrobras be the sole operator of all pre-salt projects discouraged foreign investors. Corruption is another important factor.

Domestically, Petrobras is fighting politics and pressure to keep assets and operations at home. Since 2013, the company has sold billions of dollars in overseas assets, from Tanzania to Colombia. Some in Brazil view an international deal with Pemex, or anyone else for that matter, as unwise. Related: The Illusion Of A Rapid Energy Revolution

Still, cooperation could bring many benefits for both countries and their respective national oil companies. One of the reasons Pemex is opening its oil and gas sector is that the company lacks the technical capacity to operate them. Pemex is very good at operating in shallow water – most of its oil production in the last several decades has come from the ageing Cantarell super field. But it has little experience in deepwater. That is where Petrobras excels.

Whether this latest deal, or “qualitative leap” in the words of Mexico’s president, will result in quantitative results, remains to be seen. That Petrobras has much to offer is undeniable and many experts agree that maintaining an international portfolio would be positive for the company. Pemex would be better off too.

By Alexis Arthur Of Oilprice.com

More Top Reads From Oilprice.com: 




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News