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Chances of shared reservoir between Pemex, Eni still in question, but process raising eyebrows

A recent decision by state oil company Pemex to explore an area adjacent to one of the most prolific privately operated fields in Mexico is attracting the attention of market observers, although the chances of the reservoir being shared still are being debated.

Eni, who is currently operating the field, could end up losing the operation, as some fear happened with the only other unitization process in the history of the country—Zama, discovered by Talos Energy—although some are quick to point out there are significant differences.
Slim chances

Pemex received authorization May 10 from the National Hydrocarbons Commission to drill Atoyatl-1, an exploration well located only two miles from one of the delimiting wells Eni has drilled at Mizton, one of three fields Eni operates inside Area 1.

Area 1 is a 40 square-mile block inside a much larger block owned by Pemex where Eni recently doubled production to almost 20,000 b/d of crude and 27 MMcf/d of gas after it installed the first privately operated floating production storage and offloading unit in the country. Area 1 also includes the fields Amoca and Tecoalli.

Pemex acknowledges that the chances of a shared reservoir are slim, as recent tests in the area have forced the company to reduce its expectations for the area, CNH said May 10. Still, Pemex will drill Atoyatl from June to August, hoping to prove its luck.

At this point, it is still unclear what will happen in the area, Andres Armijos, head of Latin American research at Welligence Energy Analytics, told S&P Global Commodity Insights.

“It is early to speculate about a unitization; Pemex still needs to drill Atoyatl and prove it extends into Mizton,” Armijos said, noting that there are many fields in the country that could potentially extend into another operator’s block.
Mizton is not Zama: consultant

Marco Cota, CEO of consultancy Talanza Energy, is skeptical. In his opinion, Pemex has known the potential of this area for a long time and had actually studied the fields in depth before the liberalization process of 2014, when Eni obtained the block.

“With such a deep knowledge of the fields, the possibility of the reservoir extending out of the block would have been identified by now,” Cota said.

Cota, who served at Energy Secretariat SENER during the liberalization process, noted that Mizton has been extensively studied, as there are even estimated reserves at the site, and mentioned this knowledge of the area is one of the many reasons why Mizton should not be compared with Zama.

Zama is a field discovered by Talos Energy of the US in 2017, where there are almost 1 billion barrels of oil equivalent of estimated recoverable resources. In 2022, SENER replaced Talos as Zama’s operator and gave the operation to Pemex after the two companies failed to reach an agreement.

There is a wide perception in the market that SENER favored Pemex in the decision based on politics rather than the technical and financial considerations included in the law, observers told S&P Global.

But Zama is still in a very early stage, whereas Mizton is a production field, with a high level of development and understanding, Cota said, adding that a unitization process, if it happened, would have to be very different.

“Still, there is concern among some in the market that what happened to Talos could happen again,” Armijos said.

Cota and Armijos mentioned there is a chance that Pemex is not looking for a shared reservoir, but for small pockets that could become commercial if developed together.

Pemex could be trying to take advantage of the intense activity in the area, Armijos said, noting that developing several small sites could be economical if there is enough infrastructure around.

Marco Biersinger, director of oil and gas corporate finance at Kroll, agreed that it is early to speculate on the result of a possible unitization, and explained these processes are common practice around the world.

Unitizations are meant to be designed to better exploit the resources of a reservoir for the interest of both parties, Biersinger said, adding that Mexican authorities should learn from the experience of Zama for any future unitizations.
Source: Platts

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