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Mexico’s opening of its energy sector to private oil drilling in 2013 is starting to pay off, as a joint venture of private international companies struck oil in excess of 1 billion barrels in the shallow waters in the southern Gulf of Mexico.
London-listed Premier Oil Plc said on Wednesday that, together with its joint venture partners Talos Energy (Operator) and Sierra Oil & Gas, it had made a world class oil discovery in the Zama-1 exploration well in Block 7, the first offshore exploration well drilled by the private sector in Mexico’s history.
According to preliminary analysis, “Initial gross original oil in place estimates for the Zama-1 well are in excess of 1 billion barrels, which could extend into a neighbouring block,” said Premier, which holds 25 percent in the block.
Following the announcement, Premier’s shares were surging nearly 30 percent on the London stock exchange at noon local time.
The operator of the block, Talos Energy, which has 35 percent, was even more optimistic about the find. “Initial gross original oil in place estimates for the Zama-1 well range from 1.4 to 2.0 billion barrels, exceeding pre-drill estimates, some of which could extend into a neighboring block.”
Talos, Premier Oil, and Sierra Oil & Gas signed production sharing contracts for the block with Mexico’s upstream regulator, the National Hydrocarbons Commission, in 2015.
According to the Sierra Oil & Gas press release, Mexico will receive 68.99 percent of the operating profit from each barrel produced.
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The Zama discovery “is the most important achievement so far of Mexico’s energy reform,” Pablo Medina, the senior upstream analyst for Latin America at Wood Mackenzie, told Bloomberg by email. “It is one of the 15 largest shallow-water fields discovered globally in the past 20 years,” he noted.
In March this year, Italy’s oil major Eni drilled the first well by an international oil company in Mexican waters, and said the well indicated a “meaningful” volume of oil.
Oil majors are snatching up offshore blocks in Mexico, with the latest auction exceeding expectations. Mexico is also planning to hold four more oil and gas block tenders by November 2018 as part of efforts to ensure the sustainability of its energy industry and make better use of its hydrocarbon reserves.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.