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Mexico's next government starts oil contract reviews with Talos-led deal

Published 09/18/2018, 04:04 PM
Updated 09/18/2018, 04:10 PM
© Reuters. Mexico's President-elect Andres Manuel Lopez Obrador waves while arriving to his campaign headquarters in Mexico City
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By Adriana Barrera and Ana Isabel Martinez

MEXICO CITY (Reuters) - Mexico's incoming government has begun its promised review of oil contracts, starting with a major project won by a consortium led by U.S.-based Talos Energy, the country's next energy minister said.

Set to become Mexico's first leftist leader in modern history when he takes office in December, President-elect Andres Manuel Lopez Obrador vowed during the campaign to review all oil contracts awarded under his predecessor for signs of corruption.

He won a landslide election victory in July.

Officials with Talos Energy, which also holds a 45 percent stake, and Premier Oil < (L>:PMO), which has 10 percent, did not respond by Tuesday to requests for comment.

The chief executive of Sierra Oil & Gas, which holds a 45 percent stake in the project, welcomed the review.

"They should check everything," said Sierra CEO Ivan Sandrea in an interview. "Along with the entire industry, I'm most interested that they clear up all of their thoughts that there was manipulation."

The consortium secured development rights for two blocks in 2015 during the first oil auction launched by the outgoing government of President Enrique Pena Nieto, following a landmark energy overhaul that ended the decades-long monopoly enjoyed by national oil company Petróleos Mexicanos [PEMX.UL], known as Pemex.

Last year, the consortium, which also includes Britain's Premier Oil and Mexico's Sierra Oil & Gas, said its Zama-1 well drilled in the Area 7 shallow water block confirmed the discovery of a deposit that could hold between 1.2-1.8 billion barrels of crude oil.

The contract and subsequent find are now under the microscope of Lopez Obrador's top energy aides.

"We're making progress" in reviewing several contracts, Rocio Nahle, designated to be the next energy minister, told Reuters on the sidelines of meetings earlier this month between Lopez Obrador and energy company officials.

"We're beginning with that one."

The texts of the more than 100 exploration and production contracts are all accessible online and the rolling auctions that awarded them have been lauded by sector analysts for their transparency.

The consortium estimates for the deposit confirmed by the Zama-1 well could extend into a neighboring block operated by Pemex.

© Reuters. Mexico's President-elect Andres Manuel Lopez Obrador waves while arriving to his campaign headquarters in Mexico City

The two sides are negotiating an agreement to determine the size of each parties' claim.

(Additional reporting and writing by David Alire Garcia; Editing by Richard Chang)

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