Mehren did not make it clear if the final agreement on the field was closed at that meeting in the Pemex Executive Tower, but he did say that other projects were being discussed. Just in those days, the talks on the technical issues of the agreement to operate the field ended, according to sources. Yesterday the companies delivered Zama’s plan to the oil regulator, just at the limit of the agreed term.
The controversy over Zama had been going on for more than two years. Talos Energy, Premier Oil and Sierra Oil announced the discovery in 2017 as one of the largest in decades. By 2020, the suspicions that it was in the middle of a block of the state-owned Pemex and the one awarded to Sierra Oil & Gas -acquired by Wintershall Dea in 2019- and its partners were confirmed. In the following months, the Mexican government ruled in favor of Pemex by designating the oil company as operator of the field, based on an analysis with biased variables, and then the differences took hold.
Talos Energy, the operator of block 7 and another partner in the consortium, then expressed its bewilderment about how the field process progressed, and sent a notice of dispute against the Mexican government more than a year ago, a process prior to international arbitration.
But Wintershall Dea’s CEO says he is satisfied and convinced that it has been a transparent process. “I fully accept and agree with the results. (…) It was a very transparent process, so it is clear for us to accept that result. We also think that the unification process was a transparent process”, says the manager to Expansion. The interview took place last November.
The opinion of Wintershall Dea could have defined much of the course development plan: it is the second largest partner, behind only Pemex, with just over 19.83% participation. The state company has been left with a majority part, with 50.43%. Talos Energy would keep 17.35% and the Scottish Harbor Energy -formed in 2021 after the merger of premier oil and Chrysaor– 12.39%.
The approval of Pemex as operator of the field reduced the impetus of Talos Energy’s efforts to lead the field work and now supports the government’s position to give Pemex more leadership in the sector.
Zama’s development plan
The companies, as published this Thursday in a couple of statements, have chosen to “unify talent” and have decided to form an integrated team that will share out the tasks. Pemex and Talos Energy will co-direct the planning and drilling of the more than 40 wells that Zama will have and also the planning of matters related to marine infrastructure.
Thus, Talos would have gotten some of what he demanded: to be actively involved in the operation of the field and the development of production. “Everyone has been satisfied and happy with the result, right now there is a very cordial relationship,” says one of the sources close to the negotiations. Talos has not reported whether or not he has given up on continuing an international legal process.
The German company appears to have put up no resistance to the Mexican government leading efforts in the field, despite analysts’ disbelief about Pemex’s financial and technological capacity. The companies have already approved, says the manager, the investment terms and this will be proportional to the participation percentages, with Pemex at the forefront, with more than 50%. In yesterday’s announcement, the companies did not discuss the amount of investment that will go into the project.
Sources close to the dialogues affirm that at the end of last year, the partners of block 7 had not been able to reach a joint position on what they wanted from the field and the demands to Pemex, and that weakened the position of the private party, especially , from Talos. Also in the discussions was Harbor Energy. Mehren refused to confirm the version and limited himself to saying that the oil company and the rest of those involved wasted a little time in the talks “for not having the same constructive attitude”. forward and ensure that we are not wasting any more time. Now we have to work together, as a team, very hard to carry out the project, very efficient”, he adds.
Wintershall Dea’s role
The German does not want to be a protagonist in the Zama operation – which could produce between 150,000 and 180,000 barrels per day – but says that they know that they can add value: “We, as the second largest within that consortium, want to take a role very important, we are willing to take responsibility”. In yesterday’s announcements it was revealed that Wintershall Dea will be involved in the project management office and finance working group.
Mehren comments that Zama is the most important asset for the German oil company in the country. The company did not take over the block where the deposit is located from the beginning, until it bought Mexico’s Sierra Oil & Gas at the end of 2018. The field has not yet reported production, but it tops its list of priorities, despite a series of business decisions made in recent months that will favor your portfolio. Last October, it announced the purchase of a percentage of the Hokchi field and will increase its efforts in deep water exploration and production in block 29 – in which it shares the award with Repsol and where the latter is the operator. But Zama is “a project of tremendous importance”, according to the words of the manager.
Business between Pemex and Wintershall Dea is not limited to the Zama field. The oil companies have four other businesses together, where the operation of the Ogarrio field stands out. The state company has begun to close deals with private companies – like the CFE – but without competitive processes, such as the rounds. Mehren says he is interested in increasing his presence in Mexico, especially in the gas market – where he has 70% of his portfolio – but without a firm project. Little by little, Pemex has opened up to the private market and Wintershall Dea does not take his finger off the line.