Talos and Pemex don’t see eye to eye on Zama field unitisation

Houston-based Talos Energy believes it is best positioned to operate the giant Zama field discovery located offshore Mexico despite a recent third-party review concluding that over 50 per cent of the field lies on Pemex’s acreage.

Discovered in 2017 by the Talos-led consortium, Zama is a shared reservoir that extends from Block 7 to neighbouring Pemex AE-0152-Uchukil Asignación in the Cuencas del Sureste, in the Bay of Campeche in Mexico.

Talos, Block 7 partners, and Mexico’s Pemex, with involvement from the Mexican Ministry of Energy (SENER), are working to finalize terms of a Unitisation and Unit Operating Agreement (UUOA) based on international best practices and considering inputs from the parties.

Back in late March 2021, the unitisation process of the giant Zama oil field entered its next phase, as established in Mexican regulation.

In an update on Friday, Talos clarified information recently disclosed by Pemex in its Annual Report.

The UUOA will address initial tract participating interest splits, the mechanism to re-determine those splits in the future, and operatorship, among other key topics.

According to Talos, a third-party reservoir engineering firm engaged by the Block 7 partners and Pemex to evaluate Initial Tract Participation (ITP) within the Zama reservoir recently concluded that the Block 7 consortium led by Talos holds 49.6 per cent of the gross interest in Zama and Pemex holds 50.4 per cent.

The UUOA will separately provide for specific milestones upon which participating interest splits among the Zama parties will be re-determined and adjusted based on evolving data collected over the asset lifecycle. Redetermination provisions are standard in unitisations and ensure equitable participation over time.

Under the redetermination provisions in the Zama UUOA, Block 7 partners and Pemex will reevaluate the ITP and subsequently determined splits in line with international best practices.

Talos President and Chief Executive Officer, Timothy S. Duncan, commented: “We continue to push in earnest to reach full agreement on the commercial terms of the unitisation. We believe the recent third-party analysis underestimates relevant data obtained during the appraisal campaign.

“As you will recall, Talos engaged Netherland, Sewell & Associates to prepare an independent evaluation last year which concluded that the Block 7 consortium holds 59.6 per cent and Pemex holds 40.4 per cent of the gross interest in Zama, respectively.

“Regardless of the ITP established in the final UUOA, we expect that the true percentages will ultimately be realized through the re-determination process, which is a standard component of any unitisation agreement and a global best practice, and other factors. ITP percentages are a single variable among those still being determined, most importantly operatorship.

“We remain confident that Talos is best positioned to operate the field moving forward and we will further update the market once a commercial agreement on the unitisation has been reached”.

The Zama field is located in Block 7 of the Sureste Basin offshore Mexico in the Gulf of Mexico and has a water depth of approximately 540 feet (165 meters).

It is one of the largest shallow-water fields discovered in the past 20 years, with estimated peak production of approximately 150 MBOE/day.