EXCLUSIVE Mexico to invest billions in Zama oil field if Talos accepts terms – Pemex executive

A sign of state-owned company Petroleos Mexicanos (PEMEX) shows their gasoline prices at a gas station after Mexico suspended a one-week gasoline subsidy along the U.S. border, in Ciudad Juarez, Mexico, April 2, 2022. REUTERS/Jose Luis Gonzalez

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MEXICO CITY, July 29 (Reuters) – Petroleos Mexicanos (Pemex) is ready to invest billions of dollars in a disputed major oil field in the Gulf of Mexico after its U.S. partner Talos Energy accepts that Pemex will manage the project, Mexico’s chief executive said state oil company said.

The 850-million-barrel Zama field has become a bone of contention over President Andrés Manuel López Obrador’s efforts to strengthen state control of the energy sector.

Majority shareholder Pemex has had a longstanding standoff over who should run it with Talos, which runs a private consortium that also includes Harbor Energy ( HBR.L ) and Wintershall Dea ( INT.UL ). It got to the point where the Mexican and American governments had to mediate.

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“They (Talos) are still a bit reluctant. We hope that they will finally accept and that we can start the project,” Pemex Chief Executive Octavio Romero told Reuters in an interview at the company’s headquarters in Mexico City.

The other two companies in the consortium agreed with Pemex on the need to continue, according to the executive. Pemex said it should manage the project because of its experience, its larger size and because its part of the block contains most of the reserves.

Talos has a 17.35% stake in Zama following the project merger. He wants a say in how to develop the reservoir, which is considered one of the best shallow-water prospects worldwide.

Talos ( TALO.N ) in September filed notices of dispute over the United States-Mexico-Canada Trade Agreement (USMCA), a prelude to seeking international arbitration. Reuters reported in May that Talos had suspended the action amid high-level talks. Read more

Talos had no immediate comment, and Wintershall did not respond to a request for comment. Harbor declined to comment. The Mexican presidency did not respond to a request for comment.

‘WHAT IS NECESSARY’

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

The López Obrador administration has frozen oil and gas tenders. His push to favor Pemex and the national energy company culminated last week in the United States’ request for negotiations to settle a dispute with Mexico over its energy policy under the USMCA. Read more

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 the side of Pemex.

“Pemex needs to take into account the costs of exploration companies and bring new investments into the project,” said Mexico City-based analyst Gonzalo Monroy. “This is especially true as Pemex wants to add two more fields to the project, which would increase assets but also the need for investment and could atomize the stakes of other companies.”

Asked if Pemex had the funds to develop Zama, Romero firmly agreed and promised to invest “whatever it takes.” Investments in the field this year will be “very little” but will eventually reach “billions of dollars,” he added.

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

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

“Pemex has not yet planned investments for Zama in its budget, capital spending continues to be limited and the government is using the company’s windfall to support subsidies, boosting the president’s popularity,” said John Padilla, managing director of consultancy IPD Latin America.

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

López Obrador said in June that Mexico and Talos were close to reaching a deal to develop the field.

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Reporting by Ana Isabel Martinez Additional reporting by Adriana Barrera, Mariana Paraga, Dave Graham; Editing by David Gregorio

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