In an effort to boost their decreasing energy revenues, Mexico began to deregulate their oil and gas market in 2014, breaking the monopoly of Petróleos Mexicanos, also known as PEMEX. This move allowed foreign companies to come in and drill for oil and gas. These foreign companies were also allowed to lay pipelines and build refineries. In 2015, Mexico started auctioning off blocks of land to the highest bidder.
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However, the timing seemed less than ideal with the fall of oil prices from $100 a barrel in 2014 to $26 a barrel in 2016. Additionally, the instability of Mexico caused some to shy away from the idea. The theft of gasoline from PEMEX pipelines went from 200 incidents in 2006 to around 7,000 in 2016, costing the company an estimated $1.7 billion in 2016 alone. The election of Donald Trump as president of the United States and his stance on illegal immigration, unfair trade, promises to build a border wall, and threats of renegotiating the North America Free Trade Agreement with Canada and Mexico could cause the Mexican legislators to put an end to the energy reforms.
None of this, however, seemed to dissuade Houston offshore oil company Talos Energy and its CEO Tim Duncan. During Mexico’s first auction in 2014, they awarded only two of the 14 blocks that were up for bid. Talos Energy and its partners were awarded both blocks as the competition was meager at the time. Since then, however, bidding for Mexico’s offshore blocks have become more competitive with Exxon Mobil, Chevron, and Eni all bidding.
Since Mexico opened its shores to oil and gas exploration in 2014, Talos Energy has discovered an estimated 2 billion barrels of oil in the shallow waters of the countries coast. The site is located along the Gulf of Mexico, approximately 37 miles from Puerto Dos Bocas.
The well, named Zama-1, is in just 500 feet of water. Duncan says that the reserve looks to be very big and to develop the site will take at least four years. Talos Energy plans to continue drilling until they reach a depth 14,000 feet. The goal of Talos Energy and its partners is to develop the site for oil production while the service costs are low and then start producing when oil prices begin to recover.
Talos Energy’s Facebook Page: www.facebook.com/talos.energy/