[Mexico] Zama

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Talos Energy Announces Finalization of the Zama Unitization Process

HOUSTON, March 28, 2022 /PRNewswire/ -- Talos Energy Inc. ("Talos" or the "Company") (NYSE: TALO) announced today that it has received the final Unitization Resolution ("UR") from Mexico's Ministry of Energy ("SENER") regarding the development of the Zama field in offshore Mexico. Among other things, the UR affirms the appointment of Petróleos Mexicanos ("Pemex") as operator of the unit. Unitization of the Zama field was required after determination that the field is located within both the Talos-operated Block 7 and an adjacent Pemex-operated block and provides for joint development of the entire reservoir instead of each party developing its own block.

Talos will maintain a 17.35% participating interest in the Zama field, and the Company anticipates submission of a Unit Development Plan for approval by the working interest partners within 6-12 months, a critical step before the parties can make a Final Investment Decision ("FID") in 2023. Talos will participate in activities related to reaching FID, while also continuing to evaluate various strategic and legal options. The Company does not expect any material changes to its 2022 capital expenditures guidance as a result of the issuance of the UR.

Talos, as operator and 35% partner in the Block 7 lease, discovered the Zama field in 2017 as the first private sector consortium to enter Mexico following the country's major energy reforms. Zama was subsequently named the 2017 Global Discovery of the Year by Wood Mackenzie, and the field was fully appraised by mid-2019. An independent third-party reserves auditor estimated the discovered recoverable resource volumes to be between approximately 735 – 950 million barrels of oil equivalent, and Zama could produce over 160,000 barrels of oil equivalent per day once fully developed. Talos has invested approximately $104 million in Zama since 2015 and these past investments are subject to cost recovery under the Production Sharing Contract.

Talos President and Chief Executive Officer Timothy S. Duncan stated: "We are very proud of our operational leadership in Mexico's private energy sector and of our accomplishments thus far with our world-class Zama discovery. We are disappointed that despite our consistent track record of success, safety and progress we were not provided the opportunity to retain our role as operator for the benefit of the project. However, we understand how important accelerated first oil from Zama is for the Mexican energy sector and all of the Company's stakeholders and we will work with the urgency required to finalize the Unit Development Plan so FID can be reached."

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Mexico to invest billions in Zama oilfield if Talos accepts terms, Pemex CEO says

MEXICO CITY, July 29 (Reuters) - Petroleos Mexicanos (Pemex) is ready to invest billions of dollars in a disputed major Gulf of Mexico oilfield once its U.S. partner Talos Energy accepts Pemex will run the project, the chief executive of the Mexican state oil company said.

The 850-million-barrel Zama field has become a bone of contention under President Andres Manuel Lopez Obrador's efforts to strengthen state control of energy.

Majority stakeholder Pemex has had a lengthy standoff over who should operate it with Talos, which leads a private consortium that also includes Harbor Energy (HBR.L) and Wintershall Dea (INT.UL). It has reached the point where the Mexican and U.S. governments have had to mediate.

"They (Talos) are still a bit reluctant. We hope they'll finally accept, and that we can get the project started," Pemex Chief Executive Octavio Romero told Reuters in an interview at the company's Mexico City headquarters.

The other two companies in the consortium agreed with Pemex on the need to proceed, according to the executive. Pemex has said it must operate the project because of its experience, its greater size and because its section of the block holds most of the reserves.

Talos has a 17.35% stake in Zama after the project's unitization. It wants to have a say on how to develop the reservoir, which is regarded as one of the top prospects in shallow waters worldwide.

Talos (TALO.N) in September filed notices of dispute under the United States-Mexico-Canada (USMCA) trade agreement, a prelude to seeking international arbitration. Reuters reported in May that Talos had paused the action during high-level talks.

Talos had no immediate comment and Wintershall did not reply to a request for comment. Harbour declined to comment. Mexico's presidency did not reply to a request for comment.

'WHATEVER IT TAKES'

Talos won the right to develop the lucrative field in an auction held under the previous government.

Lopez Obrador's administration has frozen oil and gas auctions. His drive to favor Pemex and the national power utility culminated last week in the United States requesting dispute settlement talks with Mexico over its energy policy under USMCA.

Pemex has not publicly disclosed its stake in Zama. According to an independent analysis of the reservoir, 50.43% of Zama's reserves are on Pemex's side.

"Pemex must take into account the companies' exploration expenses and bring fresh investment into the project," said Mexico City-based analyst Gonzalo Monroy. "That is especially true since Pemex wants to add two more fields to the project, which would increase assets but also the need for investment, and could atomize the other companies' stakes."

Asked whether Pemex has the means to develop Zama, Romero firmly assented and pledged to invest "whatever it takes." Investment in the field this year would be "very little" but would ultimately encompass "billions of dollars", he added.

The state oil firm has financial debts of $108.1 billion and $13.7 billion with suppliers, alongside other commitments that have persistently saddled it with negative working capital.

The investments Zama requires in the coming years will coincide with a hefty debt repayment schedule.

"Pemex has not yet planned investment for Zama in its budget, its capital expenses continue to be limited and the government is using the company's extraordinary revenue to support subsidies, boosting the president's popularity," said John Padilla, consultancy IPD Latin America's managing director.

If the parties reach a final agreement this year, investment for 2024 would be higher, Romero said, adding that Lopez Obrador made a firm commitment on Zama during energy sector meetings between Mexican and U.S. officials in May and June.

Lopez Obrador in June said that Mexico and Talos were close to reaching a deal on developing the field.

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9 March 2023

Harbour Energy today announces its audited full year results for the year ended 31 December 2022. In Mexico, Harbour has a 12.39 per cent non-operated interest in the Zama unit where the Block 7 partners and Pemex have substantially agreed the field development plan ahead of targeted submission to the Mexican regulator by the end of the first quarter of 2023. Front-End Engineering and Design work (FEED) is planned for 2023, along with an update of project cost estimates, ahead of a final investment decision

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Submission of Zama Unit Development Plan

24 March 2023

Harbour Energy and the other Zama Unit Holders, Petroleos Mexicanos (Pemex), Wintershall Dea, and Talos Energy, are pleased to announce that Pemex, as operator, submitted the Unit Development Plan (UDP) for the Zama field to Mexico’s National Commission of Hydrocarbons (CNH) for approval.

The Zama UDP envisages two offshore shallow water platforms and 46 production and water injection wells with the oil and gas to be transported via pipeline to new facilities located in Terminal Maritima Dos Bocas. The UDP minimises greenhouse gas intensity by using best available technology and produced gas for onshore power generation as well as by leveraging existing storage and transport infrastructure.

Further engineering and planning work, including front end engineering (FEED), will continue while awaiting UDP approval from CNH. As part of this project phase, the partners will receive refreshed cost and schedule estimates for the development. A final investment decision (FID) will be taken after the conclusion of FEED.

The Zama Unit partners have also agreed to form an Integrated Project Team (IPT) to manage the delivery of the field development. The IPT is designed to provide technical, operational, and execution expertise drawing on the talents and skills from all partners. The shared goal of the IPT is safe and efficient delivery of first production from the Zama field.

Separately, Pemex and the Block 7 partners have agreed principal terms related to hydrocarbon sales and the use of Terminal Maritima Dos Bocas (TMDB) facilities based on market indices and standard terms and conditions.

We are delighted with the collaboration between our partners which has enabled us to submit the Unit Development Plan for the Zama field on schedule. This marks an important milestone towards delivering safe and efficient first oil from the Zama field which once onstream will contribute significantly to both Harbour’s production and Mexico’s domestic energy supply.

STUART WHEATON
HARBOUR ENERGY EVP INTERNATIONAL BUSINESS